Consumer Data Right to be legislated in Australia: Government accepts Productivity Commission recommendation
Customer consent will be a key issue in the development of an open banking framework
Can lessons be learned from Europe and UK open-banking experiences?
Point of View
As we experience a paradigm shift across technology, customer expectations and regulation, ‘customer consent’ is becoming an increasingly visible matter. Following recommendations by the Productivity Commission in its inquiry into Data Availability and Use report, Angus Taylor, Commonwealth Minister for Digital Transformation, announced in late November that the Government will legislate an economy-wide Consumer Data Right, giving customers greater control over their data.
Treasury is considering the mechanism by which customers could give consent to their bank to share data via the the Review into Open Banking in Australia. How to ensure that consent is properly informed and how it can be revoked will likely be a key aspect of this Review.
Australia is not the first to embark on this journey. In Europe, strengthened conditions for customer consent, which must be ‘freely given, specific and informed’, will apply from 25 May 2018 when the General Data Protection Regulation (GDPR) comes into force. The Information Commissioner’s Office in the UK has developed guidance on complying with GDPR; which, despite Brexit, the UK will observe. GDPR will also affect foreign firms with European customers.
A strong consent model will be needed to underpin data sharing, and pertinently, open banking. In Australia, Treasury is due to release a report on an open-banking framework early next year.
Importantly, a number of countries around the world are also progressing open banking. Their experience will potentially inform our regulatory approach and business opportunities.
The revised Payment Systems Directive (PSD2) regulation is due to be transposed into the national laws of European Union Member states on 13 January 2018. This is the same date that the mandate of the Competition and Market Authority (CMA) in the UK is due to come into effect. South Africa has taken an industry-led approach to open banking, and New Zealand looks to be heading in a similar direction.
Introduction of open banking has the potential to benefit consumers, third parties (offering services to streamline and enhance the customer experience) and financial institutions. A robust consent mechanism will be needed to underpin consumer confidence in the open banking system.
Trust is critical in the realm of open banking, and in the words of the Reserve Bank of Australia, “…we trust our banks to look after our funds.” Accordingly, financial institutions are in a strong position to leverage open banking by capitalising on and building customer trust.