Banks will need to loosen their grip on customers' private data as New Zealand edges toward open banking.
New Zealand is edging towards open banking - where consumers can choose to share their banking data. Photo: 123RF
Open banking refers to consumers choosing to share their banking data - for example with an application on their phone to automatically pay bills or transfer money.
At the moment customers breach their bank's terms and conditions if they allow any third party access to their accounts.
It also includes sharing bank information with a third party company - for example a budgeting service - for those seeking financial advice.
Payments NZ - which governs New Zealand's payment systems on behalf of the banks - has released guidelines for banks and companies which want to come up with new ways to make payments and share account information.
Chief executive Steve Wiggins said it had been running a pilot since March 2018 during which the standards were developed.
"The reason for the pilot was actually to develop this in a live situation so we've been working with three of the banks ASB, Westpac and BNZ and been in partnership with Trade Me, Datacom and Paymark as part of that pilot process.
"Also we've had ANZ and Kiwibank as part of the key working groups."
He said the standards were being released ahead of the service launching so everyone could get their head around what they would need to do to comply.
"[It's] to allow organisations that are interested to start to have a look at it have a think about what they may wish to do with it so they can start their planning and preparation.
"When the service is open they can become a registered standards user and start to look at interfacing with banks and others."
Commerce and Consumer Affairs Minister Kris Faafoi signalled when he took over the portfolio that the industry needed to proactively move toward open banking, or risk being regulated into it.
At this stage the standards are not mandatory and customers do not need to make payments differently or allow third parties access to information if they do not want to.
A 'revolution'
However, Paymark head of digital payments Darren Hopper said the standards marked the beginning of a "revolution" and people would want to get onboard.
He gave the example of a customer meeting with a mortgage broker.
"If you've got information with your bank, a third party (the broker) may then be able to access that so they can understand a little bit more about that consumer and then provide and serve up a much better service."
"Historically [that information] has been held with the bank and therefore third parties and other financial institutions aren't really able to get a really clear or fundamental understanding of that particular consumer."
Mr Hopper said while traditional methods of sharing private information, such as bank statements via email, was fine, if the agency requiring that information could get it themselves it would make things easier for the customer.
"At the moment you're doing a lot of the heavy lifting here, you're having to provide a lot of information, it might not be the right information, you might have to send more information and one of the most important assets that we all have at the moment is time so what this is doing is automating a lot of that process."
Mr Hopper said privacy and making sure a customers information remained secure was at the core of the new standards.
"The great thing about these standards and what we're actually building is that this information can be acquired by a third party - with customer consent - and that information, because it's provided electronically can only be with [the third party] for a certain amount of time before it disappears so you're not handing over information that could be with those particular individuals forever."
Paymark has already launched an open banking-esque platform called Online Eftpos, where a customer can pay for things simply by entering their mobile phone number and then approving the transaction via their mobile banking app.
"We nearly all have a mobile banking app on our phone, and you trust your banking app. So effectively all you need to use mobile eftpos is a mobile phone and a banking app so you push the 'buy' button, put in your mobile phone number, select your bank, a notification pops up in your banking app, you accept it and you're done."
"There's a trend towards using your own money and not credit cards... also no one really wants to put lots of information on third party websites but simply putting your mobile phone number on a website is something most people feel comfortable with."
The standards have been released on Payments NZ's website and the service would go live in two to three months.
