November 12, 2025 • 39 mins
After years of anticipation and frustration over slow progress, New Zealand’s open banking era is about to become a reality.
On December 1, official regulations come into effect, bringing sweeping change to how Kiwis access and control their financial data. Akahu co-founder Josh Daniell, whose platform already integrates with more than 85 products that draw on consumers’ bank data thanks to voluntary agreements in place, joined the Business of Tech podcast to unpack what the new regime will mean for consumers, fintechs, and the banking giants themselves.
Daniell explained the significance of the shift underway: “Over the last 20 years, there has been a buildup of consumer demand for this type of connectivity to a point where there’s more than a million Kiwis each year in New Zealand using unregulated, open banking methods,” he told me.
The old model was a messy patchwork – screen-scraping bots, voluntary deals, and inconsistent application programming interfaces (APIs) that left customers with little transparency or control.
“Consumers didn’t have full control of how those connections worked,” Daniell said, “and any product that wants those kind of data feeds, either has to go and get a contract with each bank, or do it in a way that isn’t sanctioned by the bank”.
Encouraging the mavericks
Under the new regulatory system, a product provider or intermediary like Akahu can become accredited and access secure, standardised APIs from any major bank, a move Daniell believes will “put the consumer more in the driving seat” and sweep away the old system’s uncertainty.
This reform is not just about convenience. It is intended to foster greater competition and innovation.
“If there was a challenger in the banking sector…they can make it simple for people to connect their external accounts and then switch across to those better products,” Daniell explained.
The Commerce Commission’s recent market study recommended open banking precisely for this reason – to unlock bottlenecks and foster a more vibrant sector.
But New Zealand’s adoption of an official open banking regime is well behind other countries, such as Australia and the United Kingdom, where uptake of open banking services has been limited. Daniell is upbeat about the New Zealand system’s design.
Lessons from the Aussies and Brits
“We think MBIE really learned from those regimes that have gone in front of us, and we think the regulation is well designed. It’s simple, it sets out a data sharing system, and it doesn’t try to move into things like data protection, which is left to the Privacy Act,” he said.
He argues New Zealand’s system is more streamlined than Australia’s, which “over-engineered some aspects…and as a result, some organisations haven’t actually transitioned”.
On launch day, the Big Four banks, ANZ, ASB, BNZ, and Westpac, will be designated as official data holders, required to offer open banking APIs to any accredited party. “It turns it from a voluntary offering…to a mandatory offering,” Daniell said, “and it also means that you don’t need a contract with each bank. You become accredited centrally, and then you have access to all regulated APIs in that system”.
Payment innovation is another headline benefit. Daniell points to future use cases, such as convenient bank-to-bank payments, app-to-app transactions, and avoiding credit card fees.
“With open banking, you can essentially put your bank account on file, like putting a card on file, so you can have exactly the same experience. You leave the Uber, and you’re paying via a bank payment rather than a card payment. And the benefit here is a cost one. It’s just cheaper to process an account-to-account payment than it is to process that same payment over the card network”.
Trust and value will rule
Concerns about privacy and security remain, but Daniell is clear that trust and value will always be central for consumers.
“People absolutely need to consider the party that they’re dealing with and decide whether they trust them with sensitive data. Regulated open banking doesn’t change the decision they need to make there,” he says. Accredited companies face strict requirements – insurance, fit and proper tests, and security obligations – but consumers must weigh “how much value they&rsquo
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Welcome to the Business of Tech powered by Two Degrees Business.
I'm Peter Griffin and in this episode, we're unpacking one
of the most impactful changes coming to New Zealand's financial
landscape and years, the rollout of a mandatory open banking
regime from December. After years of frustration with the slow
pace of progress, there's finally light at the end of
(00:25):
the tunnel. New regulations set by the Ministry of Business,
Innovation and Employment are about to make open banking a
reality officially, not just a promise, but a regulated system
stitched right into the Customer and Product Data Act. What
does that mean for you? In practical terms, it's about
(00:45):
taking control. Soon you'll be able to securely connect your
bank account to budgeting apps, accounting software, and loan applications
without handing over your log in credentials. We're navigating a
web of voluntary, unsanctioned connections. For years, third party FinTechs
have worked in a sort of gray area, relying on
things like screen scraping and ad hoc contracts around things
(01:09):
like application programming interfaces. But all that's about to change.
