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Andrew Dentice

Open Banking: Where are We Now?


Andrew Dentice , Technology Lawyer at Hudson Gavin Martin gives us an update on various Open Banking initiatives in New Zealand and overseas.

In March this year we asked Open banking: Are We There Yet?  Half a year has flown by since then, so it’s a good time for an update on progress with various initiatives here and overseas.

In New Zealand, the debate has continued around whether a regulatory or industry-led approach makes the most sense. Commerce Minister Kris Faafoi laid down the gauntlet when he spoke at the Payments NZ Conference in June, saying:

“In the future, we will be testing whether there is more of a role for government in facilitating some form of Open Banking.
But the role we play is, in part, up to you [the industry]. Speed is of the essence. I do not want to see New Zealand left behind in respect of the outcomes that Open Banking could deliver in terms of economic development and benefits for consumers.“

We have also heard public statements from incumbent banks, ecosystem players like Xero, and new FinTech market entrants like Revolut, all looking to establish their positions in the developing Open Banking playing field.

Promisingly, there has also been plenty of action to go along with the talk. The Payments NZ  Payments Direction initiative, which aims to develop a common API framework (similar to that being rolled out by the Open Banking project in the UK) is progressing, with a pilot currently underway involving some of the key potential players in this space: TradeMe, Paymark, Datacom, Westpac, BNZ, and ASB. Meanwhile, Paymark has also recently unveiled its new OPEN platform, which it described as “a centralised cloud-based network that everyone – banks, payment industry partners, FinTechs, businesses – can connect to, around which you can develop, evolve and deliver innovative payment experiences.”

An important aspect to consider as things progress in New Zealand, particularly as we look to compare Open Banking initiatives around the world, is that Open Banking is an easy, short-hand term being used interchangeably for a diverse range of initiatives. What it means in Australia for example – with their focus on a Consumer Data Right – is different to the UK, where the regulator has intervened to improve competition in retail banking and drive FinTech innovation. In New Zealand, the approach so far has had a different focus again – the clue being in the name of the organisations leading a lot of the work. Payments innovation is an area where we have often led the way in the past – and this, rather than opening up account data for example, appears to be the focus of our early foray into Open Banking.

Looking overseas, FinTechNZ delegates in London for FinTech Week in July were lucky to spend an afternoon with senior representatives from Open Banking Limited, the company tasked with implementing the UK’s Open Banking programme. Among the insights we gained:

  •  Take-up has been steady but not huge  – with around 30 licences granted to FinTechs wanting access to bank data and around 140 companies in the licensing pipeline.
  •  There has been an element of “culture shock” for some of the tech companies subjected to a financial services licensing process for the first time – impacting the speed of uptake.
  • Although payments use cases may have the most potential to disrupt the industry (particularly the card schemes and traditional payments players), it is more complex to implement from a technology and security perspective. So – in contrast to NZ – account information solutions (using banking data to provide insights to retail customers) are where most of the action is currently.
  • There was a strong message that a clear regulatory directive (in this case an order by the UK’s Competition and Markets Authority) has been key in providing a firm framework and sense of urgency for the programme. Placing responsibility for both setting and implementing Open Banking standards with a single entity was also viewed as key to unlocking efficiencies and corralling the various players.

Another successful element of the UK programme was a ‘use case workshop’ held between participating banks and a selection of FinTech providers before launch. This was used to scope likely applications, test assumptions and refine the technical approach.

This is all food for thought as our industry-led initiatives take shape in New Zealand – and it’s clear the next six months will be even more active than the last in this space so look out for the next Open Banking update early next year.

Andrew Dentice Technology Lawyer | Hudson Gavin Martin | FinTech NZ Executive Council Member