API fees are a tariff on open banking competition, Prosaic's Nick Houldsworth says

By Nick Houldsworth*

Let’s call them what they are. API fees on transactional data are a tariff imposed by the big banks to stifle competition, discourage customers from sharing their own data with 3rd parties, or make more money from them when they do.  Which is why every developed country has effectively ruled them out in Open Banking policy, except New Zealand. 

New Zealand is finally moving towards open banking. The government’s recent announcement confirms that by 1 December 2025, major banks—ANZ, ASB, BNZ, and Westpac—will be required to provide standardised application programming interfaces (APIs) for customer data sharing and payment initiation. 

This initiative, under the Customer and Product Data Act 2025, aims to enhance competition and innovation in the banking sector.(Source: The Beehive).

However, buried within the policy details is a provision that could undermine these goals. While banks are prohibited from charging customers directly for data sharing, they are permitted to charge accredited third-party providers up to 1 cent per API call, capped at $5 per customer per month for near-real-time access to transaction records.(Source: The Beehive).

Think of APIs as essentially messengers. They are protocols that allow different software applications to talk to each other, and to exchange data or functionality, following a defined set of rules.

Imagine a waiter in a restaurant: you (one application) tell the waiter (the API) what you want from the menu (available functions/data), the waiter takes the request to the kitchen (another application/system), and brings back the food (the requested data/result). It lets software interact without needing to know each other's internal workings.

Back to the API fee structure: it is problematic. In practice, these costs will likely be passed onto consumers, effectively double charging them for sharing their own data with services designed to help manage their finances, conflicting with the first principle in the policy. 

This approach is also at stark odds with international best practices. Countries like the UK, Australia, and Canada have implemented open banking frameworks that mandate fee-free access to third party data recipients for basic transactional data, recognising that such fees can stifle innovation and entrench incumbent advantages.

I have some experience in this matter, from my time leading the app store and developer API at Xero. 

A significant enabler of Xero’s success was its open API, which encouraged 3rd party developers to extend and integrate with Xero in thousands of innovative ways. Ultimately Xero customers are paying a subscription to use Xero, and it is their financial data. 

The API just offers a more seamless way to read and write data in and out of Xero, without the overhead of having to export/import manually, so it is included in the service. 

Charging third party developers a fee for API access is effectively charging the customer twice. 

Once to store their data, and second time to share it. Fees to developers would be passed on to consumers, or would have simply priced out innovation in the first place. (Sounds a lot like a tariff, doesn’t it?).

This is consistent practice with platforms everywhere since cloud software became a thing. Shopify, Slack, Xero, Google. App store fees are not uncommon, we even introduced one at Xero in 2021 - but these are a commission on generating net new business and streamlining subscription billing for your developer partners. 

Customers can still connect any number of existing services via the API without those third parties paying API transaction fees. And as Apple recently found out, exert too much pressure on App Store fees and you might find yourself regulated into a much, much more competitive position.

While the banks might argue that 1c per API call and $5 a month isn't a high fee, it adds up quickly. It's not even clear yet what constitutes an API call - one bank transaction? One hundred bank transactions? 

The incentive will be on the banks to require as many API calls as they can, to maximise fees. And in practice most users have multiple accounts spread across banks, so if you want to enable bank feeds to a personal finance app like, say, Pocketsmith from three accounts across two banks, that’s a minimum $10 per month fee to Pocketsmith just to provide the service. That’s more than the cost of their basic plan.

The banks will also argue that developing public APIs is expensive, and they need to recoup some of their costs. But they’re years late to deliver a service that is table stakes for any modern digital product, they’re already making record profits in New Zealand, and every other market with open banking has mandated no fee access.

The Commerce Commission has been actively investigating ways to improve competition in the banking sector. Implementing open banking regulations presents a perfect opportunity to foster healthy competition from day one. To achieve this, it’s essential to align with international standards and mandate fee-free access to APIs for raw bank transaction data.

Open banking should empower consumers, not burden them with additional costs. By ensuring free access to essential banking data, we can promote innovation, enhance competition, and deliver better financial services for all New Zealanders.

A new technology roll out like this is an obvious, low hanging opportunity for the government to create banking regulation policy with teeth. Lets hope they get it done.

Nick Houldsworth is co-founder of Prosaic an AI-powered cashbook for accountants, and former EGM Xero App Store and CMO Vend.