How companies access your data is about to change
When the government introduced the Consumer Data Right (CDR) in 2017, it was intended to be an economy-wide reform spanning across industries.
The banking and finance sectors were the first cabs off the rank, with open banking becoming CDR's first industry case when the major banks started making consumer data sharing available in 2020.
At its core, CDR gives consumers the power to control how organisations use their data through explicit and informed consent.
Since it is an opt-in service, it gives organisations an incentive to develop better products and experiences for their customers in exchange for data sharing.
Some of the expected benefits include better product and service comparisons, faster application processes and greater ease in switching institutions.
So as the adoption of CDR becomes more widespread, what can Australians expect in the way of new benefits for sharing their data?
Mortgage as a service
The ease of data sharing that comes with CDR will give consumers more choice and promote greater competition between lenders, while also encouraging growth for savvy businesses who can see the opportunity to innovate.
That means that we're likely to see mortgage providers and brokers offer mortgage as a service with more competitive rates, faster and more customer-centric application processing.
Businesses like Sherlok, an automated refinancing and repricing tool for brokers, and non-bank online home loan providers such as Nano Digital Home Loans, are examples of 'mortgage as a service' brands who, with access to CDR, can challenge traditional banks by providing faster processing speeds for borrowers.
Switching as a service
Australian consumers will increasingly be able to use their CDR data to benefit from automated product or service recommendations from financial aggregator platforms offering switching as a service.
Currently, if you were actively searching for a new loan, you might land on a comparison site or directly on a bank or lender's website, and then check out what's on offer.
The embedding of CDR in the banking and finance sector, and very soon the energy and telco industries, means we're likely to see businesses leverage data to offer us better deals and take care of the switching process for us.
Providers are also likely to move away from phone calls and forms to consented, digital information sharing which will create faster onboarding, payment address book population and the ability to see all your history in one place.
Improved financial management
Until now, CDR has predominantly been used in the lending space, but another area to watch is how it could help consumers with their financial management - especially those who are vulnerable and disadvantaged.
Due to the pandemic, we have all witnessed a volatile economy over the last couple of years and many people have encountered stressful financial situations where it is often hard to see the bigger picture.
CDR allows them to zoom out, attain a benchmark comparison and evaluate different options more easily, which could result in actions such as consolidating debt or creating a budget for ongoing financial management.
Better insurance matching
The nature of insurance is changing. Fire and flood have redefined risk profiles and consumers need to know whether they'll be adequately covered the next time they reassess their insurance premiums.
CDR gives insurance companies the data to simplify the insurance process, better explain their products to consumers and then help them choose a coverage level that fits their shifting needs. Your life scenario and needs constantly change, and matching your insurance product suitability and even underinsurance or overinsurance levels can be transformed through the CDR.
The end of screen scraping
We should finally see an end to screen scraping - the automated process whereby a third-party extracts or 'scrapes' a customer's digital data for various services using their disclosed bank login credentials.
Unlike CDR, which offers better control and transparency for consumers, screen scraping is unregulated. It has also been banned in the UK and Europe due to data privacy concerns so now that CDR is here, I expect Australia will soon follow.
More use cases from accredited data recipients
An accredited data recipient (ADR) is a regulated organisation that receives explicitly consented consumer data to perform specified functions, like some of the use cases already mentioned above. Organisations need to seek and gain accreditation from the government, have the right technical connections, and have a compelling use case that they build, test and implement.
At present, three of the big four banks are ADRs but not all of them have live use cases. Having them all on board will set a precedent for smaller players in the banking and finance industry.
In my view, CBA is the most forward-thinking at the moment: it's not just looking at banking, it has its eye on economy-wide CDR roadmap, considering its investments in Amber Electric and Tangerine Telecom, for open Energy and open Telco respectively. The other banks can either invest in a compelling use case to try to catch up or watch as their customers get snapped up.
CDR is already reshaping the finance sector, and we are likely to see more banking and financial players build use cases that will further strengthen competition and prompt the acceleration of product development.
With the forthcoming rollout to include energy and telecommunications, we can expect to see the open energy and open telco movements echo the benefits and momentum of open banking.
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