By Jenée Tibshraeny
A banking alternative that offers fee-free international money transfers and Mastercard spending, at the interbank exchange rate, is on its way to New Zealand.
London-based, Revolut, is one of the open banking fintechs eager to launch in New Zealand.
The only problem is, it needs a banking partner.
In other words, the fintech that is aiming to disrupt banking needs banks’ buy-in to exist.
Like other open banking initiatives, Revolut requires banks to hand over information about their clients, if those clients request it, so they can manage their money through an alternate platform.
According to Revolut, “today’s hyper-connected world deserves a financial partner [IE Revolut] just as progressive. One that adapts to your needs, gives you control and constantly pushes you into new exciting spaces.”
Authorities overseas have made headway, putting some parameters in place to ensure open banking is secure. In early 2016, Britain's Open Banking Working Group created the UK Open Banking Standard framework. Meanwhile the Australian Government has just received feedback on an independent review into open banking.
Open banking plan of action to be made after April
New Zealand’s new Commerce and Consumer Affairs Minister, Kris Faafoi, admits New Zealand has “lagged back a bit” on this front, so wants to get moving fast.
Yet speaking to interest.co.nz in a Double Shot Interview, he says: “We’re simply not far enough down the road to have any firm view of exactly what might be regulated.”
He supports his predecessor, Jacqui Dean, before the election telling banks to pave the way for greater retail payments competition, or face regulation.
He says he will draw up a timeline with a plan of action on open banking after April, once Payments NZ responds to a letter Dean sent it before the election, asking how the industry will progress open banking. Dean also copied in the CEOs of the country’s major banks.
“I think there’s some exciting opportunity in open banking,” Faafoi says.
“If you take a step back from just the banking industry, this is just another example of where disruptive technology is creating opportunities for consumers to do things better. In this case it’s manage their money.
“Obviously there are some concerns that everyone might have around privacy and security of their information, and I think they are some of the most basic issues we’ll have to work through.
“We’ll hopefully work collaboratively with the banks.
“We want to build a broad-based economy, and I think there are some clever people out there in the technology space who would welcome the opportunity to design and sell this kind of technology and we want to make sure we make the most of that.”
Banks the ‘first batter up’
Faafoi sees banks as the “first batter up” in a move towards a world with more data sharing.
“I think we’ll probably learn a few lessons along the way from the discussions that we’ll have as we get closer to making open banking more of a reality,” he says.
“People might be free and willing to give that up, but as a government we have to make sure… that the information… is used in a way that New Zealanders will be comfortable with.”
Both the Australian Bankers’ Association (ABA) and FinTech Australia have made submissions to the Australian open banking review, calling for an environment to be created where data sharing is extended beyond banks.
FinTech Australia says: “if the desired policy outcome is to empower consumers with the ability to take control of their financial data, make better decisions about their financial position and ultimately improve their long-term financial health (including for small businesses), then we must take even further steps to implement a broader scope, to include superannuation, insurance and other relevant financial institutions.”
Economy-wide framework something for further down the track
The ABA, whose submission the New Zealand Bankers’ Association supports, also calls on the Government to set an economy-wide framework to “underpin data sharing across the economy with minimum standards on customer protections like privacy, liability and security”.
It says the framework should be applicable to all industries, but retain sufficient flexibility to enable industries to develop solutions appropriate to their circumstances.
Asked whether establishing a broader framework to facilitate the secure sharing of data, Faafoi says: “I think we might have to get to that once the free flow of data becomes more broad…
“We’ll have to have some principles around how the information is shared and the privacy and security of it.”
Fintech Australia says: “Large FSIs [Financial Services Institutions] should not be allowed to control the process to determine minimum security standards; there may be conflicts of duty and interest, and a disincentive for them to meet the policy outcomes as intended.
“Nor is the Government best placed to determine minimum security standards alone, as resource and geographical constraints make it difficult for them to continuously maintain a view of international best practice.
“Government is also not necessarily incentivised to create a solution that would balance practical commercial outcomes.”
Mandatory reporting and the sharing of government data
FinTech Australia also welcomes a move from the Australian Government to require government agencies and businesses covered by the Privacy Act to notify anyone affected by a data breach if it is likely to be harmful.
It says this “supports the ability to institute an Open Financial Data regime with greater consumer confidence”.
New Zealand's Privacy Commissioner has been calling for the introduction of mandatory reporting for some time. It has been included in a Privacy Bill being drafted.
Giving the Government some of its own treatment, ABA wants it to “complement open banking by enabling Australians more convenient access to publicly held personal information”.
Put to Faafoi, he says: “We have to be very careful about that. We just haven’t progressed those conversations far enough. But I would be very cautious about the kinds of information that a government collects and whether or not they can be dissemination.”
Low RealMe uptake stymies digital identity benefits
The ABA goes on to say it supports the Government encouraging innovation through the introduction of digital identities.
ANZ’s Head of Financial Crime, Paula Milne, in July talked to interest.co.nz about this idea. She suggested those signed up to RealMe could consent to their verified information being shared with approved organisations like banks, lawyers, accountants, etc.
This would reduce admin for individuals, as well as the organisations - many more of which have to do time consuming due diligence on their clients under the second phase of the Anti-Money Laundering and Countering the Financing of Terrorism Act.
The ABA also says digital identities would complement innovation, lower costs and risks.
Put to Faafoi, he says: “Initially, off the top of my head hearing that idea, I think it would make things a lot more efficient. Making sure we can scrutinise digital identities is something that I think is going to hold a lot of transactions up in the future if we don’t have a good system.”
However his concern is the uptake of RealMe.
“It’s something that the last government created, but I’m not sure how well they pushed it in terms of the raw numbers of how many people actually signed up to it.”
Currently 366,353 New Zealanders have had their identities verified through RealMe.
Faafoi says a drive for greater RealMe uptake falls into the Minister of Internal Affairs’ remit.
“As more and more of our lives go online - and in the last 10 years it’s gone through the roof exponentially - making sure that we can quantify who people are, and making sure that we can deal with people with confidence if we’re transacting financial transactions, is going to become even more important.”
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