In The Room: Senate Inquiry [Consumer Data Right]

On 18 April 2023, I appeared alongside fellow fintech representatives, Nick Kavass (FinTech Australia), Mathew Mytka (FDATA A&NZ) and D'Arcy Mullamphy (Adatree), before the Senate Economics Legislation Committee’s inquiry into Treasury Laws Amendment (Consumer Data Right) Bill 2022.

The bill introduces the framework for action initiation in the Consumer Data Right (CDR). 

As the first non-bank payments provider to become an Accredited Data Recipient [ADR] in the CDR, Zepto is an enthusiastic supporter of open data, and is excited by the potential for the CDR to support Australia's rapidly developing, data-driven economy — an enthusiasm shared by FinTech Australia, FDATA and Adatree.

At the same time, Zepto believes in the highest possible standards of consumer protection because we know that a secure and stable payments ecosystem is the key driver of value for our businesses.  

What is the Consumer Data Right?

The CDR gives you the right to share your data between service providers of your choosing. It was introduced in the banking industry and has since been rolled out in the energy sector, with the telecommunications sector to follow. This opens up interesting possibilities for businesses and individuals.  

For example, you could share all your banking data with a financial management app so that you can access all of your bank accounts in the one place rather than having to open multiple banking apps. Further, the app could provide you with valuable insights on that data for your benefit such as analysis of fees across banks or your spending habits.

What is action initiation?

Action initiation expands the CDR from a data-sharing scheme to allowing customers to authorise third parties to carry out actions on their behalf.

I expressed to the Senate Committee that the CDR is a significant piece of digital infrastructure and Zepto believes action initiation has the potential to play a critical role in driving innovation and delivering better experiences and outcomes for consumers and businesses.

Picking up on the earlier example, the financial management app could — with your consent — transfer money between your bank accounts to avoid an overdraft fee; open a new bank account for you to apply for a mortgage refinance; or even apply for short term credit on your behalf to deal with a cash flow problem.

The Bill

Zepto wholeheartedly supports the bill and I urged the Senate to pass it.

As also expressed by Nick Kavass, I emphasised that the bill is an important first step - it does not introduce action initiation per se but rather the framework for it (much of the detail will be contained in Ministerial rules which the Minister is required to introduce following a consultation period). However, with the legal framework in place, fintechs like Zepto will have the confidence to invest precious resources into building compelling use cases that deliver real benefit for businesses and individuals. 

I made the following specific observations about the bill to the Senate Committee:

1. Consistent with the previous Government’s response to the Farrell Inquiry report, Zepto supports payments as the first action type to be declared by the Minister, for the following reasons.
   
   
   1. The payments industry has undergone significant change in the past few years driven by investments in innovation both from private enterprise and Government — the New Payments Platform [NPP] being a prime example. Consequently, there is a high level of technological literacy and technical capability in the payments industry which positions it well in comparison to other industries to integrate with CDR capabilities and frameworks.
      
      
   2. Further, there is an alignment between CDR payment initiation and PayTo on the NPP in that both provide the capability for payment initiation. In regards to some of the issues which will need to be worked through for action initiation in the CDR — such as consent — the work done around consent in the context of PayTo payments can be leveraged.
      
      
   3. From the explanatory materials, it appears that the declaration process will prioritise action types that represent the most benefit for consumers and the Australian economy. Payments are a part of everyday life for all Australians. Providing new payment options for Australians which can save them time and money presents a significant benefit to Australian consumers, particularly with economic headwinds upon us.
      
      
2. There should be flexibility regarding the capacities in which one can participate in CDR action initiation. The roles of Accredited Data Recipient [ADR] and Data Holder correlate with the roles of Accredited Action Initiator and Action Service Provider in the expanded framework, respectively. However, a company like Zepto, which is an ADR, may also want to be an Action Service Provider in respect of the action of making payments. This appears to be accommodated with the voluntary action service provider framework in the bill — which Zepto welcomes.
   
   
3. Zepto supports rigorous accreditation processes for participants in the CDR because consumer protection is at the heart of what we do. Notwithstanding, where CDR participants have already obtained an accreditation to participate in the CDR in one capacity, that process should be leveraged if the participant seeks a different accreditation to participate in a different capacity. Further, Zepto supports the proposal in the bill not to regulate the action layer — as this is already regulated, and doing so would be duplicative, unnecessary and act as a disincentive to innovators to invest in the CDR.
   

Competition and leadership

In response to questions from the Chair of the Senate Committee, Senator Jess Walsh, regarding how action initiation in the CDR might support competition in Australia, I emphasised that it can do so in the financial services industry in two ways, namely:

• By giving fintechs the confidence and space to innovate on top of the CDR and develop compelling products and services with which they can compete with the bigger players in the financial services industry; and
  
  
• By creating a level playing field - the great thing about the CDR is that, subject to appropriate accreditation standards being met, access it not restricted to traditional financial institutions (which is what we see with critical payments infrastructure, access to which is largely limited to banks).
  

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Finally, I noted to the Senate Committee that Australia has an opportunity to be a world leader in open data due to the breadth of the CDR, however to realise that opportunity we must lead by putting in place, and quickly, the legal structures which make investment and innovation in the CDR possible.

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It was pleasing and encouraging to see resounding support for the bill from my fellow witnesses Nick, Matthew and D’Arcy, and I thank the Senate Committee for the opportunity to appear.