17 Nov 2023

Progress on open banking but consumer data still at risk - Payments NZ

6:30 am on 17 November 2023
Fintech theme with person using a smartphone

The banking industry is working with the government to develop legislation around consumers' data rights. Photo: 123RF

Payments NZ says it has made some significant progress on the development of open banking in New Zealand - but its efforts will struggle to achieve scale without legislation to protect consumers' data rights.

Open banking payments are commonly used in payroll services, payment apps, ecommerce and other payouts to securely transfer money from one bank account to another.

Payments NZ chief executive Steve Wiggins said its API Centre had developed a range of standards, rules and guidelines that will support full-scale open banking, with the ability to transfer that work to cover other industry sectors, such as the energy sector.

"Since the API Centre opened in 2019, we've grown the open banking ecosystem to include seven API providers, 17 third parties and more than 260 community contributors," Wiggins said.

"We're already seeing our standards beginning to be adopted and used in consumer-facing applications.

"We'll see more examples as the five largest banks in Aotearoa continue to make our standards available in line with the implementation plan we unveiled earlier this year."

He said the API Centre was learning from the experiences of other countries where there had been a higher level of regulatory intervention to date, including Britain and Australia.

Wiggins said the industry was also working closely with government, which was developing legislation to cover consumers' data rights - called the Customer and Product Data Bill.

"Right-sized regulation could lead to a sweet spot that provides speed to market of common standards, while ensuring risk and safety are properly managed."

Wiggins said legislation must anticipate emerging technologies and trends, like digital identity, and prioritise the experience of consumers.

"It's critical the government and industry work together to put in place frameworks that promote safe and innovative data sharing that deliver equitable outcomes," he said.

"The banking industry is likely to be the first sector in Aotearoa to introduce a consumer data right so it's crucial we get things heading in the right direction from the start."

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