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Open banking is a regime being implemented around the world, and now in Australia. It is driven by the idea of providing consumers with control over their data. Open banking is also referred to as the ‘consumer data right’. While it is starting in the banking sector, there are plans to roll out the consumer data right across the Australian economy, with the energy and telecommunication sectors next on the list. This article looks at what open banking means for businesses and how your business may be affected.

Open Banking Explained

On 1 July 2020, phase one of opening banking came into effect for the big four banks. Under phase one, consumers can request consumer usage data on:

  • credit cards;
  • debit card;
  • deposit accounts; and
  • transaction accounts.

From 1 November 2020, this will also include a right to request mortgage and personal loan data. Over time, the data-sharing requirements will also include further financial institutions.

The implementation of open banking is based on the consumer data right legislation passed by the Federal Government in August 2019. The key regulator managing and enforcing the legislation is the Australian Competition and Consumer Commission (ACCC). Notably, the legislation also includes data privacy provisions which the Office of the Australian Information Commissioner, the key federal privacy body, will assist with. 

Open banking aims to give consumers new impetus to search for a better deal, to consider switching banks and even transition to using fintech businesses. It aims to do this by allowing consumers to:

  • easily transfer their bank data between banks or to fintechs; and
  • use their bank data to more effectively compare products.

Which Businesses Are Affected?

Data Holders

The consumer data right will impact banks, starting with the big four. Over time, it will include other authorised deposit-taking institutions. Under the consumer data right, these businesses are classified as ‘data holders’. 

The CDR Rules identify data holders. Accordingly, being a data holder is not a choice. This means, if your business is a data holder, you will have obligations imposed on you by the new legislation which you must comply with.

It is worth noting that businesses which hold consumer bank data for data holders will also need to take steps to help data holders comply with the consumer data right.

Data Recipients

Businesses which receive consumer bank data are also affected. Only accredited businesses can receive consumer bank data from a data holder. If your business is accredited under the consumer data right, it will be listed on the accreditation register and referred to as an “accredited data recipient”. To become accredited, you must apply for accreditation and be approved by the ACCC. 

Whether you apply for accreditation is entirely optional. In considering whether you should apply, you should consider the time and expense of applying as well as how you will benefit from the receipt of consumer bank data. 

For example, it offers fintechs invaluable opportunities because the receipt of consumer bank data will allow for:

  • easier assessment of customer risk;
  • better promotion of comparison deals; and 
  • a painless transition for customers.

What Is Changing?

The key changes for your business will be determined by the role your business will play in the open banking regime. This is because the impact on data holders and data recipients are different.  

Changes for Data Holders

As a data holder, you need to be aware of your new legal obligations, such as:

  • when you must share data;
  • which data you must share; and 
  • what data privacy protections you must comply with.

Outside of your legal obligations, you also need to be prepare technology to identify and transmit the data via approved channels. You also need to train staff to accurately communicate the new rights.

Changes for Data Recipients

If your business desires to become an accredited data recipient, you need to apply for accreditation. You will likely need to perform some internal checks and potentially make changes to meet the accreditation requirements. 

These include, for example:

Once accredited, you must be ready to maintain your accreditation, by meeting ongoing reporting obligations and the requirement to submit to audits. You will also need to be capable of:

  • receiving an influx of consumer data;
  • storing such data securely; and 
  • helping consumers benefit from your receipt of their data.

How to Prepare

To prepare for open banking, there are four key steps which all financial services businesses should take. These are to:

  1. identify your legal obligations and take all steps to comply with them;
  2. identify commercial opportunities and take action to capitalise on them;
  3. train your staff, especially customer-facing staff; and
  4. review and upgrade your technical IT capabilities.

1. Legal Obligations

You will best understand your business’ legal obligations through bespoke legal advice which:

  • considers your current practices against the new requirements; and
  • identifies the practical changes you must make. 

A notable legal obligation which you will need to be ready for is the publication of a customer-facing CDR policy for your business.

2. Commercial Opportunities

It is important to identify commercial opportunities after understanding your business’ legal obligations. This is because you need to ensure that any opportunities you pursue align with the applicable legal requirements.

3. Training

Staff must be aware of the new consumer right to request bank data, and you must ensure that staff:

  • communicate with consumers accurately about these rights; and
  • allow consumers to exercise these rights.

This is an important step in reducing the risk of legal complaints and is also key in ensuring customer satisfaction.

4. Assessing Your IT Capabilities

You then need to assess your current IT capabilities. This is because it is critical that you have the required IT capabilities to support you in carrying out the above steps. If not, then it is likely an upgrade in such capabilities is a vital investment.

Key Takeaway

Open banking is an exciting time for consumers and businesses in the financial services sector. Businesses which are impacted need to take steps now to prepare for the changes. This is driven by a legal need to do so, and the commercial opportunities the consumer data rights provide. If you have any questions about how the consumer data right will affect your business, contact LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.


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