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An Australian Treasury minister has called for a "reset" of the country’s open banking rollout, after admitting that the compliance costs associated with the required changes are "too high".
Stephen Jones, assistant treasurer and minister of financial services, said last week that the Consumer Data Right (CDR), the legal framework that underpins open banking in Australia, has so far failed to deliver.
Jones blamed the previous Liberal government for its poor handling of CDR implementation, and said the cost of the CDR to businesses is cancelling out its potential benefit to consumers.
“Costs are high, uptake is low,” he said. “It’s a good idea, poorly executed, and so we need to reset.”
Since the CDR rollout began in 2020, the minister said there has been some innovation in financial products and services for consumers, but not as much as was promised by those who designed the CDR.
Businesses are not being incentivised to use CDR data for key use cases such as lending and energy switching, he said.
Meanwhile, restrictions on using and holding CDR data continue to prevent uptake among businesses, which in turn has led to low consumer uptake.
“You can’t look at these outcomes and think that if we do more of the same, we’ll get a different outcome,” he said. “We won’t.”
Compliance costs in numbers
With these observations in mind, Jones commissioned an independent report on the compliance costs associated with CDR implementation.
The report, published last week, was authored by Heidi Richards, a consultant at the Better Regulation Advisory group.
Richards found that the cost of the CDR rollout has “far exceeded” the original estimates outlined by regulators.
“Industry participants have expressed significant concerns about the continued pace of change and the resulting costs,” she said.
“Although this review did not focus on quantifying benefits of the CDR, it was evident that many participants question the cost-benefit justification of ongoing changes to CDR rules and CDR data standards, based on the very low level of usage that they observe among their customer base.”
So far, CDR implementation costs have fallen most heavily on data holders — entities that are mandated to share their data with certain recipients.
There have been a number of factors contributing to these costs, the report found. For example, data holders do not have systems and data structures in place to meet CDR technical requirements, so “very significant” systems development work has been required.
There was also limited consistency in how data holders define and manage their product and customer data, particularly in the banking sector.
As a result, cost impacts have varied substantially across the relevant industry sectors.
Indicative overall cost estimates across data holder implementation activities, to date, range from under A$1m ($660,000) to more than A$100m ($66m) each, depending on the size of the business.
The Richards report also found that changing regulatory obligations are a major contributor to CDR compliance costs.
CDR data standards have been subject to frequent updates by the Data Standards Body (DSB), based on a community-generated backlog of issues, as well as evolving policy and compliance requirements.
Since 2020, there have been three major reviews of the CDR framework; 16 consultations on legislative and regulatory changes; 20 versions of the binding CDR data standards; and more than 100 formal proposals for changes to the standards.
The findings of the Richards report align with those of a strategic review produced by Accenture on behalf of the Australian Banking Association (ABA).
Published last month, Accenture’s review found that, since 2018, Australian banks have collectively spent around A$1.5bn ($1.1bn) on CDR implementation.
As covered by Vixio, ABA CEO Anna Bligh said the review makes clear that it is “time to go back to the drawing board”.
“The current CDR regime isn’t delivering for customers or enhancing competition, and a new pathway forward is needed,” she said.
The solution?
In response to the Richards review, Jones said the Labor government will endeavour to reduce the compliance costs that are limiting uptake of the CDR.
The minister said that many businesses have complained that it is difficult to access CDR data, particularly that which is held by the country’s big four banks.
Jones said that new draft rules, published last week and currently under consultation, will make it easier for banks to use data shared via the CDR, in recognition that banks handle this type of data every day.
He added that there will also be a more “structured and consultative” approach for making standards changes.
As recommended in the Richards’ review, changes to the standards should be limited to a small, fixed number of scheduled releases per year, said Jones, and should include longer lead times for industry.
They should include explicit cost and regulatory impact consideration and follow a clear, transparent prioritisation process, he added.
Rehan D’Almeida, CEO of FinTech Australia, told Vixio that he endorses the Treasury’s latest proposals.
“This is the most clarity that we, as an industry, have had on the CDR the past 12 months,” he said.
“A firm timeline from government indicating their agenda for different parts of the CDR would consolidate momentum here, and again help everyone in the industry work towards the best outcomes for this policy.”
