Supported by Accenture, the Australian Banking Association (ABA) has released its latest strategic review of the country’s consumer data protection regime, which has revealed a staggering level of adoption.
Less than 1 per cent of Australian bank customers currently benefit from what was intended to boost competition, with more than half of data-sharing agreements having expired, according to research by Accenture.
The Consumer Data Rights (CDR) measure was introduced in the banking sector as early as mid-2020, with subsequent expansion into the energy and telecommunications sectors, but after four years, it seems that nobody cares that much.
Source: Accenture, Consumer Data Right Strategic Review, July 2024
This is against the backdrop of an estimated $1.5 billion spent by the banking sector on construction and compliance costs to date – not to mention significant government investment – with mid-tier banks bearing the brunt disproportionately. By dampening budgets for product and service innovation, the authors say, the result is the opposite of CDR’s original intent.
“Australian banks have invested heavily to ensure the success of CDR,” said ABA Chief Executive Anna Bligh. “Despite the best efforts of government, regulators and industry, this review clearly shows that CDR has not realized its potential. It is time to go back to the drawing board as the current regime is not delivering for customers or strengthening competition and a new way forward is needed.”
According to the review, only 0.3 per cent of Australian banking customers were actively using the data sharing option, while adoption rates for similar regulatory models in the UK and European Union were around or above 10 per cent. Other government-backed but market-driven open data models, such as those implemented in India and Singapore, have achieved much higher rates.
Source: Accenture, Consumer Data Right Strategic Review, July 2024
While a lack of consumer awareness and general mistrust of data sharing is one of the issues affecting local deployment – along with the limited number of compelling use cases developed by Accredited Data Receivers (ADRs), there are a number of characteristics of the Australian market that may limit future potential, including proposed upcoming improvements.
Research from 2018, when the government first introduced the CDR, found that 40 per cent of Australians were still with the same bank they first registered with as children, potentially from as early as age 8 due to primary school savings programs such as Dollarmite scheme of the Commonwealth. One-fifth said they hadn’t even considered switching, or simply couldn’t be bothered.
More recent studies have shown persistently low and deteriorating financial literacy among Australians, including one from Allianz last year which classified more than a quarter of local respondents as having “low” literacy and only 17 per cent as “high”. In another survey by Canstar, only 30 per cent of younger Australians passed a basic set of financial questions, and barely half across all age groups.
Source: Accenture, Consumer Data Right Strategic Review, July 2024
On the other hand, Australia ranks relatively high in terms of digital literacy, and the ABA report here points to a ready adoption of other personal banking innovations since the introduction of CDR, such as a 36 percent digital wallet penetration rate and more. 15 million connected cards by 2022. Only two ADRs – Frollo and WeMoney – accounted for more than half of CDR arrangements.
“Four years of ecosystem development have struggled to create compelling customer propositions, and (and) without significant increases in consumer engagement, the benefits of built infrastructure will remain largely theoretical,” Accenture’s report concludes, adding, “Compliance burden and complexity are holding back. the results of the competition and the adverse impact on some participants.”
Of course, there are many vested interests involved in such reforms. The government appears to have understood the message about the cost burden, but the traditional banking sector has also reportedly lobbied against further proposed legislation to strengthen CDRs by making it easier to switch providers. Meanwhile, FinTech Australia has questioned the framing of the data used in the ABA report.