9 Nov 2022

Open banking: 'Many unknowns' on opening up consumer data

2:00 pm on 9 November 2022
Mobile banking internet payment application on smartphone screen.

Photo: 123RF

Open banking will have to address security concerns if it is to work well in New Zealand, Consumer New Zealand says.

Open banking involves banks sharing data to third party providers like price comparison sites or finance service providers, with the aim of making it easier to compare and switch products and services.

The government has been working on it but it has yet to be rolled out in New Zealand.

Consumer NZ chief executive Jon Duffy said New Zealand had been very slow to grapple with the idea of open banking.

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Jon Duffy Photo: Jon Duffy

"It's quite a rigmarole to get your data off the bank get it in a format that another bank can understand and use and provide it to that other bank to give you an offer back that you can then compare with what you've got," Duffy said.

MBIE was looking at open banking within the much larger context of consumer data rights.

"It's not just banking-focused, it's looking at replicating this type of activity across many industries," Duffy said.

The idea is that open banking frees up data so it can be used in a form that allows consumers to compare bank services and another financial products with their existing service.

It uses application programming interface (API) standards for banks and providers for the technology used to transmit data securely to a third party.

It may be more useful in specific areas, such as shopping around for a mortgage, than in unwinding all personal banking, Duffy said.

"The problem is there are a lot of unknowns."

Banking may not be the right sector to start this with, he said.

Consumers have had the message drilled into them not to share financial data in case that makes them the victim of scam.

"Something like telco or electricity would be easier because the data that you're sharing is less sensitive."

"Whatever gets implemented here will need to address those security concerns if it's going to work well."

Along with security worries, Consumer NZ argues the system may not automatically tip towards consumers, but could increase the dominance of existing tech giants.