Open banking: How to opt in - and out - of the new payment system

Monday, 27 May 2024

Sam Stubbs, managing director of Kiwisaver scheme Simplicity, spoke with Imogen Wells about why open banking could mean Kiwis get a better deal.

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Open banking allows for new ways to pay for items online - but how does it work?

From May 30, New Zealand's four major banks - ANZ, ASB, BNZ and Westpac - must be ready to support payments through open banking - although some already have it in place.

It allows customers to give a third party (such as an online retailer) permission to connect to their banking information, meaning there is no need to enter credit or debit card details to make a purchase.

Open banking can be used both on retailers' websites and on their mobile app, if they have one. Other emerging ways for open banking to be used are for bill payments and for payments from one person to another.

ANZ, along with BNZ, ASB and Westpac, will offer open banking from May 30.

Here's how it works.

How to opt into open banking and make a payment

Confirm you want to pay via open banking. The retailer may ask if you want to pay directly from your bank account. You will need to confirm which bank you belong to and agree to proceed.
Log into your bank account. You will be taken to either your bank's website or app, where you can log in normally.
Check, enter or change your details. Choose which account you want to pay from and enter a reference for the payment if you like. This is also the point where you can check the details of your payment, including the amount of money and where it is going.
Approve the payment. Click 'continue' or 'approve' (the exact term may vary depending on your bank) to complete the transaction.
That's it! You'll be taken back to the retailer's site or app.

How to opt out of open banking

Simply select another payment option - such as a credit or debit card, or Apple Pay - when prompted by the retailer at point of purchase.

Open banking is an 'opt in' rather than 'opt out' service, so you will not be redirected to use the payment method without your consent.

Is open banking safe?

Officials and banks both say yes.

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Open banking is run through secure digital channels called Application Programming Interfaces (APIs). Under New Zealand legislation, Aotearoa's four biggest banks must meet Payments NZ standards for their use of open banking APIs - meaning the method is consistent and secure across all the banks.

According to BNZ's head of payment Jonathan Dale, the APIs only share your data with authorised third parties, such as retailers that you yourself have approved. That means your banking information is never directly accessed by other providers.

Again, your data can only be shared with a third party with your explicit consent. If you do not confirm access, you will not be opted in.

ANZ says retailers, businesses and payment services must meet stringent security, privacy and customer support standards before they are approved as a third party for open banking.

'We don't approve third parties related to a heightened risk of fraud or scams, money laundering and financial crime, unethical data use, or inadequate controls or processes.'

Each third party must also be a member of Payments NZ's API Centre and accept the centre's terms and conditions, ANZ says.

What else can open banking be used for?

Open banking can also be used to help manage money or to shop around for a better deal.

For example, you could allow a budgeting app to access all of your banking information through open banking's data-sharing service, even if you have accounts with multiple banks. That would enable the budgeting tool to pull together a clear picture of your finances without the need for you to manually enter data or upload bank statements.

You could also use open banking to shop around for a better mortgage rate or apply for a loan, by giving a mortgage broker or a competing bank permission to access your data.

According to former Minister of Commerce and Consumer Affairs David Clark, who announced the banking sector's move to open banking in 2022, that will mean you will be able to access 'more tailored and timely advice' on your finances.

'At a moment in time where cost of living is high around the world, consumers should have the power to shop around for better deals, and make sure they're getting the best bang for buck out of their investments,' he said.

While the secure payment service will be available at the big four banks by 30 May, the data-sharing service will not be available at all of them immediately. ASB will offer the data-sharing service from 30 November, while ANZ says its service is 'in development'.

Will any other banks be offering open banking?

Kiwibank is set to offer the service in 2026.

CLARIFICATION: This story has been updated to clarify how open banking will work. Amended: May 27, 2024, 2.28pm.