This week. I'm joined by Josh Daniel, co founder of Akahu,
one of the local pioneers in open banking connectivity. We
break down a new regime's impacts on not only consumers,
but on competition in the banking sector. Josh explains how
(01:30):
New Zealand's approach borrows lessons from the UK and Australian particular,
where uptake has been a bit slow, and crucially why
our rules are likely to deliver faster broader adoption. The
four big banks will finally be required to provide APIs
to any accredited third party. We get into the promise
(01:51):
and the limitations of real time payments, how news services
could finally make switching banks easier and arise hopefully of
maverick companies poised to shake up the staid financial landscape.
And as with anything involved with your money, we'll tackle
the big questions of the privacy and trust, what protections
(02:12):
will be in place and what risks remain when more
companies can access your financial data. It's a fascinating look
at the pivotal tech shift that's coming to fintech and
open banking, one that hopefully will finally spare some real
innovation and better deals for key consumers. Here's my interview
(02:32):
with Okahu co founder Josh Daniel. Josh, Welcome to the
Business of Tech. Very good, please to be here, Josh,
I'm enlisting your help to try and unpack where we've
got to with open banking in New Zealand. We've been
(02:53):
talking about it for a long time. There's been a
lot of frustration that it's been slow to get going.
But in the last year eighteen months, a flurry of
activity and on December one, the open banking regulations that
the Ministry of Business, Innovation and Employment have been finalizing
will become operational. So waho about that. Still work to
(03:14):
do around standards and operationalizing open banking, but it will
soon be a mandated thing, dovetailing into the Customer and
Product Data Act. Before we get into exactly what all
of that means, Josh, give us the background of your company,
a Carho, which you co founded in December twenty twenty
with Ben Lynch. What exactly does a Carho do.
Speaker 2 (03:37):
We're in open banking intermediay, so that means that we
specialize in data integrations with New Zealand banks and other
financial service providers, and we provide that connectivity.
Speaker 3 (03:49):
To other products.
Speaker 2 (03:51):
So the way this shows up for consumers as say
you're using accounting software where you want bank feeds so
that your transaction data automatically feeds into accounting software.
Speaker 3 (04:01):
We'd be the data pipes that.
Speaker 2 (04:02):
Enable that connection with your bank account. Same for personal
budgeting tools where again you want that account information to
feed automatically in, or a loan application where you want
to share your financial data with the lender to simplify
that application process. So basically you can think about it
like programmatic connectivity with your bank account, and then you
(04:25):
as a consumer can choose whether you want to grant
that access to a third party. So you'll wear the
infrastructure layer in open banking, and we provide our services
to a little over eighty five products around New Zealand,
and we're just New Zealand focused.
Speaker 1 (04:40):
So until now, many organizations have been getting access to
customers bank data to offer a range of third party
financial services. It's probably not very transparent to the customer
what goes on in the background to make that happen.
It's unregulated. The involvement of the bank's been pretty much
voluntary to date, and there's been varying levels of enthusiasm
(05:02):
around that. I've heard of companies using methods like screen scraping,
which is effectively giving a bot access to a customer's
bank account and automatically capturing the data on the screen
in the background without the customer needing to be present,
and in using that data outside the customer's banking portal.
There's been more extensive use of so called application programming
(05:24):
interfaces APIs in conjunction with the banks too, which is great.
So Josh, what exactly is now changing with this move
to the new regulated system.
Speaker 2 (05:34):
Yeah, I mean if you think about products like zero
been around for about nineteen years, Pocketsmith with personal budgeting
tools for over seventeen years. There are a whole lot
of products where consumers in New Zealand have been able
to connect their bank data to those products, but the
way that those connections of work has been unregulated. There
(05:56):
are different methods that are used in market, and they're
not optimal because the consumer doesn't have full control of
how those connections work. And any product that wants those
kind of data feeds either has to go and get
a contract with each bank in order to integrate with them,
or they have to do it in a way that
(06:17):
isn't sanctioned by the bank, so they have to connect
to bank systems in a way that is unsanctioned. So
over the last twenty years there has been a build
up of consumer demand for this type of connectivity to
a point where there's more than a million kiwis each
year in New Zealand using unregulated open banking methods. So
around the world and in New Zealand, there has been
(06:38):
this move towards regulating this because that can sweep away
the patchwork of contracts that allow all of it to
work currently and put the consumers in control. Because with
the regulated system, a product provider or an intermediary like
US can become accredited, and once you're credited under that regime,
(06:58):
as of right, you get to access these regulated open
banking APIs. So that puts the consumer more in the
driving seat, because it's now not up to each bank
to determine which products a consumer can share their data with.
