Three years ago, when the UK introduced a pioneering open banking infrastructure, Australia took note. The British system, enabling third parties to access customers’ banking data, looked set to revolutionise the sector, encouraging innovation and breaking monopolies. Though hailed as a triumph, moving fast has meant a limited scope, with an initial focus on specific areas of finance, such as payments, still in place. Now the UK is losing ground to other countries. Australia, for one, has set out an ambitious plan that will extend to other industries, and do more to protect data rights.
Central to the Australian approach is its Consumer Data Right (CDR), which prioritises the interests of consumers. Unlike the UK’s open banking legislation, which specifically targets financial services, the CDR can be rolled out to cover other sectors. Australia’s legislation gives consumers full data autonomy, says Joel Gladwin, head of policy at the Coalition for a Digital Economy (COADEC). This is good for innovation, he says, because it would turn the average person into the gatekeeper of their data. By forcing banks to cede control, the theory is that more would be shared with third parties and, ultimately, better products developed.
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Data portability and privacy are also key to the Australian system. The approach allows the CDR to harmonise with the country’s data protection regime, without some of the friction found in the UK. Australia also leads on the concept of “reciprocity”. The country’s 2018 Open Banking Review recommended that data sharing should flow both ways between banks and third parties. Australian lawmakers argue that this will create a “more… dynamic” system. It will also appease banks that argue that handing customer data over to the likes of Big Tech puts them at a competitive disadvantage without getting much in return.
There is appetite in the UK to expand beyond payments into other areas of finance. The government is set introduce new legislation following its consultation on smart data. But Covid-19 is delaying implementation, and without more political capital the fintech industry is at risk, says Gladwin.
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As the UK’s open banking system was legislated through the EU’s 2016 second payments services directive (PSD2), Brexit has created a window of opportunity to set out a framework for a broader “open data” system. The UK can “lead internationally”, says Gladwin, by expanding beyond payments and removing restrictive standards, such as the requirement for consumers to re-authorise use of their data by third parties every 90 days.
“Time is of the essence, especially if we want to see any tangible benefits from Brexit through open finance,” he adds. “We have to use every avenue that we can to give our sector the best possible advantage over our international competitors — Australia, for example, started on its route to an open data ecosystem three years after the UK, and looks set to eclipse us.”
This article originally appeared in the Spotlight supplement on fintech. You can download the full PDF here.
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