The Commerce and Consumer Affairs Minister says there needs to be progress in NZ’s payments sector in the next year or he’s going to be asking the industry what the hell they’ve been doing

The Commerce and Consumer Affairs Minister has told the financial sector to get a move on and stop waiting for the Government to lead the way when it comes to regulation.

At the Payments NZ conference on Wednesday, Andrew Bayly was asked if the Government would be producing a white paper that showcased a ‘regulatory-led vision’ for NZ’s payments system like the UK Government published last week. 

The short answer: nope.

“Just get on with it,” he told the room. 

“The role of government is to facilitate these types of things, right? So we just need to make sure that we're putting in the right frameworks or whatever, we don't overregulate which I know is a big concern, but also there's a requirement to have some regulation but basically this has got to be for industry by industry,” he said.

“So look, I just want you guys to get on with it. You need to let me know if we're doing it wrong, [you] need to be active. We need this in place and I want to make sure we've got some progress next year. Otherwise I'll be back here saying what the hell have you been doing?”

NZ bank CEOs voiced concern about “regulatory congestion” cramping innovation in the banking sector during a panel at the conference on Tuesday. 

ANZ’s CEO Antonia Watson said there was an important trade off between regulation and innovation that needed to be got right while Westpac CEO Catherine McGrath wants a clearer regulatory path from the Government as it would create capacity for the bank to be more innovative.

What's underway

Bayly said on Wednesday that banks were underway in implementing the three recommendations he told the banking sector to work on earlier this year: a Confirmation of Payee (CoP) system, updating the Code of Banking Practice and investigating a voluntary reimbursement scheme for victims of authorised payments scams. 

The new CoP system will now be coming out in December. The New Zealand Banking Association had previously expected retail banks to start rolling out CoP in November.

CoP is meant to provide bank customers with more reassurance when making domestic payments from one bank account to another as before a payment is made, the service will allow people to check the account name matches the account number.

Customers will be notified by the service on whether the account name and number match real-time bank records and will be provided with a match, partial match or no match notification. 

Bayly said on Wednesday that progress was being made on the scam reimbursement scheme but it wasn’t at the final stage yet, and he expects to soon report on updates on the Code of Banking Practice.

After years of a go-slow on implementing open banking in New Zealand via a process led by the bank-owned Payments NZ, the Government in August committed to a Commerce Commission recommendation for open banking to be fully operational by June 2026. A key question yet to be determined in this process is; what, if any, fees should banks be allowed to charge for those accessing their customers' data?

Regulators in the room

Bayly described open banking as one of the “crucial elements” of the Commerce Commission’s recommendations to Government from its report on competition for personal banking services. 

“Consumers should benefit from the value and choice that competition brings and I expect industry to cooperate and engage with work to implement the Commission's recommendations,” he said.

Bayly, the Financial Markets Authority (FMA) and Commerce Commission have now met with 30 fintechs in several meetings to work out what needs to be implemented to support the fintech industry.

Bayly said that it was important regulators like the Commission and the FMA were in the room during those discussions.

Out of these meetings, Bayly said the fintech industry wanted the FMA to set up a “regulatory sandbox” for the fintech industry and the FMA was making good progress on it.

“I am impatient for change. I’m impatient because I want to make sure that we bring about meaningful competition,” he said.

What's reasonable and fair?

Bayly also noted the Commerce Commission is exploring ways to find a solution to lowering card fee charges. The Commission is consulting on whether New Zealanders, including businesses, are paying too much to make and receive payments with Mastercard and Visa cards. The Commission is looking at potentially toughening existing interchange fee regulation and at surcharging. It does have the ability to issue merchant surcharging standards under the Retail Payment System Act.

Bayly said the current system is confusing for both consumers and businesses.

“It is unclear what fees are reasonable and fair. It’s hard for people to understand their rights as a consumer,” he said.

“Different fees are charged for different types of cards and transactions and I'm concerned by reports of high and misleading fees being charged. I'm strongly in favor of a more simplified system with lower, more consistent fees.”