Open banking in New Zealand: what it is and why it matters

Open banking has been a hot topic in the news recently, and for good reason. It has the potential to revolutionise the way New Zealanders manage their money, access financial services, and interact with banks and other service providers. But what exactly is open banking, and why should New Zealanders be excited about it?

What is open banking?

Open banking is a system that allows you to securely share your financial data with authorised third-party providers, such as fintechs, through secure digital channels called APIs (Application Programming Interfaces). This enables these providers to offer innovative and personalised financial services, like budgeting tools, investment advice, and seamless payment options, all while keeping your data safer and more secure.

What open banking looks like in practice

One of the most exciting aspects of open banking is its potential to transform the way we make payments. Imagine being able to make online purchases directly from your bank account with no fees and no need for a credit or debit card. Or seamlessly splitting bills with friends and family through an app. Open banking enables the development of new, convenient, and secure payment methods tailored to your needs.

But open banking isn’t just about payments. It can also enhance the way you manage your finances. Picture an app that offers personalised insights based on your financial habits, helping you to save, budget, and invest. With open banking, this app could securely access your transaction data from multiple bank accounts, giving you a comprehensive view of your finances.

By allowing fintechs to access your financial data (with your consent), open banking promotes competition and innovation in the financial industry. New businesses can enter the market, leading to a wider range of products and services at competitive prices.

Open banking can even simplify processes like applying for a loan. Instead of manually providing bank statements and other financial documents, you could securely share this information with a range of lenders through an API, streamlining the process and potentially leading to faster approvals and more competitive offers.

What’s needed to make open banking a reality in New Zealand

Two key components are necessary to make open banking a reality in New Zealand – consistent technology across the banking sector, and supporting legislation. New Zealand’s biggest banks are required to implement Payments NZ open banking API standards by 30 May 2024. This ensures that all banks are using a consistent and secure method for sharing customer data with authorised third parties.

At BNZ, we’ve been leading the charge in this space, providing API access to customers since 2018, and we achieved the Payments NZ API standard a year ahead of schedule. Already, more than 250,000 BNZ customers are enjoying innovative financial services made possible through open banking – this includes the likes of Xero, Volley, and Blinkpay – all of which connect to BNZ through secure APIs.

In addition to the tech, legislation is needed to empower individuals and businesses with greater control over their data. Such legislation should set clear rules for data usage and liability, creating a strong legal foundation for open banking in New Zealand. It must include that customer data can only be shared with third parties with explicit customer consent. And it should also aim to streamline the accreditation process for fintechs by creating a standardised framework across banks.

This means fintechs that meet set standards will be able to offer their services to customers of all major banks without the need to negotiate individual agreements with each institution, lowering barriers to entry.

How your data is kept safe with open banking

Data security is paramount in open banking. Secure APIs are used to share your data with authorised third parties, ensuring that your sensitive information is never directly accessed by external providers. Additionally, under open banking, your data can only be shared with third parties with your explicit consent, giving you control over who accesses your data and for what purposes.

Additionally, legislation that creates a standardised accreditation process for fintechs would ensure that only trusted and vetted providers can participate in open banking.

At BNZ, we’re excited about the future of open banking and the possibilities it brings for our customers. As we continue to work towards a fully-realised open banking system in New Zealand, we remain committed to ensuring the safety and security of our customers’ data while embracing the opportunities for innovation and improved financial experiences.

This article is solely for information purposes and is not intended to be financial advice. If you need help, please contact BNZ or your financial adviser. Neither BNZ nor any person involved in this article accepts any liability for any direct or indirect loss or damage arising out of the use of, or reliance on, all or any part of the content.