'Data rights' law to smash banks' stranglehold

World leading business strategist, Gary Hamel, says mobile payments are the future. He says banks 'will be an app', in the future and those businesses that don't evolve with "these bleeding edge technologies...will get outmanoeuvred"...

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."

Commerce Minister Kris Faafoi is promising consumer data rights laws for New Zealand. 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.

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

New Zealand Bankers' Association chief executive Roger Beaumont said: "Nine of our banks have registered as API providers. That demonstrates their commitment to working with third parties to develop open banking solutions.

Open banking was supposed to unlock New Zealanders' banking data helping create competition to drive down the cost of banking.

Sam Stubbs, founder of the Simplicity KiwiSaver scheme, said banks' heel-dragging was protecting their high profits for as long as possible.

"The reality of open banking in New Zealand is that it's a fiction," Stubbs said.

He applauded the plan for consumers in New Zealand to have their data rights enshrined in law. "The topic was first discussed here three years ago, when it became clear that personal data rights would become the global norm. In the UK and Australia, where this is being codified into a common standard, there is a renaissance in financial services unfolding. Just look at providers like Monzo and Atom bank.