Australia's major banks will be forced to make banking data available to consumers from the start of the 2020 financial year, under a new open banking regime agreed upon by the federal government.
Agreeing to implement the recommendations made by a Review into Open Banking, conducted by law firm King & Wood Mallesons, the government touted the new regime as having the potential to transform the competitive landscape in financial services and the way in which Australians interact with the banking system.
The review on how to boost competition and innovation in the country's financial services sector in February made a total of 50 recommendations on how Open Banking in Australia should look, including forcing financial institutions in Australia to participate.
The Commonwealth Bank of Australia (CBA), National Australia Bank (NAB), the Australia and New Zealand Banking Group (ANZ), and Westpac currently hold around 95 percent market share of the entire Australian finance industry.
In announcing it would be implementing the recommendations from July 1, 2019, the Australian government said the regime will boast strong privacy protections and information security for customers' banking data.
"A key element of these protections is that only trusted and accredited recipients will be permitted to access data, only with customers' express consent and only for the purposes the customer has expressly permitted," Treasurer Scott Morrison said in a statement.
It is expected Open Banking will be phased in with the aim that all major banks will make data available on credit and debit card, deposit, and transaction accounts by July 1, 2019, and mortgages by February 1, 2020.
Data on all products recommended by the review -- including GST and tax accounts, foreign currency accounts, pensioner deeming accounts, and mortgages -- are to become available by July 1, 2020, by financial providers in the top tier.
All remaining banking institutions will be required to implement Open Banking around 12 months after the major banks, with the government noting the Australian Competition and Consumer Commission (ACCC) will be empowered to adjust timeframes if necessary.
The ACCC, alongside the Office of the Australian Information Commissioner (OAIC), has also been tasked with determining the rules of Open Banking, with the standards requested to include transfer, data, and security standards.
The OAIC will specifically ensure that privacy protection is a fundamental feature of the system.
CSIRO's Data61 will also be appointed to perform the role of a Data Standards Body, developing technical standards for the system in collaboration with industry, fintechs, and consumer and privacy groups.
NAB on Thursday showed support for implementing Open Banking, saying the regime may introduce new ways for banks to compete.
CEO Andrew Thorburn said during a review of Australia's four major banks last year that while his bank was supportive of the concept, he wants the potential risks of opening up data to be clearly identified, as he is concerned over what the potential reputational damage the data getting into the wrong hands would mean for NAB.
Australia's fintech scene is also relatively happy with the new regime; however the body representing Australia's fintech industry isn't impressed that the federal government decided to delay mortgage data access to February 2020.
"A government-backed open banking framework will be a game-changer for consumers and businesses, along with drive a new wave of fintech innovation and growth in Australia," FinTech Australia chair Stuart Stoyan said in a statement Thursday.
Open Banking is being implemented as part of the country's new Consumer Data Right, which will allow individuals to "own" their data by granting them open access to their banking, energy, phone, and internet transactions, as well as the right to control who can have it and who can use it.
The Consumer Data Right will be established sector-by-sector, beginning with banking, energy, and telecommunications.
Handing over AU$65 million earlier this month to reform the Australian data system, Morrison detailed the expenditure during the 2018-19 federal Budget, giving the Consumer Data Right a total of AU$44.6 million in funding over four years.
AU$20.2 million will be spent on the ACCC determining the costs and benefits of designating sectors to be subject to the Right, and developing and implementing the rules to govern the Right and the content of data standards; AU$12.9 million to OAIC to assess privacy impacts and ensure consistency of rules with the Privacy Act; and AU$11.5 million for Data61 for its role as data standards setter.
The Australian government's response to the Productivity Commission Data Availability and Use Inquiry has also revealed that it will be standing up a National Data Commissioner to oversee the sharing of data.
The Australian Privacy Foundation wants the government to develop security controls around sharing open data and provide the agency charged with investigating data misuse with 'adequate' resources.
A review has requested that Australia's largest banks be ready to hand over customer data at request from the day an Open Banking regime becomes legislated.
Australia is charging headlong into a privacy disaster as government open data initiatives come online without considering how to properly implement privacy safeguards and data anonymity.