Open banking is a major step closer to being broadly rolled out in New Zealand.
The bank-owned organisation that governs New Zealand’s payments system, Payments NZ, has launched a set of standards to accompany the technology it has developed to facilitate open banking.
Open banking is a global phenomenon that sees banks open parts of their systems to third parties that can carry out some banking functions. Put another way, it sees third parties sit on top of banks’ infrastructure.
The idea it is to enable consumers to make payments or access their bank accounts through these third parties.
For example, instead of someone using their bank credit card to make payments online, companies like Datacom and Paymark offer products that enable consumers to okay payments from their bank accounts without having to use bank cards that incur fees.
While governments in the UK and Australia have forced banks to engage in open banking to drive more competition, the New Zealand Government has tasked Payments NZ with getting the wheels in motion on its own accord, or risk being forced to do so under regulation.
Payments NZ has now reached the point where it’s released a set of standards that banks and third parties that engage in open banking can use.
The standards outline how open banking should be designed to manage risks and be secure. For example, they detail how customers who entrust a third party to access their banking information need to be informed when consenting to this.
Consumers also need to be able to opt out whenever they want.
The standards don’t include any principles of reciprocity. In other words, they don’t require a third party that uses a bank’s data to reciprocate by sharing their data with the bank.
Commerce and Consumer Affairs Minister Kris Faafoi at the end of last year signalled his support for reciprocity.
In line with the view of his Australian counterparts, he said it could act as a safeguard against open banking ultimately giving very powerful tech giants like Facebook and Google a foot into banking, possibly gazumping banks themselves as well as smaller financial technology firms keen to innovate in the payments and budgeting spaces.
