Australia’s Proposed CDR Changes Open Up Payments

October 10, 2022
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Australia’s Treasury is seeking comment on draft legislation that could introduce new rules for action initiation within the country’s open banking framework that will enable, among other things, payment initiation.

Australia’s Treasury is seeking comment on draft legislation that could introduce new rules for action initiation within the country’s open banking framework that will enable, among other things, payment initiation.

According to the Treasury, the proposed legislation will create a “new channel” for consumers to instruct businesses to initiate actions on their behalf and with their consent.

Such actions could include making a payment, opening and closing an account, switching providers and updating personal details (such as an address) across providers.

“Action initiation would empower consumers to authorise, manage and facilitate actions securely in the digital economy,” the Treasury said in a statement.

“These use cases are an example of how introducing action initiation will unlock new business models and drive consumer benefits and digital innovation.”

The Treasury said that the benefits of action initiation can be seen in the success of payment initiation in the UK, which in August totalled 6.5m transactions, according to the Open Banking Implementation Entity (OBIE).

The new rules on action initiation are proposed as an amendment to the Competition and Consumer Act 2010.

In 2017, this act also absorbed Australia's Consumer Data Right (CDR) legislation, the foundational rulebook on which the country’s open banking framework is built.

If adopted, the amendment will introduce enabling provisions for action initiation, outline key obligations and safeguards for data providers and receivers, and provide a pathway to bring individual action types into the CDR.

However, the legislation does not codify these action types. Instead, specific action types would be added to the CDR following a ministerial declaration, similar to the current designation process for data-sharing.

According to a Treasury briefing paper, the Treasury minister could declare more than one action at one time.

The declaration would specify which data holders would be obliged to accept action instructions under the CDR.

However, before declaring an action type, there would have to be a period of public consultation, and the minister would be required to consider factors such as data privacy and impact on markets, competition and intellectual property.

Following a declaration, the minister would be able to make rules for an action type. The rules could include obligations for action initiation participants, such as recordkeeping, reporting and audit requirements, fee charging and consumer complaints guidelines.

Two new entities

The proposed legislative framework does not seek to regulate the action layer. Instead, the framework would regulate only the "instruction layer", which is made up of the activities associated with consumers sending instructions for the performance of actions, such as a payment.

The proposals contain a number of key features to establish the framework for action initiation under the CDR.

In particular, it would create two new types of CDR entities: accredited action initiators (AAIs); and action service providers (ASPs). Both types will be accredited by the Australian Competition and Consumer Commission.

With the relevant account holder permission, an AAI would be able to instruct an ASP to carry out actions on behalf of the consumer.

According to the Treasury, an ASP must accept valid action requests, and would treat such a request as if it came directly from the consumer.

This does not mean they need to complete every action request, however, as they could still refuse an action if they would not be able complete the action outside the CDR in normal circumstances.

For example, a bank may decline to complete a payment if the consumer is not eligible for the particular transaction or does not have sufficient funds in their account.

However, it is proposed that ASPs cannot discriminate against instructions that came through the CDR framework.

Svetlana Atanasova, legal analyst at VIXIO, said that if the draft legislation is adopted, it is expected to be a “game-changer” for open banking in Australia, and will instantly open up new service types to banks, fintechs and payment firms.

“Given that the CDR infrastructure is already in place, the changes would be introduced fairly quickly, and so grasping what the new rules entail ought to be equally quick across the industry,” she said.

“Furthermore, this consultation and the proposed legislation will have a significant indirect impact on open banking discussions among lobbyists and policymakers in other countries, and so ought to be followed closely by firms with multinational operations.”

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