Banks 'first cab off the rank' in Govt's consumer data right plan

Thursday, 22 June 2023

The screeds of valuable customer data held by banks, insurers and power companies will take on the characteristics of the personal property of customers under new plans from the Government.

Data has been the gold of the information age, but private companies, including banks, have guarded it jealously, making it harder for customers to shop around for better deals.

“Customer data holds enormous value and opportunity, but only if customers are able to make full use of it,” the Ministry of Business, Innovation and Employment Hīkina Whakatutuki (MBIE) said in a consultation document published on Thursday on the Customer and Product Data Bill.

It envisioned customers being able to require banks, insurers and power companies to share their data with rivals to make it easier to shop around for better deals.

“A customer may want to share information about their power usage with a price-comparison application to find out which power provider would be cheapest for them based on their consumption habits,” MBIE said.

“Or they might want to put that information through a carbon-footprint calculator, to learn more about their emissions profile.

“Unfortunately, consumers are generally unable to access or exchange their data in a way that would enable them to unlock the full value of their data.

“The draft law would give customers greater control over their data, by allowing them to choose to exchange it with trusted third parties,” it said.

The draft law would give a purely opt-in right for consumers to share their data, and include penalties of up to $5 million for misuse by companies.

A customer data right is deemed particularly important for bringing competition to financial services like banking and insurance, benefiting customers through reduced prices, improved product offerings, and greater productivity.

Commerce and Consumer Affairs Minister Duncan Webb promised the draft consumer data right law would be released this week when he, and Finance Minister Grant Robertson, announced a banking competition probe on Tuesday.

They instructed the Commerce Commission to conduct a market study on the state of competition in the retail banking industry.

Webb said consumer data rights would unlock the ability for customers to compare products in real time, manage accounts across different providers simultaneously, and switch between providers seamlessly.

“Providing this power to customers is at the heart of the Customer and Product Data Bill which brings in a consumer data right for Aotearoa New Zealand. It is truly exciting to imagine the possibilities that will emerge.

“The draft law will enable innovators in our economy to develop new products and services and increase competition, which, in turn will benefit customers by leading to reduced prices and improved product offerings,” he said.

”The banking sector will be the first cab off the rank,” Webb said, driving the development of “open banking”.

“Open banking will put consumers in the driver’s seat of how their data is used and shared,” he said.

Open banking is the term for the tech-driven revolution in financial services overseas involving tech companies building money management and payment apps for consumers, which cut the cost of banking.

The Government has been accused of dragging its feet on open banking, copping the first criticism in 2019 for allowing banks to set the pace of its introduction.

A cabinet paper dated July 2021 acknowledged allowing progress had been “slow”.

“It is unlikely that businesses will pursue initiatives that will deliver consumer-oriented and large scale benefits without a form of external pressure, compulsion, or the credible threat of regulation,” the cabinet paper said.

It also acknowledged that Government regulation was needed to ensure trust, by making sure the likes of banks could only share customer information with trusted third parties.

“Outside of New Zealand, an increasing number of jurisdictions have regulated to accelerate the uptake of open banking models in particular,” the cabinet paper said.

The Government had been told of companies moving offshore, or bypassing New Zealand altogether, due to the barriers of data sharing.

New Zealand has been lagging other parts of the world on introducing a customer data right.

The European Union introduced customer data rights in 2015, and Australia did it 2019.

The draft bill’s release follows the release of a consultation document in August 2020.