Data republic meetup – Open banking

In September 2018, Data Republic (a data collaboration vendor) convened at an industry event called Data Republic Meetup, that brought together professionals interested in exploring “analytics in the age of data portability” with a focus on forthcoming Consumer Data Right (CDR) and Open Banking legislation.

Open Banking is the first iteration of the Consumer Data Right focusing on enabling the sharing of customer bank data (e.g. consumer spending behaviour) with industry participants – not limited to financial service providers. The intent of the legislation is to increase innovation and competition for an efficient and fair market. It is envisaged that the CDR framework will be extended and refined over time across other industry data including telecommunications and utilities.

The meetup consisted of a panel discussion facilitated by Steve Millward (Data Republic) with the panellists from Deloitte (Jonathan Benson – Principal, Data Modernisation), Origin Energy (Nick Merry – Senior Manager, Analytics Capability Delivery) and NAB (Michael Bridgeman – Head of Innovation Strategy & Experiments).

The key discussion points included the three themes outlined below – which have been enhanced with further context for this audience.

1. From a Customer perspective, do I opt-in and what data will be shared?

A common misconception of the CDR and associated Open Banking framework is that industry participants will get access to complete datasets of all banking customers including their private information (such as purchase history / credit behaviours). The mechanics of the CDR is designed such that each customer has the opportunity to share their data with industry participants of their choice.

An example of how open banking may be relevant to a customer is to work with industry participants to evaluate whether they are currently receiving the best offers in the market – for example comparing interest rate offers for a home loan and/or credit card.

The panel emphasised that the Government mandate stated that it was the customer’s prerogative to choose to opt-in to the initiative. The customer can only be enrolled in sharing their financial details where their explicit request and consent was provided. Once a customer has consented, industry participants (or customer nominated entities) can only gain access to:

  • The customer data sets for which the individual has explicitly requested and consented to be shared. Comprehensive customer data sets are not being shared through the Open Banking initiative.
    • In the first instance of the CDR, only active / online customers will be eligible to share their data
    • The data eligible to be shared includes generic product, transaction and balance information
    • The product scope is evolving over time with the initial focus on transaction banking datasets.
  • The customer data sets can only be shared with accredited recipients i.e. not limited solely to Banks and Financial Institutions.
  • Only a subset of customer data will be available and at this point in time excludes derived data, such as credit scores.

Once the data has been shared, Banks, Financial Institutions, and data recipients must provide a customer dashboard showing the data shared/received and the customer can elect to stop the sharing of data at any time.

2. From the Government’s perspective, should CDR architecture be nationalised in order to facilitate the Open Data agenda?

When seeking to implement an industry wide data architecture, a number of different patterns were considered including a government hosted / centralised solution as well as a more distributed API / de-centralised driven framework.

Through a review commissioned by the Treasury, a report (known as the Farrell report into Open Banking) recommended the adoption of a de-centralised API driven framework that would amongst other things place the onus of responsibility for infrastructure delivery on industry participants with regulatory oversight from the ACCC and a data standards body (Data 61 – a division of the CSIRO) aligned to privacy legislation and Office of Australian Information Commissioner (OAIC) considerations.

In order to facilitate the implementation of Open Banking, the Government’s role would be to define and regulate the system, thus the legislation will be drafted via the Treasury Laws Amendment (Consumer Data Right (CDR)) Bill 2018 to amend the Competition and Consumer Act 2010, Privacy Act 1988 and the Australian Information Commissioner Act 2010. The Consumer Data Right will give customers the right to access their data in a safe, convenient and timely manner.

For further information regarding the Review of Open Banking in Australia, please visit the Treasury website here.

3. From the Bank or Financial Institution’s perspective, how can we prepare for the rollout of this CDR framework?

Through the acceptance of Farrell’s recommendations into Open Banking, the Treasury has set forth an aggressive timeframe for the implementation of the CDR framework culminating with the launch of the CDR on 1 July 2019.

In order to achieve this outcome, the ACCC, data standards body and industry participants are responding to the development of legislation and implementation of their capabilities in parallel.

This will naturally lead an initial focus on minimum viable product (MVP) to be extended overtime. As such we anticipate, industry participants will go through three waves of maturity:

  • Legislative Compliance – Banks and Financial Institutions are likely to focus on the minimum obligation to comply with the initiative beginning with all major banks sharing data related to transaction accounts (credit, debit and deposit) on 1 July 2019. The initiative will then rollout to sharing mortgage related data on 1 February 2020 and then the sharing of data related all other products on 1st July 2020. The remaining banks will implement Open Banking on a 12-month delay timeline
  • Market Share Defence – As data recipients will progressively gain access to banking data, smaller and leaner competitors will enter the market. As such, Banks and Financial Institutions may face challenges to retain their customers and keep the cost to serve competitive
  • Market Share Growth – As the market grows and diversifies, Banks and Financial Institutions are likely to explore and invest in new growth opportunities by better understanding their customers. To gain greater insight into their customer’s behaviour, Banks and Financial Institutions may partner with big technology companies (e.g. Google, Apple, and Amazon) to enrich their customer analytics.

With unprecedented access to data that describes consumer spending behaviour there will be opportunities to innovate as well as exposure to unethical use of information and data breaches. Throughout this journey, industry participants will need to balance both their investment in core capabilities and innovation with the need to implement well considered data governance controls.

For more information on Open Banking and the Consumer Data Right, refer to the Deloitte microsite here.

For a more detailed exploration of the data governance and architecture implications of Open Banking and the Consumer Data Right, refer to “Open Banking: Competitive edge through data architecture” paper published here.

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