It is now up to the consumer to choose, and
so that centralized accreditation is key to the whole thing.
And another key component of the regulated system is that
(07:21):
now everyone can have confidence that here are the rules
of the game and that can be enforced whereas in
the contractual the voluntary version of open banking that we've
been in, you beholden to the custom terms in each
contract and to be planted, there hasn't been much negotiating
power if you wanted to use those APIs. So what
we're seeing as open banking transitions to a regulated system
(07:46):
is increased interest from organizations that are interested in using
open banking, but they've previously been on the sidelines because
it hasn't felt like the right kind of environment for
them to jump in. But now the long term operating environment.
But this regulated system is coming and it's well designed
and everyone knows the rules of the game, and that's
(08:06):
leading to more investment and products that use open banking.
Speaker 1 (08:09):
So we've got this regulatory regime coming in. Is it
fit for purpose? Is it well designed? Because we went
the first to this, The UK went a few years ago,
Australia more recently, but still years ahead of us. Did
we learn from those experiences and putting this together?
Speaker 2 (08:25):
So the way this regulatory system hangs together. You've got
the Customer Product Data Act that was finalized in March
this year. Then you've got a secondary regulation that was
finalized last week and then NBA is currently consulting on standards,
which are like a tertiary form of the regulation that
fits in, so we know for sure what's in the
act and what's in the secondary regulation, and we think
(08:47):
it's really well designed. We're really happy with that. What
we've seen in other regulated systems around the world, like
the UK, Australia, Brazil, is that the design of the
regulated system really does matter for customer uptake. And you know,
one example is in Australia, they you know, from my perspective,
(09:09):
over engineered some aspects of that regime and as a result,
some organizations haven't actually transitioned to that regulated open banking
system yet if they need data exchange with the banks.
An example of something that made it tricky there is
that there are certain rules that follow data that you've
(09:31):
collected out of that regulated system. So if you're a
product provider and you're collecting data via different methods, there's
data that you collect out of the open banking system
in Australia has to be treated differently than the other
data that you've collected. So things like that can make
it practically hard to adopt the system. In New Zealand,
(09:52):
we think that NB really learned from those regimes that
have gone in front of us, and we think the
regulation is well designed. It's simple, it sets out a
data sharing system and it doesn't try to move into
things like data protection, which is left to the Privacy Act.
So yeah, overall we're really happy with where that's landed.
Speaker 1 (10:12):
Well, that's good to hear because you know, people like me,
we're critical of the government really trying to get it
to move, saying well, look at Australia, look at the UK,
they're already doing it. But the reality was that the
uptake hasn't been that great in those countries, so there
was something obviously fundamentally holding back the industry, both in
Australia and the UK. So do you think that we've
(10:34):
learned from those mistakes and likely to get better uptake here? Yeah.
Speaker 2 (10:38):
I think there are a few reasons why we're going
to get stronger uptake on a per capita basis, at
least than Australia and the UK. One is the design
of the regulation, which we've just talked about, where our
regulation is better than those other regimes. The second is
that the New Zealand region covers both data and payments,
and there are a lot of use cases that combine
(10:59):
both of those those functionalities. So you know the fullness
of what is going to be available in the first
couple of years of the New Zealand regime is more
than what Australia currently has, for example, So there are
more use cases that are viable. And the third factor
that I think is important here is that the banks,
at least the largest four banks, have been delivering early
(11:23):
versions of an open banking API, so they're not starting
from zero. They have been in that voluntary chapter of
open banking with open banking services and market So what
we hope is that some of the data quality or
API quality issues that have plagued the system in Australia
will be pasted. A lot of those things. There will
(11:44):
still be issues to resolve, and we're really happy that,
you know, there's going to be a regulator that can
jump on them, but we do think that the issues
are going to be fewer than what we've seen in
those regulated systems that have gone from zero to one
when the regulated system began.
Speaker 1 (11:58):
That's great, so they've been that on a voluntary basis.
In New Zealand, we talked about these regulations designate the
Big Four a did asbbns IN and west Pac as
data holders from the first of December. What does that
actually mean, you know, how does that change compared to
what was in place before.
