Information provided through open banking 'unreliable'
Open banking, which is meant to increase competition in a market dominated by big banks, has hit some hurdles, according to a report in the Australian Financial Review.
Also known as the Consumer Data Right (CDR), early adopters of open banking say they have identified issues with the quality of some banks’ data and are calling for the ACCC to resolve these problems quickly. The ACCC says it is aware of data quality issues and is working with banks to “understand and resolve them”, it told the AFR.
CDR launched as open banking more than two years ago with the goal of providing a trusted framework for consumer data sharing among financial institutions. Treasurer Jim Chalmers (pictured above left) said this would act as a tool for customers to compare deposit pricing, increasing competition among Australia’s big banks.
However, those testing the regime said they were struggling with its adoption, noting how the data provided by some banks was unreliable or incomplete.
Data on mortgages provided by banks was not comprehensive enough to allow for customers to accurately compare home loan pricing across the sector, the AFR reported, as some banks failed to update loan interest rates published in the system.
Additionally, banks were not required to report when a fixed rate mortgage expired, making it difficult to provide information to consumers looking to switch lenders in search of more competitive rates.
“Many of the data holders are reluctantly playing in the open banking space,” Sherlok CEO Adam Grocke (pictured above right) told the AFR. “There are no incentives to participate, and they risk losing customers if they do it properly because it makes it easier to switch.”
Sherlok is a fintech which uses AI to provide a retention and refinancing platform for mortgage brokers, and is developing CDR applications for brokers,.
Early adopters of the CDR regime have also shared their frustration over having to bear the costs of identifying and reporting issues to the ACCC.
The ACCC has a system in place for users to flag identified issues, but a report by Brenton Charnley of consultancy Open Finance Advisors found that it took banks an average of 119 days to offer rectify these issues and that 65 of these data holders had not specified a timeframe for resolving them.
Charnley’s report also found that 92% CDR data holders had data reliability issues and implementation gaps, 70% had not complied with implementation timelines, and 90% still had pending rectification works.
“The data supply is not reliable – and there is nothing incentivising demand,” Charnley said.
Users call for stronger enforcement by the ACCC
Users of the CDR framework said the ACCC should be firmer in enforcing compliance among banks and have called for harsher fines.
According to the AFR, BOQ paid a penalty of $133,200 in July after six-month delay in carrying out its obligations under the regime, while in December ING was fined $53,280 for four infringement notices that similarly alleged its failure to meet obligations.
“Those fines would not come up as a rounding error within those banks,” Grocke said, adding that data holders should face “significant consequence” if they do not comply or fix problems quickly.
Jill Berry, chief executive of Adatree, a data intermediary involved in testing CDR, voiced similar concerns regarding the ACCC’s enforcement.
“ACCC compliance and enforcement teams should be trying to make this work,” she said.
The ACCC said that the severity of these penalties was fixed by legislation after careful consideration of “the most appropriate action which is proportionate and likely to achieve specific and general deterrence”.
The regulator also revealed its plans to publish findings from a consultation on CDR data quality compliance, which a spokesperson said would include actions that have been taken in response to user feedback, the AFR reported.
“I am extremely optimistic of the potential, but my biggest fear is that this could be the greatest opportunity for consumer competition in Australia that fails to deliver,” Grocke said. “We have an unbelievable opportunity to drive better customer outcomes. But there are significant parts of the framework that are like walking on soft sand, rather than being a solid foundation.”
Frollo, another fintech involved with the regime, previously reported that more than 100 banks have begun using open banking to share data for over 30 different financial products, although consumers still lack knowledge about the system.
“With the initial roll-out complete, businesses launching use cases and consumers showing real interest, now is the time for the government to start educating consumers about the secure, government-regulated alternative to sharing banking passwords,” Frollo CEO Tony Thrassis said last November.