A casual observer at last week’s Open Banking Showcase could have been forgiven for thinking the event was about smartphone and online payments mainly. Which is natural enough, as the showcase was held by bank-owned Payments NZ.
The purpose of the event was to spread the word that the country’s big four banks are ready for open banking, ahead of the Thursday (May 30) deadline, with an application programming interface (API) that fintechs and startups can use to build apps and services. With an API, you have a standardised structure for a protocol that computers can use to communicate and exchange information with each other.
This is for the Payments Initiation API version 2.1, with the Account Information API 2.1 scheduled to be ready by November this year. Kiwibank is also set to join in on the APIs, but not until 2026.
We’ll see what happens at the end of the month, as only BNZ is marked by Payments NZ as fully ready, with the others having amber status indicating the banks have reported risks they have actions in place to manage, so as to meet the requirements for the API deadline.
Having that standardised API is the first step towards new services from third-party providers which can access bank customer data for these. That is, if the bank customers have consented to it, and the whole thing is done securely and with strong privacy.
Ideally, open banking will come without having to sign up and sign in because who needs even more of that? And absolutely no entering of internet banking credentials with third-party providers for screen-scraping logins.
Easy to use for everyone, and no thank you to steep transaction fees and charges - particularly not the Paywave Russian Roulette in which you need to check the terminal in case there’s a difficult-to-work out surcharge, or a dollar cost for daring to use contactless payments. Having to pay for already pricey goods will go down like a lead balloon in an acute cost of living crisis.
But, open banking has been moving forward slowly in New Zealand being industry driven rather than pushed by a regulator, and it’s still early days. Other countries are already revising their first versions of open banking, and Australia is considered to be a leader in the field.
Australia already has another key component for open banking, namely a Consumer Data Right (CDR). On this side of the Tasman, our Minister of Commerce and Consumer Affairs Andrew Bayly only released the updated new CDR bill on May 16 this year, after the exposure draft was issued in 2023.
The CDR will go further than just banking, and we should see it used for customer data sharing in the energy sector, with telcos, online retail, insurance and health. With a CDR in place, enabling robust controls by consumers over their data, and not just being able to easily and quickly migrate it, we should see less provider lock-in and more competition coming up.
Nevertheless, New Zealand is already considered to have open banking, and the showcase demonstrated some examples. There was Blinkpay’s integration with Sharesies to pay for trades, Qippay doing payments to phone numbers, and Volley doing the same with QR codes and existing banking apps.
Their implementations look pretty sweet, and now the providers will need to hone their sales pitches to merchants. Customers will need to become familiar with new payment options as well so there’s plenty of communications work ahead for providers.
The “original gangster of fintechs” in the showcase was the established payments player Worldline’s New Zealand arm.
Locally, that’s what became of ye olde Paymark, sold by the banks in 2018-19, and the first in New Zealand with open banking via its Online EFTPOS offering which allows customers to shop online without a debit or credit card, using their smartphones and banking apps.
This may seem a bit strange as Payments NZ’s API Centre was only launched in 2019; Paymark launched Online EFTPOS with Mighty Ape in 2016 however.
No time machine was used to develop Online EFTPOS however, as the service uses a combination of Payments NZ API Centre standardised APIs, as well as bespoke digital systems communications interfaces depending on the bank.
“Online EFTPOS existed before the API Centre and we had APIs with ASB and Westpac prior to the API Centre and the API Centre standards,” Worldline spokesperson Julia Nicol said.
First launched with ASB and the Co-Operative Bank, Online EFTPOS now has five banks supporting the service, with Westpac, BNZ, and ANZ also joining the fold.
Nicol said Worldline has been working with Payments NZ and shared its knowledge with the organisation, to help form the API Centre standards and specifications.
“The APIs we have with BNZ and ANZ are in accordance with the API Centre standards as those APIs were built more recently. And yes, they use payment initiation functionality as described therein,” Nicol explained.
“The ASB and Westpac APIs use the same technology but as the APIs are not contracted under the API centres terms and conditions, they are not considered standardised,” she added.
“There’s very little difference between the BNZ and ANZ APIs and those used for ASB and Westpac. ASB and Westpac simply went earlier,” Nicol said.
Nicol said Online EFTPOS currently has over 600 active merchants, with over 950,000 unique customers having used the payments facility.
Worldline senior product manager for Online EFTPOS Simon Adams said the company has been working with the banks on the future of EFTPOS, a digital in-store experience combining local debit, loyalty and identity.
It’s easy to see why Worldline is thinking hard about how to make the move for EFTPOS from plastic to digital, and to contactless payments, if they can get into smartphone payments run by Apple and Google for example. Without that happening, there’s a risk that Visa and MasterCard debit cards become the only option for bank customers.
What will be music to the ears of merchants is Adams saying Worldline believes there are opportunities to extend Online EFTPOS to further reduce costs for them - and consumers. If that comes true, it’ll be a major selling point.
As HudsonGavinMartin partner Andrew Dentice put it recently on the Of Interest podcast, open banking will be all about the services it enables. The technology driving it will take a backseat to the applications being cool, easy to use and finding a niche that makes them popular.
The plumbing is now being put in place, but slowly and it doesn’t feel like open banking and the CDR is priority work. Maybe the New Zealand implementation will be better for it, due to the long gestation, but for startups in the field it must be agony to wait such a long time before putting their ideas to the test in the market.
Article amended to reflect that the Minister introduced a wholly new bill to Parliament, and that it doesn't have a deletion requirement.
4 Comments
I am sure all the above is really nice for providers, commentators etc but what does it actually mean for the average person? For example I have no idea what "Online Eftpos" is - is that when I use my Visa eftpos card online to make a payment ? Or is it one particular provider who is using a generic expression to describe a specifc service? And it is all very well to say "new services from third-party providers which can access bank customer data for these. That is, if the bank customers have consented to it, and the whole thing is done securely and with strong privacy. " - so I should be able to trust my bank? fine, assume I do now. But once my info is splashing around in a "new provider" what trust level do I have?
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