Banks argue CDR costs too high for limited consumer uptake

08 July 2024 4 min. read

With the support of Accenture, the Australian Banking Association (ABA) has released its latest strategic review of the country’s consumer data right regime, revealing an underwhelming level of uptake.

According to Accenture’s research, less than 1 percent of Australian bank customers are currently capitalising on what was intended to boost competition, with over half of the data sharing arrangements having already lapsed.

The consumer data right (CDR) measure was introduced to the banking sector back in mid-2020, with an expansion to the energy and telecommunications sectors to follow, but four years on and it seems nobody all that much cares.

CDR compliance costs as a percentage of total expenditure

Source: Accenture, Consumer Data Right Strategic Review, July 2024

This is against the backdrop of an estimated $1.5 billion outlay on build and compliance costs from the banking sector to date – not to mention the significant government investment – with the mid-tier banks disproportionately bearing the brunt. In then stifling budgets toward product and service innovation, the result is the opposite of the underlying intent of the CDR, the authors say.

“Australian banks have invested heavily to secure the success of CDR,” said ABA chief executive Anna Bligh. “Despite the best efforts of government, regulators and industry, this review makes it clear that CDR has not realised its potential. It’s time to go back to the drawing board, as the current regime isn’t delivering for customers or enhancing competition and a new pathway forward is required.”

According to the review, just 0.3 percent of Australian banking customers were actively using the data sharing option, whereas adoption rates for similar regulatory-driven models in the UK and European Union were around or above 10 percent. Other government-supported but market-driven open data models such as those introduced in India and Singapore have achieved much higher rates.

CDR adoption compared to similar open banking regimes around the world

Source: Accenture, Consumer Data Right Strategic Review, July 2024

While a lack of consumer awareness and general distrust in data-sharing is one issue impacting local uptake – along with, according to the report, a limited number of compelling use-cases having been developed by accredited data recipients (ADRs) – there are number of characteristics of the Australian market which may limit future potential, even with the proposed upcoming tweaks.

Research from 2018, when the government first introduced CDR, found that 40 percent of Australians were still with the same bank they had first signed up with in childhood, potentially from as young as the age of 8 due to primary school savings programs such as the Commonwealth’s Dollarmite scheme. One fifth said it hadn’t even occurred to them to switch or that they just couldn’t be bothered.

More recent studies have shown persistently poor and worsening financial literacy among Australians, including one from last year by Allianz which classed more than one quarter of local respondents as having ‘low’ literacy, and only 17 percent as ‘high’. In another survey by Canstar, only 30 percent of younger Australians passed a basic set of financial questions, and barely half among all age brackets.

Decrease in growth in the number of new ADRs entering CDR market

Source: Accenture, Consumer Data Right Strategic Review, July 2024

On the flip-side, Australia ranks relatively highly when it comes to digital literacy, and the ABA report here points to the ready adoption of other personal banking innovations since the introduction of CDR, such as the 36 percent penetration rate for digital wallets and over 15 million linked cards as of 2022. Just two ADRs – Frollo and WeMoney – accounted for more than half of CDR arrangements.

“Four years of ecosystem development has struggled to create compelling customer propositions, (and) without significant increases in consumer engagement, the benefits of the infrastructure built will remain mostly theoretical,” the Accenture report concludes, adding, “Compliance burdens and complexity are inhibiting competition outcomes and adversely impacting certain participants.”

There are, of course, many vested interests involved in such reforms. The government appears to have got the message on the cost burden, but the traditional banking sector has also reportedly lobbied against other proposed legislative measures to reinforce the CDR by making it easier to switch providers. Meanwhile, FinTech Australia has contested the framing of the data used in the ABA report.