ANZ, ASB, BNZ and Westpac given until late 2024 to be ready for open banking

Tuesday, 30 May 2023

Payments NZ chief executive Steve Wiggins says open banking encourages greater competition and customer innovation.

The big four Australian banks have been given 2024 deadlines to be ready with open banking standards, by an organisation they co-own.

Payments NZ’s “API Centre” has published its “minimum open banking implementation plan” giving ANZ, ASB, BNZ, and Westpac until next year to get ready for open banking.

Open banking is the term for the tech-driven revolution in financial services overseas involving non-bank tech companies building money management and payment app services for consumers.

Open banking is touted as a way of bringing more competition to the banking sector in New Zealand, and delivering a better deal to consumers.

But for open banking apps to work safely, secure interfaces with banks (known as APIs) are needed to give app providers and other companies the ability to access their customers' banking data, and do things like initiate payments on their behalf.

But banks have been accused of dragging their heels on open banking, having been rebuked as far back as 2019 by the government for their tardiness.

Former commerce minister Kris Faafoi defended himself against criticism for not regulating open banking in May 2019.

Josh Daniell, chief executive of open banking provider Akahu, wanted banks to go faster.

“Speed is essential. Without open-banking infrastructure, many Kiwis are sharing their bank details with third parties for data needs. Akahu can deliver an API/open-banking solution for banks in as little as 12 weeks, so why isn’t it happening this year?”

Payments NZ styles itself as “a governance organisation at the heart of the payments system”, but is a company co-owned by ANZ, ASB, BNZ, Citi, HSBC, Kiwibank, TSB and Westpac.

In November last year, David Clark, who was Commerce and Consumer Affairs Minister at the time, announced the Government was working up legislation to introduce open banking to New Zealand, a move he said would increase bank competition.

Open banking payment initiation would enable bank customers to give others, like their power companies, or money management apps, permission to initiate payments from their accounts.

By November next year, the banks must be ready for the API standard for account information.

Open banking account information sharing, which again would only happen in cases where bank customers had given permission to authorised service providers, could result in money management apps being developed that banking customers could use to better manage their money.

Kiwibank has been given a longer deadline, and must be live with both API standards by May and November 2026.

Wiggins said: “Open banking is already under way in Aotearoa.

“Setting this implementation timeline will bring scale and the broad market coverage that is needed.

“This is an important step towards enabling easier and faster partnerships between banks and third parties who use our standards and protocols, allowing them to bring financial services innovations that will benefit consumers to market more effectively and efficiently.”

The “open banking” that was under way involved people breaching bank terms and conditions by providing their log-in details to third parties like POLi Payments and online accounting solutions , said Daniell.

It was a work-around that around a million people were using, he said.

Daniell said just being ready with the APIs was not enough. Banks had to also let companies like Akahu use them.

BNZ already had a payment initiation API in place, and Akahu had passed the bank’s security review in August last year, but still had not been granted permission to use the API by the bank.

Daniell said: “Despite this commitment, many banks are still seeing open-banking as a threat and aren’t moving fast enough to achieve what is widely available globally.”

One of the big gains from open banking for New Zealand would be to cut the cost of payments, he said.

Establishing consumer data rights would address the current issue of needing to negotiate terms with each bank, he said.

Last July, the Government agreed to establish a consumer data right framework which would require data holders like banks to ensure New Zealanders could gain access to a wider range of products and services that better meet their needs. Banks would be the first sector to implement the mechanism, he said.

Speaking in November last year Clark said: “Open banking ensures banks must share customer information if they request it, making it easier for New Zealanders to compare mortgage rates, apply for loans and switch banks.”