Speaker 2 (12:18):
The key thing is that the regulations require those banks
to offer an open banking API to any accredited party,
so that that party is called an accredited requestor under
the regulation. So if you're a credited you have the
right to access an open banking API from those banks.
And by the way, QBI Bank is designated too, It's
(12:39):
just that their delivery dates fall in twenty twenty six,
so it's just as you say, the Big Four from
one December. So yeah, it makes it. It turns it
from a voluntary offering of an open banking API to
a mandatory offering. And it also means that you don't
need a contract with each bank in order to use
those APIs. You become accredited centrally and then you have
(13:00):
access to all regulated APIs in that system.
Speaker 1 (13:03):
And the Commerce Commission recommended this in twenty twenty four
Open Banking and its Banking Competition Report. So there's a
lot of other stuff going on and banking. There are
concerns about the structural makeup of the banking sector. But
they obviously thought that part of unlocking the sort of
the bottlenecks in our banking getting more competition into the sector,
(13:26):
that open banking is a key component of that.
Speaker 2 (13:29):
Yeah, we think of open banking as doing that, as
driving competition and innovation within the banking sector, which is
obviously the focus of that Commerce Commission market study. But
open banking is used for a whole lot of use
cases outside of that. So you know, at the start
of this conversation we were talking about use cases like
(13:52):
accounting and tax solutions, or personal budgeting tools, or you know,
there are a whole lot of SaaS products that use
data feeds make payments. Those use cases aren't driving competition
or innovation within the banking sector. But to narrow in
on what the Commerce Commission is talking about there in
the banking sector, good example would be if there was
(14:13):
a challenger in the banking sector that was offering fundamentally
a better rate on deposits and or loans, then they
can make it simple for people to connect their external
accounts and then switch.
Speaker 3 (14:25):
Across to those better products.
Speaker 2 (14:28):
So the Commerce Commission also pointed out in their market
study that open banking peers well with a challenger or
they refer to a maverick in their market study, because
without that maverick, you know, if you're just using open
banking to compare rates and all the rates are the same,
then you don't actually get the benefits of the competition.
But if there is a maverick, then open banking makes
(14:51):
it easier for them to go and allow people to
compare and switch to better products.
Speaker 1 (14:57):
And look, we've seen in related area areas look at
chairs ease and share broking, when you have a maverick
come in, the difference it can make and the customer experience,
the fees, everything can be dramatically better. So we're hoping
this will unlock all of that in banking as well.
The framework includes payment initiation. That's really interesting, sounds quite technical.
(15:22):
What does that enable for consumers? Are we talking about
the potential to bypass things like credit card fees, to
do app to app transactions beyond the traditional way of
paying for things.
Speaker 3 (15:34):
That's exactly right.
Speaker 2 (15:35):
So everyone is familiar with paying for things via the
card networks. Often your card is attached to your bank account,
so in a lot of people's minds. Those two things
are the same, but when you use a card it
is often using the Visa or MasterCard or MX payment
system rather than the interbank payment system. So what open
(15:58):
banking enables you to do allow third parties to initiate
payments from your bank account to another bank account. So
you see this in New Zealand already with online poly
you've got blank pay Volley when.
Speaker 3 (16:11):
Cave has a solution.
Speaker 2 (16:12):
So there are all sorts of account to account payment
solutions and they will all I would expect transition to
these regulated open banking APIs for those one off payment
use cases. To me, there are some exciting other use
cases that will be opened up through this regulation. I
often go to the example of the Uber app, where
(16:33):
you've got a card stored and then when it comes
time for payment, it just happens in the background. You
leave the Uber and the payment happens bya the card network.
Worth open banking, you can essentially put your bank account
on file, like putting a card on file, so you
can have it exactly the same experience. You leave the
Uber and you're paying via a bank payment rather than
(16:54):
a card payment. And the benefit here is a cost.
One is just cheaper to process an account to account payment.
Then it is the process that same payment over the
card network, So that is the benefit, and then it's
really up to merchants to decide how does that benefit
that extra margin get allocated between the merchant and the customer.
Speaker 1 (17:15):
And can we do this in real time bank to
bank transfers that's been I think one of the barriers
to date is that we don't have that real real
time settlement between different banks. It's improved, it's happening multiple
times a day, but is that possible. If I am
using an uber type app and I want to pay
with my bank account with open banking, can I do
(17:37):
that instantly?
