How is open banking progressing in New Zealand?

Open banking will give customers more control over the data and support mortgage advisers in the collection process, a technical expert says.

Still in the early phase in New Zealand, open banking allows customers to instruct their banks to share their financial data with third-party providers, using standardised application programming interfaces (APIs).

The Ministry of Business, Innovation and Employment (MBIE) released an exposure draft of the Customer and Product Data Bill for public consultation in 2023, aimed at improving customers’ access to and control over their data and make it easier to exchange data with a consumer’s consent.

The four main New Zealand banks (ANZ, ASB, BNZ and Westpac) are required to be ready to start implementing open banking in May, with Kiwibank to join in 2026.  

Payments NZ, which governs New Zealand’s core payment systems and established an API Centre in 2019, has been involved in consulting on and developing open banking standards, in conjunction with industry representatives. It has run weekly working groups which have included the four major banks and a range of community contributors.

Phil Cass, API centre manager at Payments NZ (pictured above left) spoke to NZ Adviser about how open banking is progressing and the benefits it will provide to mortgage advisers and their clients.

Open banking puts customers in control of their data, ensuring that data can only be used for what they had consented for, he said. 

“It enables faster, more secure sharing of data,” Cass said.

How will open banking help advisers?

From a mortgage adviser’s perspective, Cass said that open banking would support greater efficiency around verification of income, enable enhanced credit scoring and allow more information to be accessed.

“Open banking will give a more holistic view of an individual’s situation and help those with limited credit scoring history or who aren’t traditionally well served by traditional credit scoring methods, such as contractors and the self-employed,” Cass said.

“It enables more personalised loan offers, more accurate risk profiling and it can also be used by a mortgage adviser to offer enhanced services, such as help with budgeting,” he said.

For example, a mortgage adviser could access a monthly download of a customer’s banking data securely, enabling preventative measures around affordability to be addressed with clients earlier.

Examples of current data exchange methods which open banking seeks to improve are providing   internet banking login details to non-bank apps, or logging into a bank account through a third-party interface and sending financial data via email, Cass said.

How is open banking superior to screen scraping?

Screen scraping is a process where an app or third party provider collects data from customers to support a range of activities. There are concerns that it poses risks to consumers, particularly where personal login information, such as internet banking login details, are shared.

Cass said that screen scraping created risks for consumers, as well as issues around service disruptions.

“Once open banking in New Zealand is up and running, the alternative of doing things in a safer, secure way with the customer in control will be the prevailing way that the app providers will provide their services,” Cass said.

In Australia, open banking is a legislative reform introduced by the Australian Government and implemented through the introduction of a consumer data right (CDR).

In New Zealand, Cass said that open banking had been industry-led, which he said provided the ability to learn some of the lessons from other jurisdictions and work with industry experts to develop standards, protocols and rules. 

How can advisers prepare?

In preparation for open banking, Cass suggested that advisers could start to look at how they would access data through APIs, either by building their own APIs to access the data directly from a bank or identify a registered intermediary who can build a pipeline and extract the data from a bank to advisers.

Commenting on the Commerce Commission market study into competition in the personal banking sector, Cass said that by enabling more choice, he anticipates that there will be an expectation from the Commerce Commission that open banking and standardised APIs are driven by the banks and made available to third parties.

When will the legislation be finalised?

Andrew Bayly (pictured above right), Minister for Small Business, Revenue, Commerce, Consumer Affairs and Manufacturing confirmed to NZ Adviser that the Customer and Product Data Bill would provide the legislative framework to establish a consumer data right (CDR) in New Zealand.

“I intend to seek Cabinet approval to introduce the Customer and Product Data Bill in the first half of this year, so ‘third party players’, like fintechs, can better develop competitive and innovative products and services in designated sectors, such as banking,” Bayly said.

“I am currently seeking advice from officials about next steps for how to achieve this.”

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