Unlocking the Benefits of CDR Open Banking for your Business

February 20, 2024
10
minutes to read
by
Jaala Alex
Table of Contents

The Consumer Data Right (CDR) is a program implemented by the Australian government that gives consumers and businesses the right to access and control their data. CDR was designed to improve competition, increase innovation, and provide greater choice. When it comes to banking, CDR is referred to as Open Banking. Open Banking allows you to retrieve, access and manage your account and transaction data with accredited third parties - such as comparison websites, business lenders and fintechs - to help you make more informed decisions about your business. In this post, we'll cover how the CDR regime works and how you can use Open Banking for your business.

The idea of CDR first took hold in Australia in 2017, when the Australian Competition and Consumer Commission (ACCC) released a report recommending the introduction of a CDR. In 2018, the Federal Government announced it would implement a CDR, starting with the banking industry. The first phase of the CDR, which applies to the banking sector, began on 1 July 2019, and it allowed customers to share their banking data with accredited third parties.

Who is responsible for managing the CDR?

The CDR is regulated by the ACCC and the Office of the Australian Information Commissioner (OAIC). They are responsible for the development of the rules and regulations that govern the CDR, as well as for enforcing compliance.

Many stakeholders, including consumer groups, financial institutions, fintechs, and government organisations, support CDR. These stakeholders see the potential for the CDR to increase competition, improve consumer outcomes, and drive innovation in the economy. In conjunction with the Federal Government and corresponding legislation, these groups have ensured that the CDR has been rolled out successfully across the banking industry.

What are the benefits of the CDR? 

The CDR allows customers to share their data with accredited third parties, such as comparison websites and fintechs. In the past, accessing your data to get a business loan or to compare financial products was almost impossible. In most cases, you had to provide copies of your bank account statements if a third party wanted to review your financial history.

"The CDR allows customers to share their data with accredited third parties, such as comparison websites and fintechs."

Under the CDR regime, business owners can access their data, correct any inaccuracies, and share it with third parties. Accredited third parties can then use this data to help customers make more informed decisions about products and services. For example, if I have an account with Bank A and want to apply for a loan with Bank B, I can pass my transaction data securely and in real-time to Bank B to assess my creditworthiness. There is no manual handover; it's highly accurate and significantly more secure than providing paper bank statements.

To ensure the security and sanctity of the CDR regime, third parties must undertake a rigorous process to get approved to receive information. This includes ensuring proper information security and data handling procedures are in place to protect consumers.

What are some ways a business could use CDR? 

There are several ways a small business could use CDR, including: 

  • Comparison services: A business can use the CDR to share their data with comparison services, which can help them find the best deals on products and services such as credit cards or loans. 
  • Switching providers: A business can use the CDR to move from Bank A to Bank B or to streamline the setup of a new account with another provider. 
  • 360-degree view: If a business has different bank accounts with various providers, it can take time to determine your overall financial position. With CDR, a company could pull the details of all their funds into one place. 
  • Improved decision-making: By accessing their financial data through Open Banking, small businesses can make better-informed decisions about cash flow management, budgeting, and forecasting. 
  • Personalised products: Accredited service providers can use CDR data to offer personalised financial products, such as tailored lending products or cash management tools designed to meet the business's specific needs. 

How do you share data under the CDR?  

A small business can access its data via Open Banking through a process known as "consent-based sharing." This process involves customers providing their consent for their data to be shared with accredited third parties.

The steps involved are: 

  • Locate a CDR-accredited third party: To access your data, you will need to locate a CDR-accredited third party with whom you would like to share your data. This could be a fintech, comparison website or another service provider. 
  • Verify your identity: Before sharing your data, you must verify your identity with an accredited third party. This ensures that your data is only shared with parties you have authorised. 
  • Provide your consent: Once your identity has been confirmed, you will need to provide your consent for sharing your data. This is usually done by logging in to online banking. 
  • Revoke access: If you wish to revoke access at any point, you can contact the accredited third party and request to have your data deleted or access revoked. You can also contact your bank and ask them to withdraw your consent to share your data. 

What is the difference between CDR and Open Banking? 

CDR refers to the framework that allows consumers to access and share their data, whether for banking, electricity or other utilities. Open banking is one stream of the CDR framework that specifically enables consumers to share their banking data. Open banking aims to encourage competition and innovation in the banking sector by allowing consumers to take control of their financial data and use it to access a range of personalised financial products and services.

Does Thriday support Open Banking? 

Thriday believes that making it easier for small businesses to access their financial data, compare products and receive personalised experiences is critical to improving the overall health of the Australian economy. Besides advocating for the CDR regime, Thriday supports Open Banking, which means that Thriday customers can access their account and transaction data with accredited third parties. This is an important consideration when comparing bank accounts or accounting software.

Thriday consent dashboard

What is the roadmap for CDR and Open Banking in Australia? 

The ACCC is managing the roadmap for CDR and Open Banking in Australia. Open banking is being rolled out in phases, with different levels of data sharing being introduced over time. The first level of Open Banking, which involved product data sharing, was introduced in July 2020. The second level of open banking - the sharing of customer data - was introduced in 2021. There is consultation occurring around future phases, including the ability to initiate transactions from a third-party application. For example, under 'payment initiation', you can pay from your Bank A account without logging into Bank A's internet banking.

The ACCC will continue monitoring and reviewing the implementation of CDR and open banking to ensure that they meet their intended goals of promoting competition and innovation in the relevant sectors.

Open Banking FAQs

What is Open Banking?

Open Banking is a system that allows customers to permit for their financial data to be shared securely between banks and other authorised third-party providers. This system is designed to promote competition and innovation in the banking industry and to give customers greater control over their financial data.

When did Open Banking launch in Australia?

Open Banking was launched in Australia on 1 July 2020.

Which banks are participating in Open Banking in Australia?

All banks in Australia must participate in Open Banking, including ANZ, Commonwealth Bank, National Australia Bank, and Westpac.

What are the benefits of Open Banking for customers?

Open Banking gives customers greater control over their financial data and allows them to share it with authorised third-party providers securely. This can make it easier to switch banks or financial providers and to find new products and services that better meet their needs. Open Banking can also lead to more personalised financial advice and services.

Is Open Banking safe?

Open Banking is designed with security and privacy in mind. Banks and third-party providers must follow strict data protection standards and protocols, and customers must give explicit consent before their data can be shared. Customers can also revoke their consent at any time. Additionally, the Australian government and regulators are monitoring Open Banking closely to ensure it operates safely and securely.

The CDR regime represents a significant step towards empowering businesses with greater control over their data and promoting competition in the banking industry. For small businesses, Open Banking means increased access to affordable financial services and the ability to manage their finances better. By taking advantage of these new opportunities and platforms like Thriday, small businesses can save money, gain more significant insights into their finances, and make more informed business decisions. Overall, the CDR regime and Open Banking represent a win-win for small businesses in Australia and something business owners need to be ready to start taking advantage of.

DISCLAIMER: Team Thrive Pty Ltd ABN 15 637 676 496 (Thriday) is an authorised representative (No.1297601) of Regional Australia Bank ABN 21 087 650 360 AFSL 241167 (Regional Australia Bank). Regional Australia Bank is the issuer of the transaction account and debit card available through Thriday. Any information provided by Thriday is general in nature and does not take into account your personal situation. You should consider whether Thriday is appropriate for you. Team Thrive No 2 Pty Ltd ABN 26 677 263 606 (Thriday Accounting) is a Registered Tax Agent (No.26262416).

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