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Open Finance, a precursor to the Consumer Data Right began as a grassroots movement, campaigning for the legal rights of consumers and businesses to have control of their financial data and to be able to share this data with businesses of their choice digitally. It is part of a broader suite of Open Data initiatives, aimed at empowering consumers and small businesses to access, change and benefit from the data held about them by governments and institutions.

The initiative has gathered considerable momentum; various markets around the world are assessing, adopting or implementing laws and regulations to support it. In the EU, Canada, USA, Mexico, Brazil, India, Japan, Australia, Russia, New Zealand, South Korea, Singapore and many other significant markets are already at varying stages of review, policy development or implementation.

Despite these positive market developments, there is still much to understand about the versatility of Open Data, Open Finance and Data Portability to unlock economic potential and to improve the financial wellbeing of customers. In addition to exploring these opportunities, there are also risks and ethical considerations which will be critical factors for governments and regulators in developing policies and regulatory reform moving forward.

Research is needed to understand, measure and forecast the considerable impact of Data Portability on society and to shape public policy to ensure a Consumer Data Right creates positive disruption and the appropriate flows of capital allocation in markets, as well as to assess the techniques of regulation.

FDATA wishes to commend the efforts of the Australian Government in the continuing consultation with Industry and the release of the latest version of rules that will form Australia’s Consumer Data Right. Various groups have supported these works intending to design and develop a fit-for-purpose solution.

To arrive at the most suitable solution for Australia, working with such groups of expertise and enthusiasm, along with a comprehensive suite of participants, is essential. Globally, FDATA has provided comprehensive research and advisory to Federal Regulators and their Government’s alike. The design of the following sections provides targeted feedback in response to this final round of consultation. FDATA would be pleased to provide additional feedback or Global research to the Australian Government if required to progress the formalisation of CDR rules.

Australia has proven to be a world leader in legislative reform and its unique approach to adopting a Consumer Data Right. FDATA commends your attempts to learn from other jurisdictions and consider all options before deciding on the right path forward.

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How SCA and 90-day Reauth Harm Competition & Security

If you’ve read the previous tomes in this series, you’ll know that the FCA’s proposed change to the 90-day reauthentication requirement will have significant positive impact on the industry – and why this course correction is good for the competitive landscape and fintech innovation. You’ll also already know the context for how the rules combining secure customer authentication (SCA) and the 90-day rule are mired in a conflicting quagmire that does nothing to materially improve customer security and access to open banking value propositions. Not to mention, you’ll already be familiar with how SCA and 90-day do nothing to further the PSD2 objectives to improve innovation, promote competition, and secure consumers better financial outcomes; in fact, it does the just the opposite as it dooms PSD2 to a political failure rather than an innovation triumph.

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The Detrimental Impact of 90D Reauth & SCA on Fintech, the Market, & End Customers

Secure Customer Authentication (SCA), combined with the requirement for end-users to reauthenticate every 90 days, is meant to provide a secure and reliable way for consumer to connect their bank accounts to regulated fintech services. Or at least that was the intention when it was enshrined in law as part of PSD2’s Regulatory Technical Standards (RTS). But the road to Hell is paved with good intention, and the path that SCA and the 90 Day Reauth rule have created has been chthonic at best, and hellish at worst: the entire Open Banking market has suffered from lost revenues, lost opportunities, and less innovation with fewer value propositions brought to market because of it.

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Opposing Forces: The PSD2 Secure Customer Authentication & Regulatory Technical Standards Quagmire

If you use any fintech product that relies on data from your primary bank account, you will have navigated Secure Customer Authentication (SCA) processes. You will also have run into the 90 Day Reauthentication requirement that demands you confirm you want the fintech to have access to your bank account data, while at the same time re-navigating SCA and consent mechanisms. These two components are part of PSD2’s regulatory technical standards. They’re also the finicky bits that are killing PDS2’s ability to deliver competition, innovation, and better customer outcomes to the EU and UK markets.

