Consumers 'data rights' law to smash banks' stranglehold

Friday, 20 December 2019

Consumers will be given 'data rights' after mounting government frustration with a banking sector go-slow on implementing open banking.

Open banking is the term for the tech-driven revolution in financial services overseas involving tech companies building money management and payment apps for consumers, which cut the cost of banking.

But for open banking apps to work safely here, New Zealand tech companies like Jude, POLi and Choice to Pay need safe and secure interfaces with banks (known as APIs) to access their customers' banking data, and banks have been dragging their heels in providing them.

Now, in an open letter, Commerce Minister Kris Faafoi has told banks: 'The current rate of progress appears to be both uncertain and slow.'

Commerce Minister Kris Faafoi is promising consumer data rights laws for New Zealand.

* Commerce Minister Kris Faafoi to continue push for 'open banking'

* 566,378 customers impacted by bank errors, Financial Markets Authority reveals

* NZ prepares to join the 'open banking' revolution**

He accused bank management of not giving open banking sufficient priority, and said: 'I have directed my officials to provide me with possible advice on a possible Consumer Data Right.'

This would provide a legal right for consumers to provide access to their data to trusted third parties.

Secure APIs were to be organised through the API Centre run by Payments NZ, which is owned by a group of eight banks, but Faafoi was unimpressed with progress.

Instead of using industry standard APIs, banks were using slightly different API standards, bringing them to market at different times, Faafoi said.

This was making life hard and costly for companies trying to launch open banking apps in competition to the banks.

Faafoi warned banks to make API access a priority, properly fund API development, implement standard APIs, and to start reporting publicly on their progress.

Open banking was supposed to unlock New Zealanders' banking data helping create competition to drive down the cost of banking.

Steve Wiggins, chief executive of Payments NZ, said: 'It's certainly going to be listened to and we will continue to work with industry to make progress.'

The industry would regroup in the New Year, but he insisted: 'We have made really good progress to date.'

Faafoi's plan for a consumer data rights law was 'really interesting', and appeared to be a parallel for laws introduced in Australia.

New Zealand Bankers' Association chief executive Roger Beaumont said: 'Nine of our banks have registered as API providers. That demonstrates their commitment to working with third parties to develop open banking solutions.

'Banks are at different development stages in this area. It's important we get the foundations right to ensure good customer outcomes. That includes making sure customer data is kept secure and there's clarity on liability in case of any breach.'

Sam Stubbs, founder of the Simplicity KiwiSaver scheme, said banks' heel-dragging was protecting their high profits for as long as possible.

'The reality of open banking in New Zealand is that it's a fiction,' Stubbs said.

'The reality of open banking in New Zealand is that it's a fiction,' said: Sam Stubbs, founder of Simplicity KiwiSaver.

He applauded the plan for consumers in New Zealand to have their data rights enshrined in law.

'The topic was first discussed here three years ago, when it became clear that personal data rights would become the global norm. In the UK and Australia, where this is being codified into a common standard, there is a renaissance in financial services unfolding. Just look at providers like Monzo and Atom bank.

'The UK has had open banking along a common (API) standard for almost two years now, and transactions and information sharing is doubling every month.

'The banks here make positive noises about open banking, but it's a big threat to their profits.

'Open banking doesn't write the banks obituary, it just makes them work harder for customers to earn their profits,' he said.

Faafoi's letter follows a series of warnings from the minister going back as far as November 2017, when he said: 'My preference is everyone realising there is opportunity here. Anyone being overly obstructive may find themselves being left in the dust.'

In May this year, Faafoi defended that stance at an Open Banking forum in Auckland.

He said he was aware some believed the Government had been 'sitting on the sidelines' and needed to regulate to secure the benefits associated with open banking.

'That might be true in time,' he acknowledged, but said: 'I'm genuinely focused on giving industry-led open banking a real chance to succeed.'