Banks use existing power to control open banking

In its latest open banking report, the commission says the major banks have delayed aspects of open banking by rolling out their own products.

“We are concerned that while providing an uptick in innovation this trend will not deliver any material enhancement of competition because the major banks remain in control.”

The commission says there are "a handful" of payment and banking services already in the market that are "suboptimal" because they use less secure methods than open banking.

“Suboptimal access on the interbank payment network is not in the long-term interests of consumers as it requires consumers to share their bank login credentials.”

It wants the “handful” of providers to use the more secure methods furnished by open banking "as soon as possible."

Of the big four banks, the BNZ has come in for pointed criticism.

In April the commission met each of the major bank CEOs "to seek better conduct on progressing open banking”.

The commission says while it has seen improved conduct from most of the banks, it is concerned the BNZ has not met its expectations on open banking.

Unlike the other major banks, BNZ has not yet partnered with entities who continue to use the less secure methods for instances the secure methods don’t yet support.

“This is disappointing, we consider BNZ has been the leading bank on progressing open banking as a whole.

While the banks have begun to roll out their own open banking services, which will provide support to the emerging payment network, the commission says bank-owned products will have ready access to other payments channels, placing fintechs at a competitive disadvantage."

It uses BNZ’s Payap as an example. It is set to be rolled out and has access to scheme networks (Visa and Mastercard) as well as open banking. "This means Payap has near-ubiquitous coverage of New Zealand consumers, which purely open banking fintechs will not have in the short to medium term."

The BNZ says the safety and security of its customers’ information is paramount in an environment where fraud and scams are increasingly prevalent.

It says it remains unwilling to partner with entities who won’t commit to stopping the use of unsecure methods to access BNZ’s customer data.

"We are pleased to see the Commerce Commission acknowledge that suboptimal access is not in the long-term interest of consumers as it requires consumers to share their bank login credentials."

In another move, the banks have also cemented control of GetVerified, New Zealand’s provider of confirmation of payee services.

The commission considers confirmation of payee a utility service that should be available to all users in a timely manner. It wants to see fair access to confirmation of payee and for the services to be implemented by more organisations over time as seen in other jurisdictions.

Only the four major banks have delivered the APIs, and the standardised APIs do not support all key use cases currently supported by suboptimal access.

The commission is proposing a hybrid model and says without it there will be a disruption in the availability of comparable services to consumers.

A hybrid model transition phase would also enable some competitive pressure on bank-owned products as open banking gains momentum.

It is also suggesting a sunset date be used for the hybrid model, expected to be at least six months after all banks deliver the APIs. “Suboptimal access is not in the long-term interest of consumers or widespread open banking adoption,” the commission says.

Smaller banks will be expected to deploy APIs in 2027.

The big four banks will be regulated from 1 December this year, while Kiwibank has a 1 June, 2026 deadline. MBIE’s Consumer Data Right regime allows for smaller banks and deposit takers to opt in to the regulatory regime.

The commission says it wants to specifically hear from the smaller banks on its proposed timeline for them to join the open banking ecosystem.

It says it is excited to see local fintechs bringing innovative products and services to market. “We want all New Zealanders to enjoy better banking and payment services.

Earlier this year it estimated at least 15% of eligible customers at each of the four largest banks had made an open banking payment using APIs and the number continues to increase.

“This is encouraging and is comparable to levels in the UK.”