Bill aims to give NZ consumers more power

Thursday, 23 May 2024

ANALYSIS: “Information is power”, says entrepreneur Justin Lim.

Lim, founder of the Quashed insurance comparison website, is a fan of Commerce and Consumer Affairs Minister Andrew Bayly’s proposed laws to give people power over data held on them by big businesses like banks, insurers and power companies.

Bayly’s Customer and Product Data Bill, which was scheduled for its first reading on Wednesday evening, is hailed by the minister as paving the way to a modern economy with more competitive industries, and better deals for households.

Not just better deals. Faster deals.

“Australian customers can get a 10-minute home loan online,” Bayly says. “Meanwhile, because we do not have a consumer data regime in place, Kiwi customers of the same banks still go through a lengthy, manual process to get a mortgage.”

What exactly would the bill do?

The law would give people a statutory right to require companies and other organisations holding their data to share it with “accredited” third party services such as product comparison websites.

They would have to do so electronically and efficiently, and if they failed to do it, would face large fines.

Lim says: “That would enable customers be to be empowered to shop around and compare prices much more easily.”

And not only more easily, but more accurately.

Jon Duffy, chief executive of Consumer NZ, says: “This will enable comparison sites, with your consent, to use your actual usage data to … give you a really accurate picture of where you would get a better deal.

“Or inform you that you should stay where you are because you are on the best deal already.”

It wouldn’t just mean more accurate power comparison sites. It would mean better comparison sites for banking, insurance, and telcos.

What’s that about a 10-minute home loan?

So much in New Zealand takes an excruciatingly long time.

Being able to order a company like a bank to share their data with another company could speed up things like getting a home loan, or insurance, and reduce boring form-filling.

Shane Marsh, co-founder of open banking startup Dosh, says: “A consumer data right puts the power and control of a person’s data back in their own hands. They will be able to control who has access to that data, and importantly enable other providers they trust to be able to access their data.”

A person who needs a loan, for example, may decide not to get it from their bank. They could give another lender the right to retrieve their banking data, enabling that lender to assess their finances to see whether a loan would be affordable, and what interest to charge them.

“The way it works today is there’s quite a lot of friction in the process. It’s hard for the consumer,“ he says.

Which industries does the minister have in mind?

The bill envisages the Government designating sectors to be covered by the consumer data right law. Banking is clearly the first cab off the rank.

“New Zealand has some of the world’s most profitable banks,” Bayly says. “This Bill lays the foundation for ‘open banking’ which will make it easier for innovative start-ups to compete with traditional banks.

“Greater choice for Kiwi customers – about who to bank with, and how to manage their finances – should lead to more competition and potentially lower prices.”

Why is this only happening now?

There are various theories as to why Australia and the United Kingdom have data right laws, and we don’t.

Perhaps having competitive industries was not close enough to the top of recent governments’ to-do lists.

“It really comes down to where does improving competition in the market sit in the priorities of government,” says Marsh.

Given the consultation on a consumer data right was done in 2020, which is a reminder Bayly’s bill is built on the work of the previous two governments, some say the Covid pandemic ended up delaying it, though Marsh says that would be a “weak excuse”.

For Duffy, there’s been a lack of political decisiveness, and common sense.

He points to the glacial pace of the arrival of open banking, which previous governments left largely to the banking industry.

“Successive governments have been giving the strongest hints possible banks should be implementing open banking because it’s good for consumers, and will enable competition, but nothing tangible has really happened,” he says.

“Big industries like banking, like insurance, like telcos, like power companies will sit on your data, treat it like their own. They are not incentivised to encourage competition. Competition is good for consumers, not incumbents with big market shares that don’t want their market shares threatened.

“It’s folly to think you can write letters to industries to say ‘do things that are contrary to your interests, or else’,” he says.

Are there people this might not be good for?

A more joined up world could be one that is more punishing to the already disefranchised, according to some.

Financial mentors help people struggling to pay their debts and other bills, and a consumer data right could make it much easier for them to work out what debts clients have, and with whom.

Financial mentor David Verry says gathering debt, banking and other information on clients can mean having to send multiple privacy waivers to banks, government departments and lenders. Being able to use consumer data rights to demand that information fast, would be welcome.

But Fincap policy officer Jake Lilley warns that a more connected world could result in the struggles of the already struggling being intensified.

The likes of power companies, telcos, banks and other lenders would have more ready access to more data about people.

“That needs to be monitored, and the risks mitigated,” he says.