Low Uptake of Consumer Data Right Scheme Concerns Australian Banks

Consumer Data Right (CDR) is a scheme introduced in Australia in 2020 that allows consumers to give accredited businesses access to their data, enabling the tailoring of products and services to their needs. However, despite an investment of $1.5 billion by Australian commercial banks, the uptake of CDR has been alarmingly low. The Australian Banking Association (ABA) conducted a review of the CDR regime and found that by the end of 2023, only 0.3 percent of bank customers were using CDR.

One of the major concerns highlighted in the review is the negative impact of CDR on competition. Mid-tier and regional banks are facing disproportionately higher compliance costs compared to major banks, leading to trade-offs such as cutting down on investments in vital technology and customer projects. This imbalance is hindering smaller banks from effectively competing with larger banks, further exacerbating the issue.

ABA CEO Anna Bligh expressed her disappointment, stating, “Despite the best efforts of government, regulators, and industry, this review makes it clear that CDR has not realized its potential. It’s time to go back to the drawing board.” Her sentiments were echoed by Customer Owned Banking Association CEO Michael Lawrence, who emphasized that the CDR has provided little benefits for customer-owned banks despite their substantial investment.

The concerns surrounding data risks associated with CDR are also a significant issue. A study conducted by the University of New South Wales highlighted the heightened risk of data loss due to the dissemination of consumer data to a wider range of stakeholders. This increased sharing of data increases the likelihood of data breaches, especially as organizations become more digitally integrated and flexible in their work arrangements. The introduction of “action initiation” further raises security risks and vulnerabilities to cyber attacks.

Furthermore, research indicates that consumers have significant doubts about the ability of service providers to adequately protect their information when sharing data with third parties. This lack of trust adds to the overall concerns regarding data security under the CDR regime.

In light of these challenges, it is crucial for the government to address the issues surrounding CDR and provide a clearer roadmap for its implementation. The current regime is not delivering the promised benefits to customers or enhancing competition. Smaller banks, in particular, require a more viable pathway forward that ensures tangible returns before committing additional resources to the scheme.

In conclusion, the low uptake of the CDR scheme by Australian commercial banks, despite a significant investment, raises concerns about its effectiveness. The imbalance in compliance costs between major and smaller banks negatively impacts competition. Moreover, the heightened risks of data loss and cyber attacks associated with the CDR regime further undermine its potential benefits. It is imperative for the government to reevaluate and refine the CDR regime to ensure customer satisfaction, enhance competition, and address data security concerns.