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Australian Banking Association: Open Banking Rules Need ‘New Pathway Forward’

Australian Banking Association, open banking

Australian Banking Association (ABA) CEO Anna Bligh said its “time to go back to the drawing board” when it comes to the country’s open banking rules.

Bligh said this in a Wednesday (July 3) press release announcing research that found that four years after the implementation of Australia’s open banking rules — the Consumer Data Right (CDR) regime — only 0.31% of bank customers were using this right to share their data between service providers.

The strategic review of the rollout of CDR, which was conducted by Accenture, also found that more than 50% of data sharing arrangements were discontinued or allowed to lapse in 2023, according to the release.

The CDR went live to customers of major banks in July 2020 and to those of other banks in July 2021, per the release.

“Despite the best efforts of government, regulators and industry, this review makes it clear that CDR has not realized its potential,” Bligh said in the release. “Australians have enthusiastically embraced digital innovations in banking such as mobile wallets and PayID, however uptake of the CDR has been comparatively low.

“It’s time to go back to the drawing board,” Bligh added. “The current CDR regime isn’t delivering for customers or enhancing competition and a new pathway forward is needed.”

The review found that the banking industry has invested around 1.5 billion Australian dollars (about $1 billion) into CDR since 2018, that the government has also made “significant” investment in the program, and that other digital innovations in banking had “materially higher” customer uptake in the first three or four years after their launch.

It also found that CDR is negatively impacting smaller banks and their ability to compete because they incur disproportionately higher compliance costs compared to major banks, and because these costs force them to make investment trade-offs that lead to other projects being given less priority.

Customer Owned Banking Association (COBA) CEO Michael Lawrence said in the release that customer-owned banks, their customers and the competition in the market had seen little benefit from the 100 million Australian dollars these banks invested in CDR.

“Before smaller banks commit more resources, we ask for a clear roadmap to ensure the CDR delivers on its original intent to improve competition,” Lawrence said. “Forging ahead without addressing these foundational issues will further erode competition and divert essential investment away from improving customer outcomes and supporting local communities.”

When the CDR in the banking sector was implemented in July 2020, it had been delayed by six months amid concerns over testing and security of its new provisions for account data sharing.

Supporters said at the time that the CDR made for fundamental competition and consumer reform.

Three months later, in November 2020, an Australian senate committee began looking into whether the regulatory framework could maintain a level playing field.