Introduction
In 2017 the Australian Government announced its intention to legislate a Consumer Data Right. With a draft Bill released last month, we take a look at the Consumer Data Right, its proposed application to the Australian banking sector and the approach New Zealand is taking in respect of open access initiatives.
Coined the ‘new oil’ by Forbes magazine, the increasing value of data to businesses is undeniable, but what about its value to the consumer? The recent Cambridge Analytica scandal highlighted just how much data consumers are handing over in return for the use of free services, and how little control consumers really have in respect of that data. The European Union’s General Data Protection Regulation (GDPR) is an example of a legislative response to the increasing issues presented by our data sharing economy. Click here for our article on the GDPR. Open access initiatives go one step further by giving the consumer greater control over their data.
Summary of the Australia Consumer Data Right
In the 2017-18 Budget the Australian Government announced it would introduce an Open Banking regime. The Australian Government commissioned an independent review (Review) to recommend the best approach to implement the open banking regime. The Review made recommendations in relation to the legal and regulatory arrangements for an economy-wide Consumer Data Right; and more specifically how it should be applied to banking data. On 9 May 2018, the Australian Government agreed to the recommendations of the Review and on 15 August 2018 the Australian Treasury released an exposure draft of the Treasury Laws Amendment (Consumer Data Right) Bill 2018.
The proposed Consumer Data Right contemplates a framework to enable consumers to more effectively use their data for their own purposes. The draft Bill is a key element of the framework. Under the draft Bill the Government would be able to determine which sector it applies to by issuing a designation. Rules would be prescribed on how the consumer data right applies to the sector. Those rules would allow a consumer to direct an agency to share data held about them with trusted third parties. The intention of the regime is that this will result in the consumer’s improved ability to compare and switch between products, which will encourage competition between service providers. The aim is that having a Consumer Data Right will result in lower prices for consumers and encourage the development of innovative products and services in participating sectors.
Open Banking
Overview
What is Open Banking, then? Open Banking is the sharing of a consumer’s data through open Application Programming Interfaces (APIs), to a third party as directed by the consumer. The intention of Open Banking is to provide the consumer with greater choice and encourage informed decision making. For example, by sharing banking data with a third party comparison application, the consumer will be able to receive the most accurate information based on their current account information, and determine whether another banking provider would be more appropriate for their needs.
Open Banking also has the potential to offer greater convenience in managing money. Think mobile applications that can aggregate your personal financial data to help with budgeting or other financial decisions.
Open Banking is about making consumer data work for the consumer.
Australian position
Open Banking in Australia is intended as a ‘read only’ right, in that it allows access to the Consumer’s financial data in accordance with the consumer’s direction. Greater advancements in Open Banking have been made in other jurisdictions, such as the UK, where Open Banking also includes ‘write access’, a right to authorise other parties to initiate transactions on consumers’ bank accounts.
The Australian Government proposes designating banking as a sector to which the Consumer Data Right would apply in a phased manner from July 2019. They contemplate that all major Australian banks are to make data available on credit and debit card, and deposit and transaction accounts by 1 July 2019. Data on mortgages are to be made available by 1 February 2020. Other select banking data will be available by 1 July 2020. All remaining banks will be required to implement Open Banking with a 12-month delay on timelines compared to the major banks.
The Australian Government have also announced the intention for the Consumer Data Right to apply to the telecommunications and energy sectors.
New Zealand position
So where does New Zealand stand? Notably the New Zealand Government has at this time not elected for the regulated approach taken in Australia, instead allowing the industry to lead the way. Payments NZ is currently piloting an API framework that will enable providers to make retail payments on behalf of their customers. The intention is for Payments NZ to establish common standards that banks and providers can use to share customer data.
However, Commerce and Consumer Affairs Minister Kris Faafoi has said he will be paying particular attention to developments in Australia, and that the Government wants to see greater momentum towards open banking in New Zealand. This means that for now we wait and see what the industry comes up with.
Risks in Open Banking
Open Banking has the potential to transform the competitive landscape of banking services by granting consumers greater control over their data. However, it’s not without risks. Inherent in the increased transfer of data is the increased risk of data mishandling.
Banking data has historically been well protected by banks. Even if in technical terms the process is as secure as existing systems, consumers may have concerns in this regard. Such concerns may not unwarranted. APIs provide a new attack point for hackers to access financial data, and third party service providers could be targeted if they do not have sufficient security practices in place. It is possible that we may see regulation to set obligations on third parties with a view to mitigating these risks.
More information
If you would like to understand more about Open Banking, or your rights and obligations relating to the transfer of data, please get in touch with a member of our Corporate team.
Business Law team
If you need any assistance with the sale or purchase of your business, do not hesitate to get in touch with the Business Law team at Lane Neave.
Gerard Dale, Claire Evans, Graeme Crombie, Evelyn Jones, Anna Ryan, Joelle Grace, Peter Orpin, Ellen Sewell, Matt Tolan, Carlo Wan, Kristina Sutherland, Jacob Nutt, Whitney Moore, Alex Stone, Ben Cooper, Lisa Catto