Speaker 2 (17:38):
The settlement timeframes are the same as if you went
into your bank cap and made the payment, So it's
basically a way to interact with that same payment system
from a third party service. So, given that that bank
payment system is not real time settlement, neither are open
banking payments. But the important thing here is that when
(17:59):
you initiate an open banking payment, so when you send
that payment request to the bank, you get statuses in
real time, and so you're basically waiting for a status
that says that payment request has been accepted and it
will cecile and so that should happen within seconds. The
merchant has the certainty that's required to release the goods
(18:19):
or services, so they shouldn't have to wait for settlement
in order to have certainty of receiving funds. They wait
for that status that they get back within seconds and
then can go ahead with the purchase. And that's good
enough for these use cases because you know, in the
Uber example, they're not actually getting settlement into their merchant
account by the card network until you overnight or some
(18:42):
periodic cadence, and so it fits in with what their
expectations are in settlement there. They just need certainty that
the payment will go through an open banking does deliver
it out that's great.
Speaker 1 (18:52):
Yeah, And there's no prospect of double dipping or anything
like that, being able to spend all this money that's
pending or something like that. That API will say this
money has left that person's bank account. It's not going
to arrive immediately in your bank, but they're not going
to be able to spend that money.
Speaker 2 (19:08):
Now, that is what it should do with any of
these new APIs. You know, we need to test them
and validate that those statuses are reliable and everyone can
be certain on the back of them. And we're not
quite there yet, so there is different behavior that we've
been observing with those payment statuses. And this is the
(19:30):
kind of issue that has been hard to resolve from
the voluntary version of open banking because there really isn't
much leverage that we can bring to be able to say, hey,
this needs to be certain. Can you please clarify what
the status means or only provide this status of xyze
have happened with the regulated system, there is a regulator
that has teeth and can enforce that kind of quality,
(19:53):
and it is essential to making it work because you know,
if that attribute of open banking payments is important for
the use case I want to wait for settlement, they
want a status within seconds, then it has to be reliable. Yeah,
i'd say where we're not quite there, but if the
system is working as designed, then we will get there
on that point.
Speaker 1 (20:11):
Yeah, and look, payments are really at the pointy end
of the financial sector, so we've got to get that right.
But yeah, give us a couple of other examples, maybe
around things that are less time sensitive, like appliqued for
a mortgage or a small business load. Those sorts of
things will be sped up and facilitated by open banking
as well. What sort of ways will that work in?
Speaker 2 (20:32):
Yeah, Like, here's an example of an applet launch recently
called Fijoa that does round ups into your qisaver. So
they get a feed of transaction data from the accounts
that you select and choose to connect to Fijoa, and
then they round up the transactions that you specify and
then they periodically make a contribution of that round up
(20:53):
amount into your kiisab. So that's a good example where
it's not so time sensitive. You don't need an immediate
payment status. It just happens on autopilot in the background.
Speaker 3 (21:02):
Yes.
Speaker 2 (21:03):
Same with the loan application experience that you mentioned. It's
really a one time pull of data to verify your
income and understand your spend and basically assess whether you
can afford to service the loan that you're applying for.
So there is time sensitivity on getting the data and
making that assessment. And there are new lenders like Indy
(21:23):
for example, that can do straight through processing with the
status automated decisioning on your loan application. But there is
a payment component necessarily with those types of use cases.
So yeah, some of these use cases are very time
sensitive and the data quality has to be great for
it to work well. Some of these use cases, you know,
(21:44):
the background processes that just run and like an accounting
app would be a good example. Your transaction data feeds in,
but you're probably only doing your reconciliation once a day
or once a week, So as long as it's relatively
up to date, that's okay. So all these use cases
have different requirement.
Speaker 1 (22:00):
It's on the system, and it'll be really basic ones
like the one that has caught me a couple of
times is settlement day when I buy or sell a
property and everything has to happen on that morning. All
the legal papers have to be signed, the money has
to be transferred. And I had a situation last time
I moved where the moving man was sitting there with
all my furniture in the truck wasn't allowed into the
(22:20):
property until all the paperwork had been done. And that
was literally just bureaucratic process is slowing everything down and
costing me money. That's a center for open banking, where
the feeds, all the data is authenticated, the deal has
been done, the money is transferred, you get this notification
that the money has transferred, hand over the keys exactly.
