Commerce Commission says businesses could cut costs by 53% by using open banking instead of Visa and Mastercard debit transactions

The Commerce Commission estimates businesses could save about $180 million annually by using open banking instead of Mastercard and Visa debit transactions.

In a retail payments monitoring snapshot, the Commission says pay by bank - or open banking - is a secure way customers can pay directly from their bank account without using a debit or credit card.

"For businesses, these services can offer lower costs, faster payouts and additional functionality than traditional card payments or bank transfers,"  the Commission says.

Open banking options include; customers paying directly from their bank account at checkout, businesses sending a link for customers to pay with, customers authorising ongoing payments for subscriptions or memberships, businesses embedding payment options directly into invoices, and customers paying in person using QR codes or mobile apps.

"Businesses could avoid paying around $53 for every $100 they currently spend to accept Visa and Mastercard debit transactions by using lower cost pay by bank options," the Commission says.

This sum is based on the estimated annual merchant cost of Mastercard and Visa debit transactions from the Commission's monitoring, compared with the estimated cost of processing the same transactions using publicly advertised open banking pricing. The Commission acknowledges actual savings could vary depending on transaction volumes, merchant requirements, provider pricing and any volume-based discounts. 

It estimates annual Mastercard and Visa debit acceptance costs of $340 million, and suggests $180 million of these costs, or 53%, could be "avoided" by using open banking, reducing the cost to $160 million.

Regulated open banking launched in New Zealand last December, with ANZ NZ, ASB, BNZ, Kiwibank and Westpac NZ now required to enable customers to securely share their data with accredited providers. According to the Ministry of Business, Innovation & Employment (MBIE), the number of monthly payments made using regulated open banking technologies increased  to more than 408,000 transactions, worth $130 million, in July, from 294,000 transactions, worth $92 million, in May.

In August MBIE says more than 24 million requests to securely share banking data were processed.

"More than 556,000 open banking payment requests were processed in August, with a combined value of over $158 million. This is an increase of 147,848 payment requests, 36% growth, worth over $28 million, 22% growth, since July," says MBIE.

MBIE says 14 organisations had been approved as accredited requestors for regulated open banking under last year's Customer and Product Data Act by the end of August. With a customer's authorisation these entities can securely share a customer’s banking information or initiate payments on their behalf.

*The table below comes from the Commerce Commission.

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