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2021 Q1 Wrap

Formal Submissions
The New Zealand government has responded to our ‘Options for a CDR’ submission (September 2020) and has requested a discussion around potential involvement. Data 17th February 2020.

Download 2021-Q1-Wrap.pdf

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UK BEIS Cross Sector Options Feedback.

Thank you for the opportunity to respond to the BEIS Smart Data Cross Sector Options. The Financial Data and Technology Association (FDATA) has a vested interest how the HMG’s Smart Data initiative is delivered to market, as our members provide valuable digital financial services under Open Banking, and they will continue to serve UK residents with expanded value propositions as Open Finance begins rolling out across the market. FDATA is on the side of consumers, innovation, and competition; we welcome HMG’s willingness to orchestrate the initiative.

In regards to BEIS’ note on creating opportunities for wider collaboration within the ecosystem, FDATA strongly suggests engaging the capabilities housed in the Global Open Finance Centre of Excellence (GOFCoE), to whom BEIS awarded an innovation grant in 2020. GOFCoE has built a Global Open Finance Technical Working Group focused on establishing harmonised and interoperable international technical standards; along side this is a Consumer Data Protection Unit, an Economic Observatory, an Economic Crime unit, and an Innovation Sandbox. All of these capabilities align with the sort of support the Smart Data Initiative would require. We strongly encourage BEIS to identify other potential ecosystem resources that would contribute to enhanced cooperation.

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FDATA – OBIE VRP & Sweeping Phase 2 Consultation Response

Please provide feedback on the following points:

The need for VRP/Sweeping – why it is so much better than any other option for the customer – control, transparency, flexibility, speed, etc.

Why this cannot be limited to 2 way sweeping, as this rules out many use cases which offer the most value to customers (eg. sweeping into non-current accounts)

How the risks that are being raised by some during the consultation are either nothing to do with VRP or significantly reduced by VRP, and why VRPs actually offer customers better outcomes

How sweeping providers will use smart/ethical AIS algorithms and tight/right sized VRP parameters to only sweep money the customer can afford – and why it’s 100% aligned to their business model to protect the customer this way

How, as regulated parties, TPPs are required to manage risk and look after customers, including if they have complaints

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Member Spotlight: DirectID


Most consumers are aware that their financial institution holds all kind of information about them that is used to determine everything from interest rates to credit-worthiness.

But how could this data be used by small enterprises, and consumers themselves, for consumers’ own benefit? That was the question DirectID CEO James Varga asked about a decade ago. “I wanted to give consumers the ability to do more online, by taking the trusted data that they had in their bank account and using it to access additional services,” said Varga.

Since 2011, DirectID’s mission has been to enable businesses across the globe to effortlessly use bank data to grow their business, revolutionize their offerings, and, most importantly, better understand customers in order to improve the consumer experience. Specifically, DirectID builds products using bank data, which helps firms onboard their customers quickly, gain a fuller understanding of them, and make more informed decisions, faster. This insight also lowers operational costs for small enterprises.

For example, DirectID customer JustUs, a cutting edge peer-to-peer lending platform that helps credit-challenged consumers find responsible and affordable capital, has used DirectID’s platform to move away from traditional background credit checks. After partnering with DirectID, JustUs can now connect to an applicant’s online bank account – with their approval – to verify identity and review live bank statement transactions in just a few seconds. That means a faster decision time for in-need applicants and a higher certainty of repayment for lenders.

Security is one of DirectID’s chief concerns. Its security model is bank level, layered and protected by tokenized oAuth authentication and strong encryption. All transaction data is encrypted and access to customers’ bank information is read only.

The global move toward open banking already has enhanced DirectID’s ability to serve small businesses and consumer. Today DirectID operates in more than 50 countries with more than 13,000 banking connections.

And how does Open Banking help the very consumers Varga was thinking about 10 years ago? In a recent company blog post, DirectID said, “Open Banking has significant advantages in security, speed and convenience over existing technologies, and can be adapted for any sector including local businesses.”