Open banking is expected to provide a boost to the financial technology (fintech) sector in New Zealand. Its progress is closely monitored by the government, which says that COVID-19 has delayed its development. But the pandemic may also provide new opportunities for the growing sector, says industry group FinTechNZ.
What is open banking and who is developing it in New Zealand
Open banking enables better product comparisons and new digital experiences because it allows customers to give third-party providers .
To facilitate open banking, the banking sector has to open up their customer’s financial data via application programming interfaces (APIs). In New Zealand, this is being facilitated by the Payments NZ API Council, which announced in early July 2020 the latest version is now available in its API sandbox, “allowing developers to test that their solutions function as expected against the APIs.”
The banking industry had received a letter from the Minister of Commerce and Consumer Affairs Kris Faafoi in December 2019, expressing concern that the process for developing APIs was too slow and too fragmented. A spokesperson for the Ministry of Business Innovation and Employment told Computerworld New Zealand that it continues to monitor progress and has “remained engaged” with the Payments NZ API Council.
“In light of COVID-19, the banks have understandably had to prioritise resources to core banking services for their customers. This has meant delays in some cases to the timeframes for implementing the API standards and therefore bilateral arrangements and delivery of products in market. However, the Minister of Commerce and Consumer Affairs continues to see this work as important and expects API providers to continue efforts in the areas outlined in his letter,” the spokesperson told Computerworld New Zealand.
The fintech opportunity in New Zealand
FinTechNZ CEO James Brown describes open banking as the next transformation across New Zealand’s financial sector. “Unlike other countries, New Zealand doesn’t have as many skeletons in the cupboard. Open banking will create more trust and transparency as well as a more competitive landscape,” he says.
Brown says the Payments NZ API Centre is “a great place to test and learn your products and solutions” noting that, “our regulatory framework is well placed to help stimulate innovation in New Zealand.”
He would, however, like to see greater cooperation with global organisations. “I would like to see the Financial Markets Authority consider joining the Global Innovation Financial Network, which has over 20 regulators around the world which will help launch new products into market while we are going through COVID.”
In addition to the government providing a clear mandate on open banking, Brown is keen on a national strategy around fintech, digital IDs and AI, similar to what is in place for tourism and agricultural technology. “As a small nation we have the opportunity to leap ahead of what the UK has achieved around open bankingand could even learn from what is going on in Australia which could lead to a trans-Tasman open banking joint project.”
A FintechNZ report on trade opportunities with the UK notes that companies in this sector are some of the best New Zealand performers on the global stage, with Xero, Invenco, Vend, Pushpay and Transaction Services Group all cited. “There are 13 fintech companies listed in the TIN200 [which ranks New Zealand tech companies in terms of export revenue] for 2019, and of the TIN200 companies, fintech also had the highest staff growth rate and average wage out of all ‘secondary’ technology sectors.”
Data Portability not in new Privacy Act, but Consumer Data Right may be on its way
There was discussion about data portability being mandated in the new Privacy Act, which comes into effect in December 2019, but it wasn’t included. That means that a customer can still only request that a company provide them with their own data—there is no obligation for it to transfer the data to another business. So, if a customer decides to switch providers there is no legal requirement for the original provider to send information to the new provider, nor does the original provider have to destroy the former customer’s data after they leave.
Brown says the exclusion of data portability in the new Privacy Act isn’t a show-stopper for open banking. “I don’t think it’s essential, however I do feel that it should form part of the transition as the user then takes control of their own data and how it is shared and distributed,” he says.
Meanwhile, Minister Faafoi is aiming to release a discussion document on whether a Consumer Data Right (CDR) is appropriate for New Zealand. This would give consumers more choice and control to share their data between service providers in various sectors.
Australia introduced its version of CDR in 2017, and Brown says a similar law could be advantageous, “especially if New Zealand and Australia could look a joint project during COVID.”