Big, fat beautiful fees

Just as fintech start-ups are putting a toe in the mortgage market under open banking, banks can charge them, as accredited third parties, for access to their customer information.

By having access to this data, fintechs, in theory, are supposed to disrupt the banking system with new financial management apps for loans, investments and savings, forcing the main banks to improve their services and lower prices.

But banks can charge for access to this data, which Simplicity co-founder and managing director Sam Stubbs says represents a barrier to entry for fintechs and will stifle innovation.

He says fees for exchanging data will profit the banks and fintechs will struggle to pay.

“This is a serious impediment to progress, and evidence of how much the big banks have hoodwinked politicians and policymakers.”

For open banking to work, a wide array of software systems need to be able to interact with each other. To do this, the industry, led by Payments NZ, has developed standardised methods of operation known as application programming interfaces or APIs.

A Consumer investigation found in other markets, banks cannot charge fintechs for access, and it believes the charges will lead to a watered-down open banking experience for New Zealanders, and one with limited ability to drive competition in the banking industry.

Some New Zealand banks will not charge fees for limited timeframes. ASB is waiving fees until December this year with ANZ waiving fees for account information API calls for 12 months from April. Westpac is waiving fees for new partners for the first 12 months of the relationship, and for existing partners for the next 12 months.

Kiwibank says it will never charge for API calls, although it won’t have open banking up and running until May next year.

Chief executive Steve Jurkovich says Kiwibank exists to challenge the status quo and to create a future where banking in New Zealand is stronger and fairer than ever before.

“We see the significant value open banking can deliver for our customers and we want to enable that,” says Jurkovich. “That’s why we won’t be charging accredited third parties to make standard API requests.”

He says this sets Kiwibank apart. While some banks are offering temporary waivers on fees charged to accredited third parties, in the longer term those costs could be passed on to customers.

“By removing cost barriers Kiwibank is helping to unlock innovation that puts customers first – enabling more tailored, transparent, and empowering financial experiences.”

Westpac says it already has agreements in place with a number of fintechs, and they have been notified of their reduced pricing, which it will review in 12 months’ time as open banking evolves.  It expects to enter into agreements with a number of new fintechs in the near future.

While these developments offer businesses some breathing space as they build their open banking propositions, Stubbs says the banks’ effective self-regulation of open banking now has New Zealand six years behind the world, and about to impose charges on data sharing that are, to his knowledge, unprecedented globally.

“So, just as the banks are being forced to do what the rest of the developed world has done for years – open banking – their lobbyists sneak in fees for something that is free in every other market I’m aware of.

“Perhaps they should call it the ‘Big, beautiful fee’?”