The recent announcement by Assistant Treasurer Stephen Jones, reaffirming the Australian government’s commitment to the Consumer Data Right (CDR), has been met with strong support and optimism across the mortgage and banking sectors.
Industry leaders see the "reset" of CDR as a pivotal moment, paving the way for enhanced consumer safety, reduced costs, and broader adoption, ultimately benefiting brokers, lenders, and consumers alike.
The Consumer Data Right (CDR) is a regulatory framework that gives consumers greater control over their data.
Initially drafted in 2019 and implemented in the banking sector in 2020, it allows consumers to securely share their financial information with accredited third parties, such as mortgage brokers or financial advisers, to receive better services.
The CDR aims to promote competition, encourage innovation, and provide consumers with more tailored products and services by making it easier to switch providers or find better deals.
However, its rollout has faced numerous challenges, including issues with data quality, complex regulations, limited customer awareness, high accreditation costs, and the continued use of an unregulated data-sharing method known as “screen scraping”.
Banks are also generally lukewarm, with the (so far) $1.5 billion investment from the banking sector only affecting 0.3% of customers, according to a recent Accenture report.
So when the government announced last Friday that it would be resetting the CDR, the Australian Banking Association (ABA) was quick to say it would lobby to delay the legislation, according to the Australian Financial Review.
Still, Mortgage & Finance Association of Australia (MFAA) said it was encouraged by the “greater take-up” of CDR by brokers, aggregators and lenders “we’ve seen more recently”.
“The development over the last six to nine months of products specifically for brokers has also been encouraging,” said MFAA CEO Anja Pannek (pictured above centre).
“The benefits of these products include an easier and safer way for a broker to collect information from their clients for their home loan application and making it easier for a broker to reprice and refinance their clients’ loans.”
The MFAA has expressed its strong approval of the government’s renewed commitment to CDR, seeing it as integral to the future of the mortgage industry.
Pannek said it was clear both sides of government want CDR to be successful for consumers.
“We see CDR as a critical part of the future of our industry and the experience of a consumer working with their mortgage broker as their trusted adviser,” Pannek said.
NextGen, an Australian technology provider to the lending industry, also praised the government’s announcement, which aims to make the CDR more consumer-focused, reduce costs, and encourage wider adoption by both businesses and consumers.
Tony Carn (pictured above left), NextGen chief customer officer said, “We’re extremely supportive of the CDR announcement, which outlines concrete changes which will benefit consumers, lenders and brokers.”
The Australian Retail Credit Association (ARCA), whose members include 14 of Australia’s largest banks, mutual banks, consumer finance companies, fintechs, and credit reporting bodies, accounting for 95% of all consumer lending in Australia, agreed the CDR would benefit both consumers and credit providers - if properly designed.
“Minister Jones has hit the nail on the head,” said Michael Blyth (pictured above right), general manager for policy and advocacy at ARCA. “The CDR has significant potential but hasn’t been providing bang for buck.”
One of the most significant changes announced is the move towards a full and formal ban on screen scraping.
Screen scraping, a technique where third-party services collect consumer data by mimicking the consumer’s access to a website, has raised concerns about security and data privacy.
The MFAA noted Jones’ speech on Friday included “the strongest words so far” on the banning of screen scraping.
“Further to our advocacy on CDR, we continue to advocate for a seamless transition between the two technologies,” Pannek said. “CDR is already proving to be safer, easier, faster and a better experience for consumers.”
“As an industry, we need to be thinking about the transition from screen-scraping to CDR a bit like moving from chequebooks to tap and pay.”
To support this transition away from insecure screen scraping, NextGen said its open banking framework is set for expansion with more lenders and aggregators “turning on our solution in the coming months”, according to Carn.
“This will increase the number of brokers with free access to the service.”
ARCA, while agreeing with the need to cease screen scraping, pointed out that the current limitations of CDR still necessitate its use for many credit providers.
“Today’s announcement opens up a pathway to allow for this change, and we will work with our members on how we make transitioning away from screen-scraping achievable,” Blyth said on Friday.
Another key development is the planned expansion of CDR to include non-bank lending data by 2026.
This move is expected to provide a more complete and comprehensive view of a customer’s finances, enabling brokers and lenders to offer better-informed choices for their clients.
Carn from NextGen praised this inclusion, noting that it would lead to more accurate and beneficial outcomes for consumers.
The government has also committed to simplifying the consent process for consumers.
By allowing multiple consents in a single action, the new process aims to make it easier for consumers and small businesses to benefit from the CDR while also reducing compliance costs for lenders.
To further improve the CDR system and reduce costs, changes to CDR standards will now be done in a more consultative manner, with fewer releases per year and a focus on consumer benefits, costs, and regulatory impact.
Additionally, the Treasury will explore narrowing the scope of CDR to eliminate unnecessary data, reducing costs for lenders.
The government plans to focus on high-value use cases for CDR, such as consumer finance, energy switching, and small business accounting.
Industry players are encouraged to propose specific, high-value use cases and work with the government to remove barriers to adoption.
ARCA welcomed the focus on consumer lending as the “highest priority” use case, noting that it aligns with their advocacy efforts.
MFAA also expressed support for this initiative, emphasising the need to unlock the value of CDR for brokers and their clients.
Aside from some friction among associations, the mortgage and banking sectors are generally preparing to work closely with the government to ensure the successful implementation of these changes.
Industry leaders have expressed their commitment to advocating for a seamless transition from screen scraping to CDR and ensuring that the system evolves to meet the needs of both consumers and credit providers.
ARCA’s Michael Blyth summed up the industry’s sentiment: “This is an encouraging step in the right direction and acknowledges the work being done by the industry to improve the system. We will be reviewing the draft changes to the rules to make sure they work for both credit providers and consumers.”
As the government moves forward with its plans, the industry remains optimistic that these changes will lead to a more secure, efficient, and consumer-focused financial landscape in Australia.
