As inflation and other economic pressures weigh on Australian small business owners, having access to tools that can help them make smart financial decisions is critical. The best tools should leverage data to provide a personalised experience and give small and medium-sized enterprises (SMEs) the information they need to hire, expand, cut costs, and streamline with confidence. By expanding the Consumer Data Right to meet the needs of Australia’s 2.5 million small businesses, policymakers can help ensure they have the resources they need to weather uncertain economic times.
Policymakers can better support SMEs by enhancing the CDR to reflect how businesses truly operate, which would, in turn, bolster the Australian economy. Many small businesses owners depend on financial advisors to help run their businesses efficiently. By increasing access to data, an expansion of the CDR could enable SMEs to have more meaningful, real-time conversations with their advisors. However, not all small businesses have the resources, time, and cash flow to invest in financial advisors. Giving SMEs the ability to access and share their own financial data with a broader range of third parties, for a longer period, and the power to act on their behalf, would help to level the playing field.
Policymakers can implement these enhancements to help small businesses address the key challenges they face, including:
- Managing cash flow: Expanding the CDR could make cash flow-based invoicing and forecasting more accurate and personalised.
- Improving access to finance: Expanding the CDR would benefit both lenders and small businesses. It could help lenders create personalised products, make quicker decisions with improved credit checking processes, and help small businesses be more likely to get a loan while spending less time doing so.
- Managing late payments: Expanding the CDR could help cut transactional costs and reduce waiting times for payment.
- Winning new customers: Expanding the CDR could facilitate better credit assessments and alternative payment methods in the financial services sector. There is additional potential to help small businesses by integrating customer relationship management (CRM) data with other software.
- Streamlining financial business administration: Expanding the CDR could make it easier for small businesses to link financial services products to their accounting platform, increasing awareness of their financial position. This could also improve the accounting process through less manual data entry for tasks such as tax calculations.
- Enabling more meaningful financial conversations: Expanding the CDR could enable more meaningful conversation between small businesses and the advisors who counsel them. By providing more timely data, advisors could offer better guidance, a win for both advisors and small businesses.
To date, the implementation of the CDR in the banking sector has been aimed at empowering consumers to gain a clearer insight into their financial well-being. Following the recommendations of the Statutory Review into the Consumer Data Right, it is imperative for the Government to explore strategies to increase small businesses participation in the CDR. This includes giving small businesses the flexibility to make informed decisions on sharing their CDR data for purposes that are directly aligned with their business objectives.
As the government charts a path forward, working in partnership with the private sector can ensure the next phase of CDR innovation truly meets the needs of those it’s meant to serve: Australian consumers and small businesses. Considering the needs of small businesses will be critical to ensuring the CDR lives up to its full potential. A smart, risk-based approach that prioritises collaboration across sectors can improve data stewardship practices, encourage innovation, and foster competition to generate economic rewards as policymakers and regulators implement operational enhancements to the CDR.