Comments come as more banks integrate with third parties
New Zealand's banking sector is beginning to integrate open banking into their systems, with Westpac NZ announcing its first integration last week.
While many are excited about the possibilities that this data-sharing framework could offer, some are concerned that without proper legislation, open banking may not achieve its full potential.
"Having the technical infrastructure in place is crucial, but it's not enough to truly unleash the potential of open banking," said Jonathon Dale, head of payments at BNZ.
"To fully realise its benefits, the country needs a robust Consumer Data Right (CDR) regime."
Industry-driven initiative
New Zealand's open banking framework is being led by the financial services industry rather than the government.
At the forefront of this initiative is Payment NZ, which manages the country's payment systems.
Established in 2019, Payment NZ's API Centre is responsible for consulting on crucial issues related to open banking. Its major shareholders include ANZ, ASB, BNZ, Citibank, HSBC, Kiwibank, TSB Bank, and Westpac.
Open banking allows secure sharing of financial information with authorised third-party providers, like fintech companies, via secure digital channels known as APIs (Application Programming Interfaces).
This system enables these providers to offer innovative and personalised financial services.
Dale said that open banking has the potential to revolutionise how New Zealanders manage their money, access financial services, and interact with banks and other service providers.
How banks are already using open banking
According to Dale, consistent technology across the banking sector and supporting legislation are key components needed to make open banking a reality in New Zealand.
In terms of the technology, New Zealand's largest banks were required to implement Payment NZ's open banking API standards by May 30, 2024.
“This ensures that all banks are using a consistent and secure method for sharing customer data with authorised third parties,” Dale explained.
Dale highlighted that BNZ has been at the forefront of this movement, providing API access to customers since 2018.
“We achieved the Payments NZ API standard a year ahead of schedule,” Dale said. “Already, more than 250,000 BNZ customers are enjoying innovative financial services made possible through open banking, including services from Xero, Volley, and Blinkpay, all of which connect to BNZ through secure APIs.”
On July 28, Westpac started its own journey into opening banking, also announcing its first third-party integration with BlinkPay – a Māori fintech company that enables businesses to accept customer payments direct from a bank account.
Westpac chief information officer Russell Jones (pictured above right) said it was exciting to finally see open banking in action.
“It’s been great to see the banking industry come together and make this happen via Payments NZ,” Jones said. “Our first integration with BlinkPay is the culmination of a massive piece of work and we know it’s going to open the floodgates for more providers to connect over the next couple of months.”
“We look forward to welcoming further third parties into our ecosystem and helping provide customers with more choices when making payments.”
This was followed by Westpac making two other open banking announcements later in the week, integrating Qippay and Volley into its systems.
Many may not realise that open banking has already become part of the banking and payments framework.
Since 2022, ANZ customers have been able to use Worldline’s Online EFTPOS open banking payment service to pay for things online, straight from their bank account. This is called a payment request.
Customers use their mobile number and the ANZ goMoney app at checkout, doing away with the need for a credit or debit card.
“More than 120,000 customers have authorised a payment request,” the major bank said in a statement. “We are looking to add more approved third-party payment services soon.”
What’s next for banks to do in Open Banking?
The next major API deadline is in November, when the four main banks must have the technology in place to allow customers to securely share their banking data with third-party providers of their choice.
Dale said this goes beyond payments, allowing the sharing of account information and transaction history.
“This opens up a world of possibilities for personalised financial services, such as budgeting tools, savings apps, and tailored investment advice,” Dale said.
“For instance, a customer could allow a budgeting app to access their transaction history. The app could then automatically categorise their spending, provide insights into their financial habits, and offer personalised advice on budgeting, saving, and investing.”
Customers looking for a home loan could also benefit from open banking.
“For example, a comparison service could access the customer’s banking data to create a comprehensive financial profile, including their income, regular expenses, savings habits, and existing debts,” Dale said.
Consumer Data Right (CDR): Next steps
While the banking technology may be all well and good, like Dale said, it won’t operate effectively without legislation backing it.
A CDR is a regulatory framework that gives consumers the right to safely access and share their data with third parties, and puts standardised safeguards in place to ensure security and privacy.
In the New Zealand context, for a CDR to best support open banking in delivering on its potential – being trusted by consumers and reaching critical mass – Dale believes it should rest on three key pillars.
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Consumers in control
First, consumers must have complete control over their data.
This means deciding which third parties can access their information, and for what specific purposes, as well as having the ability to revoke that access at any time, according to Dale.
“The success of open banking hinges on trust, and without it, the entire system loses its foundation,” Dale said. “By putting customers firmly in control of their data, we create an environment where people feel secure enough to engage with these new financial technologies.
“This level of control is not just a feature – it’s a fundamental requirement for building and maintaining the trust necessary for open banking to succeed and thrive in Aotearoa.”
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Accreditation
Second, there must be robust accreditation and security standards for any entity wanting to take part in the open banking ecosystem.
This ensures that customer data is only shared with trusted, vetted providers.
“The accreditation process could assess things like a third party’s data encryption methods, storage practices, and protocols for handling sensitive information, with mandatory security audits to ensure compliance,” Dale said.
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Managing liability
Third, liability must shift with the data.
“Clear rules around data usage and liability are essential for creating a secure, trustworthy open banking environment,” Dale said.
“As data moves from banks to fintechs, the responsibility for protecting and securing that data should move with it.”
Dale said this shift in liability is crucial because it ensures the party with direct control over the data is also accountable for its protection. It incentivises fintechs to maintain robust security measures and handle customer data responsibly.
“At BNZ, we believe that a comprehensive CDR framework built on these pillars is critical for the success of open banking in New Zealand,” Dale said.
“It will provide the necessary protections for consumers while fostering innovation and competition in the financial sector.”
Moving forward
Dale said there is a crucial role for key stakeholders, including the government, banks, fintechs, and consumer advocates, to work together to educate the public about open banking.
“Over time, open banking has the potential to revolutionise how New Zealanders manage their money, access financial services, and interact with banks and other providers,” Dale said.
“By securely sharing financial data, it enables innovative, personalised services that can help people save, budget, and invest more effectively.”