(22:43):
So that's a good one. I guess a lot of
people will be listening thinking, Josh, this sounds great, but
I'm basically authorizing handing over my bank data to third parties.
And there are a lot of them there, names Dosh, Revolute,
(23:05):
a lot of them popping up offering really cool services.
Will be going all in on open banking. What about
the privacy concerns? Are they genuine? And this is so
called accredited companies? What do they have to go through
to be given the right to access our banking data?
Speaker 2 (23:24):
So an accredited party under the regulated system will have
obligations around fit and proper people, insurance requirements, security or requirements,
and other things that you would expect with that kind
of vessing system. But like I would still say that
on your first point, people absolutely need to consider the
party that they're dealing with and decide whether they trust
(23:46):
them with sensitive.
Speaker 3 (23:48):
Data and regulator.
Speaker 2 (23:49):
Open banking doesn't change the decision they need to make there.
They're still going to have a third party that has
access to sensitive information or the ability to make payments
from their bank account. They need to trust that party
in order to grant that access. One of the things
that we see time and time again across the products
that we support is that consumers basically make a decision
(24:11):
based on how much value they're going to get from
sharing their data. So trust is one component, but the
value that they're going to get is really critical to
their decision. And if you think about Zero nineteen years
ago launching a product, one of the things that made
that product better was bank feeds, the ability to link
your bank data into the accounting software so you don't
have to manually import it each time you want to
(24:32):
do bankreck. And so consumers look at something like that
and go, Okay, well that's valuable, happy to go through
this process if they trust that party and regulated open banking.
I mean, you could make an argument that there is
obligations of the regime and therefore kind of a stick
hanging over the direct participants in that regime. But really
(24:53):
from a consumer's perspective, I think they not in the
detail there, and they're still making a decision about do
they trust third party with the access that they're requesting,
and do they actually think they're going to get value
from it, and that's what drives your decision to link
their data in some way.
Speaker 1 (25:08):
The Big Four and Kiwi Bank, you know, for better
or worse, you know, are trusted institutions and that's why
we have a very stable banking sector. But this isn't
necessarily going to be bad for them, right, It's not
as tho we're going to see all these new banks emerge,
because you still need to have the capital requirements. You
have to meet a very high regulatory threshold to be
(25:30):
a bank in New Zealand. But you are going to
see that data that banks hold on our behalf feeding
all these other innovations, and presumably that's going to force
the banks to innovate as well totally.
Speaker 2 (25:42):
I mean, we've been talking in this conversation about banks
providing open banking APIs, but absolutely they will. We think
at least a couple of the larger banks will start
consuming them next year as well. And the obvious places
and own applications. So if you apply for a loan
with a bank, they can allow you to share data
from other banks using official open banking APIs. That's an
(26:04):
obvious one. Another obvious one would be account aggregation so
that you can link those external accounts and then they
can basically present offers if they can do you a
better deal on your deposits or your loans. And other
example would be if you are a bank, you know
that most of your customers have relationships with other financial
service providers, so they might be non bank can we
(26:25):
save providers or other banks. So if you allow someone
to link that data and get a full picture of
their financial life in your applications, then you're the home
base and you want to be the owner of that
experience layer because that's where people are making decisions or
stay in touch with their financial life. So yeah, there
are a lot of use cases that we think banks
(26:47):
will adopt over time, so they'll be suppliers into the
system but also consumers of it.
Speaker 1 (26:51):
Yeah, and if you look at a country like China
which has we Pay and reach Out, which is just incredible.
You know the big Chinese banks who are well integrated
into there, but so too our e commerce providers, health providers,
insurance providers. It's all one unified experience. When you pay
for anything, it's just a scanner for QR code. I
(27:12):
know the guys from Dash came back from Singapore with
that same sort of vision. What are we going to
have to do to enable that frictionalist sort of financial world.
So I guess we have the building blocks. It's going
to take a while, isn't it for it to roll out,
to get all the pieces together? But are you pretty
confident that what has been put in place here and
(27:32):
will roll out next year is particularly when you see
those standards, is it going to sort of enable that future?
Speaker 3 (27:38):
Yeah, I am confident of that.
Speaker 2 (27:39):
I mean, my starting point on adoption is looking at
the more than million kiwis that use unregulated forms of
open banking every year, and that activity should transition across
to this regulated system within the first year or two.
