Only 0.3% of Banking Customers Engage with $1.5 Billion Consumer Data Scheme

July 3, 2024 TruthUSA

The banks are concerned about the return on investment for the scheme.

Australian commercial banks are worried about the low adoption rate of the Consumer Data Right (CDR) scheme, despite investing $1.5 billion.

The Australian Banking Association (ABA) has published the results of a review of the CDR framework following its implementation in 2020.

The CDR is an opt-in service that enables consumers to grant accredited businesses access to their data for personalized product and service offerings.

According to the federal government, the data shared under the CDR includes personal information like names, contact details, and detailed usage information of specific products or services.

Only businesses accredited by the Australian Competition and Consumer Commission (ACCC) can operate under the CDR.

The implementation of the CDR is being phased, with the banking sector being the first to adopt the regime, followed by the energy and non-bank lending sectors.

Data holders in these sectors must adhere to new regulations when the CDR is introduced to their industries.

The government stated that the CDR program would enhance consumers’ data control and boost competition among businesses, encouraging them to develop new business models utilizing consumer data.

Just 0.3 Percent of Banking Customers Onboard

However, the ABA’s review revealed that by the end of 2023, only 0.3 percent of bank customers had adopted CDR.

Moreover, over 50 percent of data-sharing agreements between consumers and service providers had been terminated or expired in 2023.

Despite investing $1.5 billion into CDR since 2018 (excluding government investment), the banking sector has not observed significant benefits as anticipated.

Instead, the review indicated that CDR was harming competition as mid-tier and regional banks faced disproportionately higher compliance costs compared to major banks.

This compelled smaller banks to make compromises by reducing investments in crucial technology and customer projects, such as digital services, fraud detection, and prevention.

“Australian banks have made substantial investments to ensure the success of CDR,” ABA CEO Anna Bligh stated.

“Despite the collaborative efforts of the government, regulators, and industry, this review clearly indicates that CDR has not lived up to its potential.

“It is time to rethink the strategy. The current CDR framework is not delivering for customers or fostering competition, necessitating a new way forward.”

In agreement, Customer Owned Banking Association CEO Michael Lawrence also expressed that the CDR offered minimal benefits to customer-owned banks despite their $100 million investment.

“While we support the goals of the CDR in enhancing competition, it has actually made it harder for smaller banks to compete by tying up resources with little or no tangible outcome,” he remarked.

Mr. Lawrence urged the government to provide a clearer roadmap to ensure that the CDR could deliver actual benefits before his association members committed more resources to the scheme.

Concerns About Data Risks

Despite the government’s assurances that the CDR could enhance consumers’ data control, a study (pdf) by the University of New South Wales highlighted that the regime increased the risk of data breaches by allowing consumer data to be shared with a broader range of stakeholders.

“As more data is exchanged among more entities, the likelihood of data breaches grows, underscoring the importance of effective data management,” the study noted.

“Additionally, as organizations become more digitally interconnected and their staff adopt more flexible work arrangements, additional security vulnerabilities surface.

“The introduction of ‘action initiation’ is expected to heighten security risks for consumers further, creating more incentives and vulnerabilities for cyber attacks.”

The study also referenced other research that demonstrated significant consumer skepticism about whether their information could be adequately safeguarded by service providers when shared with third parties.

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