Reflecting on Progress: Consumer Data Right in 2024

As 2024 comes to a close, it's the perfect opportunity to reflect on the progress of the Consumer Data Right (CDR) in Australia. The past year has brought notable developments, as well as ongoing challenges, in Australia’s journey toward a more open and consumer-focused data economy.

Expansion of CDR Participants

This year, the CDR ecosystem saw a significant expansion:

• CDR Representatives: 62 new representatives joined, totalling 198, though this reflects a slower growth rate compared to prior years. Two transitioned to full ADR status, showcasing the model’s role as a stepping stone.

• Accredited Data Recipients (ADRs): The ecosystem now includes 68% actively engaging ADRs, though 17% remain inactive, and others have surrendered accreditation, signaling ongoing barriers to adoption.

These figures highlight the growing footprint of the CDR while underscoring the need for streamlined compliance and support.

Key Milestones and Initiatives

1. Consumer Data Right Reset

   The Consumer Data Right Reset, initiated by the Australian government, aims to simplify and improve the adoption and effectiveness of the CDR framework. Announced this year and continuing into 2025, the reset focuses on addressing existing challenges, reducing costs, and enhancing usability to deliver greater benefits to both consumers and businesses.

2. Action Initiation Passed
   The passage of the Treasury Laws Amendment (Consumer Data Right) Bill 2022 was a game-changer, enabling services such as payments and account switching. However, implementation challenges mean real-world impacts will take time to materialise. The Australian Bankers Association (ABA) lobbied hard to block Action Initiation, claiming the cost to its members would be over $3 billion.

3. Acquisitions and sales

   We have seen further acquisitions, with Waave being acquired by Banked and Fat Zebra, which helps companies process card payments, acquiring Adatree.

4. Focus on Consumer Awareness
   Despite technical advancements, consumer engagement remains a hurdle. Efforts to increase awareness, such as educational campaigns by FinTechs like WeMoney, gained traction but require broader collaboration to inform the public about the tangible benefits of the CDR.

5. Enhanced Tools and Use Cases
   Several new products launched this year:

   • Adatree’s Account Verification Tool: Simplifies fraud prevention.

   • NextGen’s AI-Driven Income Detection: Improves mortgage application efficiency.

   • Effi’s Loan and Savings Trackers: Empowering mortgage brokers with real-time insights.

6. Mortgage Brokers begin to see the value of the CDR

   Mortgage brokers finally started using the CDR for income verification for home loan applications. NextGen, in collaboration with Frollo, facilitates income verification for home loan applications through the mortgage broker channel. This process is notoriously slow and cumbersome, the introduction of the Finance Passport software product simplifies this process by enabling applicants to seamlessly provide their financial data via the CDR, thereby saving significant time and effort.

   Two of the Big Four banks, Commonwealth Bank and Westpac, along with several smaller lenders, accept the Finance Passport service via ApplyOnline.

Open Finance and Sectoral Expansion

Treasury is seeking feedback on draft amendments to the CDR rules, as it plans to expand the CDR to the non-bank lending sector and narrow the scope of CDR data for the banking sector.

The government has stated that expanding the CDR to the non-bank lending sector will “facilitate more informed consumer engagement with both banks and non-bank lenders, leading to improved financial outcomes for individuals and businesses”.

In addition, it will increase the availability of data, “encouraging innovation in financial technology and helping consumers to better understand and manage their finances”.

Challenges Persist

The road to success has not been without obstacles:

• Data Quality Issues: Data inaccuracies remain a significant barrier for adoption, particularly in lending and financial management.

• The banking sector grumble over cost and uptake: Despite a substantial investment of $1.5 billion since 2018, the ABA claimed the CDR had not delivered significant customer benefits or enhanced competition. A review funded by the ABA revealed that by the end of 2023, only 0.31% of bank customers had active data-sharing arrangements.

• Awareness remains low: Consumer awareness of the CDR and the benefits of sharing data remains very low.

The Road Ahead: 2025 and Beyond

Looking to 2025, several priorities emerge:

1. Broader Consumer Education: Enhancing public understanding of the CDR’s value is essential for widespread adoption.

2. Implementation of Action Initiation: Turning legislative momentum into practical applications will be key to unlocking the CDR's full potential.

3. Inclusion of Non-Bank Lenders: Expansion into sectors like "Buy Now, Pay Later" and non-bank lending promises greater consumer impact but requires careful execution.

2024 has demonstrated steady, albeit slow, progress for the CDR. As we enter 2025, the focus must shift toward resolving some of the barriers that have limited adoption and driving consumer engagement.

Newsletter update

This is the last issue for 2024. With the regulators, ADRs and Data Holders going into the Christmas shutdown, I’m taking a break as well!

Thanks again for all your support this year. Have a happy and safe Christmas break.