Australia moves to Open Banking in 2019

Australia will begin the implementation of Open Banking from 1 July 2019, as the first phase of a broader regime that is intended to be rolled out across a number of sectors in respect of consumer data.

Culture of risk aversion to data sharing detrimental
The reforms follow a series of studies and reviews undertaken in relation to data use in Australia. In particular, a 2017 report by the Australian Productivity Commission (an independent advisory body of the federal government), found that Australia's public and private sectors had an entrenched culture of risk aversion of in respect of data sharing and use.

The Commission reflected that this was out of step with competing economies like the US, the UK and New Zealand, and would be detrimental to Australia in a competitive global economy that is increasingly driven by digital data.

Open Banking in Australia to apply sector by sector
The proposed Consumer Data Right (CDR) system will afford individual and business consumers the right to access specified categories of data about or related to them that is held by a designated entity, and direct the transfer of such data to accredited third parties. The CDR will apply to sectors designated by the Australian Treasurer, with the banking sector the first to be designated.

The regime will be overseen by the Australian Competition and Consumer Commission (ACCC), with additional supervision from the Australian privacy commissioner.

Ambitious implementation timelines
The federal government has set ambitious timelines for the implementation of Open Banking.

From 1 July 2019, Australia's four major banks will be subject to the CDR in respect of all data relating to credit and debit cards and deposit and transaction accounts. Data held by other banks and relating to other products will be phased in over the following two years.

Comparison to the UK regime
In many respects, the Australian regime is similar to its equivalent in the United Kingdom. For one, the timeframe for implementation is similarly short. The federal government has described the timeline as 'challenging but realistic', though Australian banks will be mindful that when the UK implemented Open Banking earlier this year, six major banks missed the implementation deadline, despite being given a 18-month lead-in period.

Like the UK regime, Open Banking in Australia is expected to utilise a set of APIs to facilitate the easy transfer of consumer data. In Australia, APIs will be developed by a government-appointed data standards body.

Departing from the UK regime, draft legislation released in August 2018 indicated that the CDR would apply to aggregate or value-added data 'derived' from consumer data. Following significant pushback from industry, a revised version of the legislation was released in September which permitted only the inclusion of data that has been enhanced, but not materially so, where that data is included in the Treasurer's designating instrument. In addition, data that is not related to an individual consumer (but rather, for example, to a product) will only be required to be provided or transferred where it relates to the eligibility criteria, terms and conditions, or price of a product or service. As a result, consumers will only be able to access and transfer limited sets of derived or value-added data, which is a welcome change for FinTechs and others who expend significant resources on enriching data sets.

What happens next?

With the phased implementation of Open Banking set to commence from 1 July 2019 (assuming passage of the enabling legislation in early 2019), the federal government is also looking to conduct consultation in relation to how the CDR will apply to other sectors in the future.

The government has already indicated that the CDR will be extended to the energy sector next, with the telecommunications sector to follow.

This article was contributed by Allens.