Government talks up potential of open banking for small and medium sized businesses

ANZ , ASB, BNZ, Kiwibank and Westpac will be required to provide open banking services to all small and medium-sized business (SME) customers from June next year, the Government says.

Regulated open banking launched last December, but some of the major banks' digital service channels are currently outside regulatory designation.

Commerce and Consumer Affairs Minister Scott Simpson and Small Business and Manufacturing Minister Chris Penk say this will include the likes of mobile apps and websites many businesses use for online banking.

Businesses choosing to share banking data with trusted providers, such as financial technology or fitech companies, should be able to access faster loan comparisons, automated accounting, and smarter cashflow tools, Simpson and Penk say. 

"It means fintechs can develop new tools for businesses which can mean less time on paperwork and admin, and more time focusing on customers and growth," Simpson says.

"Simple things like automated accounting tools and streamlined payment systems can save businesses hours every day. In the United Kingdom, businesses using open banking tools saved around 150 hours a year on basic tasks.  That’s nearly a month of time gained, and that’s time that can be spent growing the business, supporting staff, or serving customers," says Simpson.

Public consultation on amendments to the Customer and Product Data (Designations for Banking and Other Deposit Taking) Regulations will follow. Open banking regulations are overseen by the Ministry of Business, Innovation and Employment.

The Government says, however, banks won't be required to provide regulated open banking services to big corporates and institutions at this point. Simpson and Penk say international examples show limited demand and use case for open banking among larger entities, but the Government will monitor demand and review this position if necessary.

Open banking requires banks to share product and customer data with customers and third parties (accredited requestors), with the consent of the customer. The idea is that such data sharing could increase price transparency, and enable comparison services to accurately assess how much a product would cost a customer based on their behaviour. This could therefore enable the recommendation of the most appropriate products for individual customers.

Penk suggests open banking could prove especially valuable for small businesses by tackling several of their biggest constraints at once.

"Small businesses can struggle to secure loans because they lack long credit histories or substantial collateral, but open banking products allow lenders a clearer picture of how a business is actually performing," says Penk.

"Cash flow is also one of the biggest pain points, which fintechs can use open banking to address by bringing accounts from different banks into one place, helping owners track money in and out in real time so they can avoid shortfalls and make better spending decisions."

“For smaller operators with fewer staff, manual reconciliation, invoicing, and financial tracking take up valuable time. Services harnessing open banking can automate these tasks, reduce paperwork and errors, and free up capacity to focus on running the business," Penk says.

The Government doesn't yet have any data available on the number of New Zealanders using open banking.

The June 1, 2027 deadline means banks have "a clear and achievable timeline" to develop open banking functionality for SMEs, the Government says.