Commerce and Consumer Affairs Minister Kris Faafoi gives slow-moving banks a timeline to set up systems to better enable data sharing aimed at creating more competition

Commerce and Consumer Affairs Minister Kris Faafoi gives slow-moving banks a timeline to set up systems to better enable data sharing aimed at creating more competition
Commerce and Consumer Affairs Minister Kris Faafoi

Commerce and Consumer Affairs Minister Kris Faafoi is cracking the whip on banks, setting deadlines for them to make open banking operational.

Faafoi wants bank customers to be able to extract their data and give it to approved financial technology firms that can do what banks do - and more. For example, process payments or gather transaction histories for budging purposes.

Authorities in the UK and Australia have forced banks to do this through law. Faafoi has however taken the approach of his National predecessor, and told banks to lead the charge on their own to avoid regulation.

However, he said in a letter to the industry, he has now directed government officials to look into creating a Consumer Data Right in New Zealand.

This would establish a legislative framework for the sharing of consumer data in particular designated sectors, but wouldn’t necessarily be implemented “unless necessary and appropriate”.

His rationale is, why should banks have a monopoly over the management of their customers’ money, when there are financial technology firms that can also do so, creating more competition and therefore better outcomes.

Faafoi wants banks to provide the infrastructure, enabling approved financial technology firms to sit on top and offer banking-related services.

So instead of using a Visa or Mastercard to shop online, open banking could enable shoppers to access their bank accounts directly to make payments, possibly at a lower cost. Datacom and Paymark already offer such payment products.  

Faafoi told the industry the rate of progress being made on open banking is “uncertain and slow”.

He said where progress is being made, there is “inefficiency and fragmentation”.

He recognised that for open banking to really have the desired effect, financial technology firms need “critical mass”.

In other words, if a firm starts an app that lets you pull together your transaction histories from your various bank accounts, with different banks, it really needs all the banks to be on board for this tool to be useful. The same goes with payments tools.

Faafoi said: “I am still not satisfied that all banks are giving open banking appropriate priority.”

Faafoi has said that providers of APIs (the technology that essentially links two systems), including banks, need to adopt standards designed by an industry-owned organisation within six months of them being available.

Payments NZ has created a set of standards to accompany APIs its created.

These 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.

Faafoi said banks need to adopt the second version of these standards within six months of them being available.

He said the agreements made between banks and third parties need to be made on “reasonable terms” within “reasonable timeframes”.

While Payments NZ has created standards, it is still up to Bank X to make contractual arrangements with Fintech Y around how costs and liability will be shared. For example, if Fintech Y is hacked and someone loses their banking information, who’s liable?

Thirdly, Faafoi said he wanted to see a "range" of products or services brought to market that deliver “value safely and securely for consumers”.

Faafoi wanted these three things implemented in the “short term”.

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10 Comments

A sudden rush to do ............something ..............by this do-nothing lefty Government .

They have done more in a year than National ever did..

You're forgetting the flag referendum!

True..but that took them 5 years?

Totally agree, Labour youth camp sex/rapist scandal, immigration corruption/Sroubek Saga, denying knowledge about bringing in a refugee from Manus Island who now has done a runner in NZ, Kris Faafoi's dodgy text messages for speeding up his mate's immigration issues and soo much more swept under the carpet. Didn't see much of these in the news, maybe the media think this lot is too dumb and inept to be corrupt :)

Just more lip service.

Half these banksters should be in jail for abusing their power, considering the social damage they have caused.

A good start would be rounding up ex politicians who are employed by the same banking system that benefited from the same inaction this lap dog MP is doing.

How about a whip to stop interest only loan to housing market Mr Minister.

At the moment the Banks own Customer information.
Allow Customers to own their own information by having a unique number that is transportable to another, or many, other financial services provider. ie: the customer information is attached to the 'bank account number', not the Bank, and so goes with it to a new provider. The information would be aggregated in an Information Clearing House.
Just allow, say, me to have an account number 345-67890 and add a prefix, say, 010, 011,012 etc to signify which provider is using that customer number. ( Suffixing is already in use intrabank to differentiate account types, so how hard would this be as banks already prefix account numbers to show which bank the customer is tied to)

Weak. Just go straight to regulation

I'm suspicious that this open banking initiative is going to favour banks and hurt consumers. Basically third parties like Google and Russia are going to get your data on sensitive stuff like your spending habits.

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