The Ministry of Business, Innovation and Employment (MBIE) has released the all-important regulations for how open banking will operate in New Zealand, and by and large fintechs are pretty happy.
New Zealand is late to open banking, with the Customer and Data Product Act only coming into force on March 30 this year. The United Kingdom was an early cab off the rank with open banking, mandating its implementation by the nine largest British banks in 2018. Australia's open banking regime launched in 2020.
It may be that the delay turned out to be a good thing for New Zealand, however.
Josh Daniell, co-founder of open banking infrastructure provider Akahu, said; "yes, the final regulation is looking good".
"Getting rid of API [application programming interface] fees makes the regulated open banking system viable for a much broader range of products. This will lead to higher consumer uptake," Daniell said.
Prior to the current regulations, fintechs had been concerned banks would be allowed to charge third-parties for accessing data their customers have elected to share through the APIs, money which would have to be recouped through, for example, monthly fees.
Daniell said the NZ regulation has shaped up well.
"MBIE has avoided the temptation to over-engineer it, so it's simpler than comparable systems in the UK and Australia, and we think that consumer uptake will be higher as a result," Daniell said.
Akahu expects the majority of unregulated open banking activity to migrate to the regulated system by 2026.
Nick Houldsworth, co-founder of artificial intelligence based accounting software provider Prosaic, praised the Ministry's efforts with open banking regulations, saying it and Commerce and Consumer Affairs Minister Scott Simpson heard "loud and clear" from industry how at odds allowing API fees was, and presented a new set of options to cabinet which was supported.
"MBIE was really good to be fair, they engaged, we met multiple times, they accepted that they probably hadn't canvassed widely enough on the first pass, and took onboard the feedback," Houldsworth said.
"We think it's exactly the right policy setting; we're stoked," he added.
Houldsworth cautioned that there's still a long way to go get open banking up and running, and the standards for it nailed for all account types, but it's off to a great start that will allow the industry to build momentum.
Under the regulations, ASB, ANZ, BNZ and Westpac are designated as data holders, starting December 1 this year. Kiwibank will join the Big Four banks for payments APIs on June 1, 2026, and account information access on December 1 that same year.
Other deposit takers can opt in to becoming data holders as well.
Data holders are required to give access to accredited requestors within 20 working days, and they cannot be charged for providing open banking, MBIE ruled.
MBIE said that there were concerns under the unregulated system that some banks were charging fintechs too much for customer data requests. This "may have been impacting the viability of certain products and services, such as those involving frequent, small payments, or data requests," the Ministry said.
Fees and levies are payable by both data holders and fintechs seeking access to the information under the open banking regulations, "to make the system fiscally neutral for taxpayers," MBIE said.
Accreditation for fintechs costs up to $2000, and they are also looking at an annual levy ranging from $1300 for businesses with turnover not exceeding $1 million, rising to $85,000 for revenue of more than $100 million.
Banks are also subject to levies. A bank with assets below $1 billion pays $63,400, which goes up to $1,248,700 when the financial institution's assets exceed $100 billion.
"The Government has agreed to charge fees and levies to make the system fiscally neutral for taxpayers," MBIE consumer policy manager Glen Hildreth told interest.co.nz.
"Businesses applying to be accredited requestors will be required to pay an application fee at the time they apply for accreditation and renew their accreditation."
"The levy is paid to the Ministry of Business, Innovation & Employment to cover the cost of regulation activities, including monitoring and enforcing banks’ compliance with the obligations in the Act," Hildreth said.
Banks to cough up
A Westpac spokesperson told interest.co.nz the bank will wear the levy, as a cost of business.
There is some concern that the levies combined with no API fees could backfire on the industry, and slow down innovation just as open banking is picking up a head of steam.
"Under these rules banks are funding almost all of the open banking scheme, as they're paying significantly higher levies than third-parties (even those with high revenue) and now are prohibited from charging API fees," James McCann, who heads up payments app Volley, said.
"There's no cost recovery available to them at all. We think fees paid by the companies that are benefiting from the development help to drive more development."
"This makes it really hard to push for all of the things that fintechs want out of open banking - more features, better customer experiences, better performance and so on - as due to the cost and lack of any benefit to them they're only likely to do the minimum set by regulations," McCann added.
"We think the progress that's been made over the past year and a half is really amazing and we would love to see this to stay at the same trajectory," he said.
McCann suggested that fees akin to ANZ's public pricing for account access via API, 0.1 cent for each request, seems reasonable to Volley.
Otherwise, McCann and Volley said they are really pleased that peer-to-peer payments are supported by the regulation, calling it a "huge win for Kiwis".
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