Brave new world for banking
New apps poised to become banks’ front door
Andrew Sieprath is among the first people in the Europe to embrace ‘‘open banking’’ as a customer. The former ASB banker fits the bill for those with most to gain from not playing by the banks’ rules.
He’s young, tech-savvy, and frequently travels between countries, so he needs to manage his money on the move, and seeks to avoid bank fees or losing money on currency conversions.
His chosen banking provider is Revolut, which isn’t even a bank.
It’s a ‘‘fintech’’ company which operates an app-based subscription service used by more than 900,000 Brits and Europeans. It lets them hold money in multiple currencies, make currency conversions at interbank rates, and make payments using their phone or debit cards.
‘‘If you are going abroad it will save you at least 3 per cent on every transaction,’’ Sieprath says.
‘‘You can hold and switch between multiple currencies, and you can spend using the card anywhere in the world. I hate to say it but it’s the Uber for payments.’’
Revolut is just one of three ‘‘open banking’’ services due to launch here in the next few months. They will lead New Zealand into something of a banking revolution which threatens to do to banks what Uber is doing to taxi firms, and ultimately put more pressure on them to cut staff or close branches.
Open banking is the term used for interface systems like Revolut, which offer payments, money management and banking services, without being a bank.
There are many emerging open banking models, but as a starting point, think internet banking that’s slicker, more intuitive, and allows users to see and manage accounts from multiple banks in a single place.
Open-banking cheerleaders, which include the British government, believe that if consumers embrace fintechs like Revolut, there will be more competition among banks, and the cost of banking will fall for ordinary people.
If open banking becomes the normal tool people use to manage their money lives, banks could be relegated to being money wholesalers, selling their wares through open banking services, a bit like vege growers selling their wares through supermarkets.
That could, some believe, spell the death knell for year-on-year profit rises for banks, like the $1.86 billion profit announced this month by ANZ for the year to September, a rise of 21 per cent.
Revolut
Will Mahon Heap is the Kiwi in charge of launching Revolut in Australia and New Zealand. This will occur once it has secured a banking partner to wholesale accounts and services.
The term ‘‘open banking’’ is heard frequently in the UK and Europe, where lawmakers and competition authorities view it positively.
But here in New Zealand, where former prime minister Sir John Key has just been appointed as chairman of ANZ, no politician has campaigned on a promise of facilitating open banking.
The British Competition and Markets Authority says older and larger banks don’t have to compete hard enough for business, and smaller and newer banks find it difficult to grow.
Open banking, given regulated data and security protocols, could change that, it believes.
In Australia, like the UK, open banking has also become a political priority.
‘‘It’s a real concern that Australia is going to lead in Australasia,’’ Mahon Heap says.
Hey Jude
Even if politicians here don’t facilitate open banking, it’s going to happen anyway, says Ben Lynch, the founder of open banking platform Jude.
Jude plans to launch here early next year, targeting tech-savvy university students as its first customers.
Lynch, who Simplicity KiwiSaver founder Sam Stubbs jokingly calls ‘‘New Zealand’s next billionaire’’, cut his coding teeth with Xero.
Jude will let users link all their bank accounts to its platform, so for the first time it will be possible to have accounts with a range of banks. They will be able to keep tabs on those accounts and manage their payments through a single digital portal, using their mobile phone.
Those who can’t be bothered to type can do their banking through voice commands.
They will effectively have the power to build their own bank, by picking and choosing the services and accounts that suit them best, whether from challenger banks like Heartland, Co-operative and SBS, or giant Australian-owned banks like ANZ and Westpac.
T’s & C’s
Users will give Jude permission to access their banking details by effectively handing over their bank credentials, which is technically in breach of bank terms and conditions, though it has been happening in the likes of the US, where there is no regulated open banking regime.
‘‘Yes, it’s a breach of banks’ terms and conditions, but banks don’t really care,’’ Lynch says.
If they do, there’s precious little they can do about it.
Lynch says everyone agrees that customers’ bank data belongs to them, not to the banks.
But it’s a leap of trust. Among banks’ strongest attributes is how secure they are, both as custodians of customers’ money, and as facilitators of payments.
Search for an API
A project in its very early stages at Payments NZ, a company owned by the banks, which governs the country’s core payment systems, may play a part in ensuring open banking security in New Zealand.
The project is to get common