Flag of Australia.
Editorial credit: Shutterstock.com

Australia’s banking sector has expressed concern about the lack of engagement with the Customer Data Right (CDR), four years after its introduction by the federal government.

The CDR was approved by the Australian legislature in 2017, adopted into law in 2019, made available to consumers in 2020 and to banks in 2021. The framework allows customers to gain access to direct data holders by providing CDR data to an accredited data receipt.

Several international stakeholders in the banking, finance and political spheres have noted Australia as a leader in Open Banking adoption. 

Stephen Wright, Head of Regulation and Standards at Bank of APIs, expressed this view to Payment Expert earlier this year, for example, Enabling data sharing is essential to this proliferation in the country, being a key ingredient to Open Banking’s functions. 

However, the Australian Banking Association (ABA) has conducted a review of the CDR, finding engagement with it has not progressed significantly over the past four years.

“Australian banks have invested heavily to secure the success of CDR,” said ABA Anna Bligh. “Despite the best efforts of government, regulators and industry, this review makes it clear that CDR has not realised its potential.”

The ABA’s review found that by the close of 2023, only 0.31% of bank customers were using CDR and more than 50% of data sharing agreements had been called off. 

Smaller banks are not exactly incentivized to initiate CDR engagement, with mid-tier and regional banks observed to be incurring higher compliance costs in comparison to major banks.

This is despite significant investment in CDR across the banking sector. The ABA observes that the Australian banking industry has invested around AUS$1.5bn (£788.5m) into CDR since 2018, one year after legislative approval of the initiative.

Australian banks have highlighted a number of hurdles holding back CDR, which in turn is negating the full potential of the country’s Open Banking infrastructure. 

Challenges raised by the ABA’s review include unsubstantiated consumer propositions, an absence of a robust cost/benefit governance framework, excessive complexity and prescriptiveness in compliance obligations.

CDR has fallen short of its expectations, the ABA asserts, failing to fully achieve its objectives of customer focus, prompting competition, encouraging innovation,and boosting efficiency and fairness.

This is despite Australia’s banks and consumers embracing digitalisation and emerging payments innovations and methods. 

Mobile wallets and PayID, the letter a means of using personal details like a mobile number or email address to receive a fast payment, are well received by Australians – the ABA does not see the same enthusiasm for CDR, however.

Bligh continued: “Australians have enthusiastically embraced digital innovations in banking such as mobile wallets and PayID, however uptake of the CDR has been comparatively low.  

“It’s time to go back to the drawing board. The current CDR regime isn’t delivering for customers or enhancing competition and a new pathway forward is needed.”