Open banking allows customers the ability to safely share their financial data for a range of purposes, such as to make a payment or to help with budgeting.
It relies on a secure and standardised system, which is rapidly becoming established in New Zealand, creating new ways to bank.
The technology behind it is called an API, a piece of software that allows consumers and businesses to share their data and their bank accounts with trusted third parties without ever having to disclose their bank login details.
They can securely control who they’re sharing data or payments with, across what accounts, and can revoke access at any time.
BNZ, which already has 250,000 customers using open banking, says it can be a game changer for financial products and services.
“It’s a highly secure system,” explains Joe Rastrick, BNZ Head of PayTech and Emerging Payments.
“When you make a payment through open banking, it happens in real-time with multiple security checks. You’ll see the transaction immediately in your bank statement, and you maintain full visibility and control.”
Payments enabled by open banking can eliminate the need for card transactions altogether, offering a simpler, contactless alternative.
Another use case for open banking is budgeting. By consenting to let a trusted third party access your data, it can present your finances in a way that helps you take on the daily challenges of managing your spending and saving.
The third party providing the service will have been pre-assessed and approved before they even get access to the bank’s API and must adhere to Payments NZ API standards.
“Know that this industry-led approach has a strong and secure framework and standards put around it, ultimately protecting you as a consumer but also giving you freedom and choice,” says Rastrick.
Further protection is coming with the Customer and Product Data Bill currently on its way through Parliament, which will create a Consumer Data Right aimed at improving people’s access to and control over their own data.
Education of the public is also important, making sure people know what they’re agreeing to. “Open banking is about consent, so you can revoke access at any time,” says Rastrick.
Potential examples of using Open Banking:
· Bank account to bank account payments online without the need for a credit card. Technology equipment company PB Tech is one company using this approach.
· Cut out some of the hassle in getting loan approval by allowing a lender direct access to your data so they can easily assess your financial situation.
· Easy signup to accounting software by direct link from their software to your bank account without the need to fill in forms. Online accounting firm Xero is using the system.
· Top up your Sharesies accounts using a payment service such as Blinkpay.
· Split a bill with friends or family without having to share bank account details, using an app such as Volley.
· Allow a budgeting service to access to your bank accounts and credit cards so you can monitor all your spending and saving in one place in realtime or, eg, fortnightly.
· Get more effective investment advice by giving an adviser access to your data, allowing them to get a detailed picture of your finances.
Timeline for keeping it safe
May 2024 – deadline for major NZ banks to support payments via APIs, enabling direct account payments through third-party apps. New Zealand’s major banks have now achieved this standard.
November 2024 – requirement for major NZ banks to support information sharing via APIs (Already achieved by BNZ).
Ongoing – The Consumer and Product Data Bill is working its way through Parliament. Public submissions closed in September. The legislation will, if passed, establish a Consumer Data Right, enabling open data sharing in banking and other sectors.
This content is sponsored by BNZ.
This article is solely for information purposes. It’s not financial or other professional advice. For help, please contact BNZ or your professional adviser. No party, including BNZ, is liable for direct or indirect loss or damage resulting from the content of this article. Any opinions in this article are not necessarily shared by BNZ or anyone else.