Open banking is happening — and it could now be easier for you to switch banks or get a cheaper home loan

Photo: Cameron Spencer/ Getty Images.

Prime Minister Scott Morrison and fintech leaders have hailed the passage of the consumer data right law through parliament, contending that the new “open banking” regime will shake up competition for consumers and boost start-ups against the big banks.

The consumer data right law passed by the Senate on Thursday is a critical component of the emerging “open banking” system and will ultimately be extended to the telecommunications and energy sectors.

Championed by Mr Morrison when he was treasurer as a signature microeconomic reform, the new rules require banks to make customer data available to competitors on credit and debit cards, deposit and transaction accounts and mortgages if a consumer wants to switch banks, for example to a smaller lender or a fintech operator.

Stuart Stoyan, chief executive of peer-to-peer lender MoneyPlace and the former chairman of Fintech Australia, said the law would make it easier for consumers and small businesses to share their data so they can change banks, get a cheaper loan or use a budgeting tool.

“The Consumer Data Right empowers consumers so that they can take control of their data and get a better deal,” Mr Stoyan said.

“As we expand CDR to the energy and telco sectors, we will see the elimination of products and services that are complicated, convoluted and rip customers off.

“It shouldn’t be that hard to get a credit card, mobile phone plan or energy contract that is simple, easy to understand and in your best interests.

“CDR will eliminate this friction and make it easier for all consumers.”

Morrison hails reform

Mr Morrison said Australians will have more power to compare and switch home loans and credit cards, as well as energy and phone and internet companies.

“The Consumer Data Right will revolutionise the way consumers and small businesses use their data and not only help them switch to cheaper offers, but encourage competition between service providers, leading to better prices and more innovative products and services,” the Prime Minister said in a statement.

“The improved competition and data-driven innovation from the new system will also help create new jobs and ultimately boost the economy.”

The new law will help lenders better price services such as home loans and credit cards by taking into account people’s unique circumstances and allow more convenient switching between products and providers.

Bank executives privately said there could be pros and cons for consumers because it could lead to more risk-based individual customer pricing over time, enabling high credit-grade borrowers to get cheaper loans and riskier borrowers to be charged more.

The government, with the support of Labor, raced against the clock to pass the legislation this week before parliament breaks until September, in order to give banks enough time to meet a February 2020 deadline for the open banking regime to formally begin.

Labor, fintech start-ups and consumer advocate Choice broadly support the regime, though some privacy advocates were concerned about the retention of people’s personal data.

Labor pushes ‘right to delete’

Labor’s financial services spokesman Stephen Jones said it had secured a commitment from the government for a consumer “right to delete”.

The regulation will be finalised after parliament returns in September, requiring the Australian Competition and Consumer Commission to set out clear rules that require data recipients to delete data when they receive a valid request by a consumer.

“This new legislation will give Australian consumers an off switch when it comes to data sharing,” Mr Jones said.

Westpac chief data and strategy officer Jamie Twiss said: “Keeping customer data safe is crucial to Westpac so we welcome this as an important step towards building a trustworthy and secure regime for all Australians.”

King & Wood Mallesons partner Scott Farrell said customers will soon have the right to ask for their data to be shared with others they choose to trust.

“Now is the time for businesses connected with the banking, energy and telecommunications sectors to work out not only what they will need to do for their customers, but also what new services they will be able to provide,” he said.

Australian Banking Association chief Anna Bligh said the regime would increase competition across the industry.

“Empowering customers with the ability to use their data to drive a better deal on banking products has the potential to dramatically increase competition and foster innovation across the industry,” Ms Bligh said.

“By the end of August the industry expects the ACCC will issue the ‘lock-down’ version of the rules governing the system.”

“Following the passage of the legislation and the ACCC guidance on the rules, the industry, together with regulators, will begin rigorous testing to ensure the system is safe for Australian bank customers to use.”

Three of the four major banks last month voluntarily launched the first stage of the CDR.

It will be regulated by the ACCC and the Office of the Australian Information Commissioner, with a new Data Standards Body developing transfer and security standards.

This article was first published by The Australian Financial Review. Read the original here.

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