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Payments & FinTech Lawyer

Australia consults on Final Report on Open Banking

The Australian Government published its Final Report on its Review into Open Banking for consultation on 9 February 2018, which puts forward 50 recommendations, on amongst other things the regulatory framework, the type of banking data in scope, privacy and security safeguards for banking customers, the data transfer mechanism and implementation issues. Open Banking is the first of a series of initiatives intended to give effect to Australia’s new Consumer Data Right (‘CDR’), which was announced in November 2017.

The intention of the CDR is to improve customer choice and convenience by allowing data to be shared with third parties in order to enable customers to compare services, secure better deals and switch providers across the economy. The Australian Government’s move to establish a CDR was partly instigated by the Productivity Commission’s Inquiry into Data Availability and Use that was sent to the Government in March 2017, which recommended that a new Comprehensive Right for consumers be created across all sectors to give individuals and businesses opportunities for active use of their own data.

Open Banking is the realisation of the CDR within the banking sector. “I expect the cost of implementation will be very high for banks, but I question whether consumers will appreciate any direct benefit,” said Andrew Galvin, Partner HWL Ebsworth Lawyers. “Consumers can expect a proliferation of sophisticated FinTech intermediaries pressuring them to exercise their CDR in the promise of finding a better deal. The sophisticated comparisons may be complex, and I query whether consumers will fully understand the output from these data recipients.”

One immediate advantage of Open Banking for industry however, comments Galvin, is the improved access lenders will have to the true financial position of the consumer, a necessity under responsible lending obligations enshrined in the consumer credit legislation. “‘Screen-scraping’ as an alternative means to collect this information, is still in its infancy in Australia and faces some regulatory and consumer confidence challenges. As a formal Government initiative backed by legislation and overseen by regulators, Open Banking would likely enjoy much higher levels of consumer confidence and facilitate better compliance with responsible lending obligations,” explains Galvin.

The Final Report recommends that data holders should be obliged to share the outcome of an identity verification assessment performed on a customer provided anti-money laundering (‘AML’) laws are amended to allow data recipients to rely on that outcome. Galvin explains that a difficulty with this recommendation is that customer identification procedures required under AML laws must be performed using a risk-based approach that depends on the nature of the service and other factors. “It follows that sharing the outcome of identification procedures fails to take account of the different identification standards which may be warranted between the provider of the data and the recipient of the data,” adds Galvin.

Australia’s New Payments Platform launched on 13 February 2018, which aims to provide consumers and businesses with access to the most modern payments system in the world.

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