Cuscal’s Basiq warns CDR could sever customers’ direct ties to banks

Cuscal-owned Basiq has warned the government that the "action initiation" amendments proposed to the consumer data right (CDR) could unintentionally undermine the finance market and pave the way for "super apps".

On Tuesday, Cuscal and its open finance platform, Basiq, fronted a Senate economics legislation committee hearing regarding proposed changes to CDR enablement laws.

The proposed amendments relate to "action initiation", which would let consumers instruct fintechs and other service providers to perform automated actions on their behalf, such as opening new accounts to switch banks.

Draft legislation has already passed the lower house and is currently before a senate committee that is expected to report by early May 2023.

Responding to questions from comittee chair Jess Walsh, CEO and founder of Basiq Damir Ćuća said that while action initiation could boost competition and give consumers more choices, it may also lead to market consolidation and the rise of super apps.

Ćuća said his concern over the amendment is a ministerial declaration power could enable “somebody to define what API or application programming interfaces [the] entire industry needs to roll out.

“If we fast forward, what that could potentially lead to, if it's not managed properly, is white labelling of businesses that are naturally direct-to-consumer businesses," he said.

“If somebody designates and says, hey, you need to now open up your core business services as an API interface, and you need to enable third parties to be able to connect to [it], that can create an economic environment where consumers no longer have to go directly through to the business that's offering the core service because they'll be able to do it through a third party.

“That would disadvantage [businesses] significantly. I think our bigger concern is that it could lead to a 'white labelling' of industries going forward."

He added if consumers no longer need to use a business's website or app to be able to carry out specific functions, there are concerns around regulations.

“What we're flagging as a potential concern is that if we go too far with this, if we don't define the actions in what we call 'industry participative approach', we could have a negative impact," he said.

Citing brands like Apple and Google, he said: “The negative impact in the extreme could be [the emergence of] potential super apps, [where] someone's got a phenomenal amount of marketing dollars that can plug into all these APIs and can pay for all the consumers to go to their app and never have to go to the other third-party app.

“I think that's something that we think needs to become a balance out and be managed really carefully."

Ćuća is strongly advocating for increased participation by the industry itself adding the fintech sector “was one that got a little bit left out” despite being the “ones that actually implementing” the CDR.

“Making sure that we have the right balance is important,’ Ćuća said.