Faculty of law blogs / UNIVERSITY OF OXFORD

Australia’s World-Leading Reforms in Consumer Data-Sharing

Author(s)

Ross P Buckley
Scientia Professor and the KPMG Law – King & Wood Mallesons Professor of Disruptive Innovation at UNSW Sydney
Natalia Jevglevskaja
Research Fellow in the ARC Laureate Project at the University of New South Wales in Sydney

Posted

Time to read

3 Minutes

The consumer data right (CDR) is being rolled out progressively across most of Australia’s economy.  CDR puts people in charge of the data businesses hold about them and does so in a way that is simple for consumers. Within five years, it should have transformed commerce, promoted competition in many sectors, and simplified daily life.  

Our recent paper analyses the five potential benefits of this world-leading reform and the six risks and challenges that may thwart its full realisation.  

The first application of CDR has now been rolled out, in two stages, across the entire banking sector. CDR in this context is known as open banking and allows customers to direct their current bank to provide their raw transactional account data to another potential financial service provider so the latter can offer them a better service.

Open banking is being implemented in many countries. The transformational aspect of CDR in Australia will be the breadth of its reach. The rollout of CDR across the energy sector is now well underway, and is commencing in telecommunications. The government has recently announced that it will soon be extended to non-bank lending, pensions and general insurance.

These changes will be utterly fundamental – for CDR goes to who owns the data. Your bank knows so much about its customers by operating their bank accounts. Historically, banks thought of this as their data – information they collected about their customers. CDR says it is the consumers’ data – the data of the people it is about – not the data of the bank that collects it.

Progress with CDR is slow and it should be for two reasons. Firstly, while Australians tend instinctively to look to government to set technological standards (the rails upon which CDR will run), governments mandating technologies rarely ends well. Technologies should be the choice of industry, and Australia’s government is rightly pushing these choices back onto industry. Government rules tend to lock certain technologies in place in deeply unhelpful ways. Secondly, and most importantly, data reforms need to be done right the first time. Once someone authorises the transfer of data to one alternate service provider and receives competing offers from five, trust in the system will be diminished.

Rolling this out initially in banking makes sense – but it has also clouded the message in Australia – for if people know of this at all, they tend to think it is limited to banking, whereas this will eventually be an economy-wide reform. 

In our opinion, the energy sector may well be impacted more by data sharing than the banking sector. Consumers pay too much for their electricity, for when someone rings to offer a better energy plan, they tend not to respond. They are usually too busy to take such calls, and if they have time might think that they would be unable to compare different energy offers. But once CDR applies to the energy sector, consumers won’t have to answer annoying unsolicited phone calls to change providers. They should be able to simply click on a button on a website or email and direct their energy usage data to be sent to their chosen potential new supplier. Importantly, the CDR regime will then enable that supplier to set out what consumers are paying before and after switching providers. The problems of comparing apples and oranges, so prevalent today particularly for mobile phone plans, should be resolved as the regime will reward comparability. If consumers prefer the new arrangements competitors offer, they can simply click another button, initiate the transaction, and change provider.

Once the recommendations of the report on Future Directions for the CDR are fully implemented utilising CDR will often be literally easy as clicking on a few buttons. Consumers won’t have to give a potential new provider lots of information about themselves. They won’t have to phone up and disconnect from current providers. All they will have to do is to click a button to accept the new offer and change suppliers.

Importantly, this will deny current providers the opportunity to reclaim customers by offering a better deal when they call to cancel existing contracts. It will be too late.  The cancellation will have happened. The current provider will be forced to treat consumers fairly upfront – or risk losing them.

Banks today routinely offer new customers better terms on home loans or other financial products than existing customers. E-commerce platforms in the US routinely offer consumers individualised prices on prospective purchases based on a raft of factors that, in sum, mean poorer consumers often pay more for their goods. Both practices seem deeply unfair.

Thirty years ago, most Australian businesses thought charging current customers more than new customers was unfair and the law reflected this – such differential pricing was illegal. Today those standards of behaviour seem to have fallen away and this is reflected in more relaxed consumer laws. In many contexts, CDR should reinstitute a commercial morality, a basic fairness, that modern business practices have set aside.

Open banking was launched first in the UK and its implementation is underway in many jurisdictions around the world. Where Australia is leading the world is in rolling out this reform across a wide range of sectors of the economy. How it should do so in the coming years so that this transformative reform succeeds is the subject of our recent paper.    

Ross P. Buckley is the KPMG Law – KWM Professor of Disruptive Innovation, and an ARC Laureate Fellow, at the University of New South Wales in Sydney

Natalia Jevglevskaja is a Research Fellow in the ARC Laureate Project at the University of New South Wales in Sydney

Share

With the support of