The data that is shared via CDR and Open Banking includes raw and derived data.
Raw Data in data management terms, is information as gathered at the source before it has been further processed, cleaned or analysed. Under CDR, a data holder could provide another business access to the following raw data:
CDR data isn’t just limited to the data directly received from Data Holders. It also includes any data derived from CDR data and any information extrapolated from that.
And this is where Open Banking has the potential to create significant innovation.
Derived data is created by transforming existing raw data points to create new insights that aren’t readily obvious from observing the original data. These insights can be created from observations, experiments, and simulations when raw data is cross-referenced against different data sets and advanced statistical analysis is completed on that combined material.
A good example of this derived data is an automation that triggers a ‘yes or no’ insight, which uses CDR data to get an answer to progress to the next step of a customer interaction.
For example, XY Company, Accredited Data Recipient receives raw consumer CDR data and analyses it against an algorithm for the purposes of determining whether they are credit-worthy against its unsecured personal loan scorecard. The end answer of ‘yes or no’ that XY Company will use to determine if the applicant meets its requirements to be offered a loan is considered derived data.
It isn’t the raw transactional data itself, but is an answer to a question that becomes new data. Any subsequent processes based on the ‘yes or no’ are also considered derived data.
This is an important point because it highlights the automation potential for innovation, and is a key benefit of CDR for any business in creating more efficient services, products and offerings.
For advice businesses, derived data could flow into automated triggers that would prompt a review of real-time suitability which would prompt an Adviser to recommend to their client strategy changes and product recommendations etc.
Data derived from CDR data is treated like CDR data and needs to comply with all the CDR Rules.
The CDR is designed to support businesses to create competitive advantages and drive the innovation of products and services. But the CDR is also designed to give consumers ownership over one of their most powerful assets: information about themselves. It hinges on consumers consenting to share this data with a Data Recipient for a specific purpose.
“When a customer consents to hand their data over to an organisation, like Moneysoft, for example, we will only collect the data that we need to provide the Moneysoft service, we cannot access all of your data, in the way Facebook does today, that is not how the CDR works. It really has to be very strictly and tightly controlled, in terms of using that data only for the specified purpose. There are a lot of controls around this, which is a very good thing in terms of giving people confidence about the safety of the regime.” – Jon Shaw.
Consumers can control the consent that they provide to any data collector, providers must provide a dashboard by which consumers can see to whom they have provided consent, who they are sharing that data with and the ability to control that data flow.
This data flow is consumer driven and opt-in with mandatory opt-in every 12 months. Data can be switched off externally at any time. If consent is revoked then the data held by the ADR must be de-identified or deleted.
With the background to what CDR and Open Banking is, how it works and what is involved in accreditation the second half of this report focuses on how Advisers can use this information in their client service offering.
To date, the biggest challenge for financial services organisations in CDR has been a lack of clarity around what it takes to make the most of the reform.
For a business to embrace CDR, it requires the acknowledgement that the future of data holding and sharing is going to move from a silo approach toward an eco-system and open style data sharing.
Any organisation that embraces this move now can add more value and be more competitive by innovating with data-driven insights to create better product and service offerings.
The main benefits of CDR for consumers are:
The main benefits are designed around reducing friction in experiences with different service and product providers either directly through quicker outcomes, or indirectly through reduced costs.
As businesses adopt CDR and use automation to refine their services and products, consumers will benefit from better services, tailored to their specific situation and needs.
In application this can translate into being able to more easily sign up for a new account, credit or debit card, application for loans, and using budgeting tools more efficiently and in real time, as well as the ability to switch from one bank or provider to another more easily.
From an Advice perspective, for clients it could include efficient onboarding and sharing data to auto-complete fact find documents, and financial information at reviews. Managing cashflow real-time. Sharing banking and investing data to enable their Adviser to provide specific, personalised and tailored advice to product solutions based on real time data.
The main benefits of CDR for Accredited and Other Recipients are:
“I believe there are three main benefits: Increased confidence around sharing information through the transparency of CDR, the reliability and trust of the information that is shared, and then over time, the richness and breadth of the data available.” – Jon Shaw.
For Approved Deposit Recipients there are also some disadvantages: