Minister looks to ‘data rights’ to fast-track open banking

Consumers will be given ‘‘data rights’’ after mounting government frustration with a banking sector go-slow on implementing open banking.

Open banking is the term for the tech-driven revolution in financial services overseas involving tech companies building money management and payment apps for consumers, which cut the cost of banking.

But for open banking apps to work safely here, New Zealand tech companies like Jude, POLi and Choice to Pay need safe and secure interfaces with banks (known as APIs) to access their customers’ banking data, and banks have been dragging their heels in providing them.

Now, in an open letter, Commerce Minister Kris Faafoi has told banks: ‘‘The current rate of progress appears to be both uncertain and slow.’’

He accused bank management of not giving open banking sufficient priority, and said: ‘‘I have directed my officials to provide me with possible advice on a possible Consumer Data Right.’’

This would provide a legal right for consumers to provide access to their data to trusted third parties.

Secure APIs were to be organised through the API Centre run by Payments NZ, which is owned by a group of eight banks, but Faafoi was unimpressed with progress.

Instead of using industry standard APIs, banks were using slightly different API standards, bringing them to market at different times, Faafoi said.

This was making life hard and costly for companies trying to launch open banking apps in competition to the banks.

Faafoi warned banks to make API access a priority, properly fund API development, implement standard APIs, and to start reporting publicly on their progress.

‘‘It’s certainly going to be listened to and we will continue to work with industry to make progress,’’ Steve Wiggins, chief executive of Payments NZ, said.

The industry would regroup in the New Year, but he insisted: ‘‘We have made really good progress to date.’’

Faafoi’s plan for a consumer data rights law was ‘‘really interesting’’, and appeared to be a parallel for laws introduced in Australia.

The New Zealand Bankers’ Association has been approached for comment.

Sam Stubbs, founder of the Simplicity KiwiSaver scheme, said banks dragging their heels was protecting their high profits for as long as possible. ‘‘The reality of open banking in New Zealand is that it’s a fiction.’’

He applauded the plan for consumers in New Zealand to have their data rights enshrined in law.

‘‘The UK has had open banking along a common [API] standard for almost two years now, and transactions and information sharing is doubling every month. The banks here make positive noises about open banking, but it’s a big threat to their profits. Open banking doesn’t write the banks obituary, it just makes them work harder for customers to earn their profits.’’