Certainly the traffic that a car who is responsible for
will transition next year. For the big four banks, then
there is new activity because we don't just want the
(28:02):
system to facilitate the existing activity. We want it to
spur on new products that are going to bring new
competition and invasion.
Speaker 3 (28:10):
And we are seeing more people.
Speaker 2 (28:13):
Interested in using open banking because this regulated system is
close to becoming operational. So we are seeing a good
new use case that we didn't think about until this year.
Is can we save a hardship applications where the applicant
is sharing financial information to evidence that they are in
financial hardship and that information needs to be collected somehow,
(28:35):
and open banking is a great method for doing that.
So over time there'll be new use cases like that
that pop up. But I think that, you know, in
terms of new activity, the most exciting thing is those
organizations that have been on the sidelines thinking open banking.
It's been sort of too shaky in this voluntary phase,
but the regulatory phase looks good. We know the rules,
that's the long term operating environment, so we build for
(28:56):
that environment that's going to be the long term, and
they are waking up and making decisions about what they're
going to do now.
Speaker 1 (29:03):
Recently I had Paul James, the Chief Digital Government, Chief
Digital Officer, I think he's called on the show talking
about the All of Government app, the Digital Trust Framework
that's going into authenticate our identity as citizens. So you
can imagine a future scenario as an opt in thing
they've said it will be. But if you are dealing
with inland revenue MSD or whatever, through that app, you
(29:26):
could plug into your bank account information as well to
facilitate your interaction and hopefully the services that you get
from the government. So you know, it's probably a while away,
but this is the start of sort of unified not
having silos of data about yourself, whether it be health data,
government data, financial data. It's bringing that together in a
safe way.
Speaker 2 (29:46):
Totally agree that that digital identity piece fits in nicely
with a lot of open banking use cases, and to
make that tangible.
Speaker 3 (29:54):
There are a lot of people that have.
Speaker 2 (29:56):
Not optimized the products that they're in with their deposits
and their loans, and part of the inertia there is
comparing offers and making the decision to switch. But then
the next piece of inertia is actually signing up with
that new provider if you're not already on board with them,
And that's where the digital identity comes in. So if
you've got a service that in the background compare and
(30:18):
recommend other financial products suit you better, they're just fundamentally
better rates, and then you can tap a couple of
buttons to share your identity and onboard seamlessly to a
new provider. Then all of a sudden there'll be a
great optimization of the financial products that people are in
and that is worth billions of dollars each year in
terms of money that is left on the table from
(30:40):
people earning zero interests on their deposits or being in
loan accounts that are not at the best market rate.
Speaker 1 (30:47):
And Josh, at some point a couple of months ago,
there was a lot of consternation that the fees that
may be involved in this new regime. I think the
banks were able to charge quite a big fee for
these API calls and that sort of thing. I think
there's been progress on there. Where is that landed in
terms of what this is actually going to cost open
banking participants.
Speaker 2 (31:07):
Yeah, So the background here was that in May there
was the release of some information about the secondary regulation,
and at that point, the policy was that banks would
be able to charge API fees up to a certain
per customer, and for some use cases they would have
been absorbable. For a loan application, for example, where there
(31:28):
are good margins and you're only doing a one off
pool of data, those fees that were proposed there would
have been viable, but a lot of use cases they
would not have been viable. And so there's a reaction
from a number of open banking enabled services that have
either got products in market or planning to deliver products
that were saying, hey, we won't be able to use
the regulated system if banks do charge fees up to
(31:51):
those caps, you know, to the government's credit, they really
listen to that feedback, reconsidered and changed their position, so
that new position came out last week and it's really simple.
There is a prohibition on banks charging API fees for
use of regulated open banking APIs. And to be clear,
that's the same as how it works in the UK
or Australia or Brazil, so it's not like New Zealand's
(32:14):
gone out and done something different than other regulated systems
around the world. But it was a change from the
original policy position. And the upshot is that the regulated
system will now be viable for much broader range of
products and as a result, there will be better customer
uptake because there are broad range of products available. So yeah,
the policy intents here is to drive competition and innovation.
(32:37):
So if you're going to maximize that policy objective, you
know it does need to enable all those products brilliant.
Speaker 1 (32:43):
Well, I'm glad sense prevailed there, because that is what
the Commerce Commission was actually talking about. So that's great.
What does it mean for Akahu? Obviously we've got eighty
five connections or products that you're facilitating, so I guess
you'll get a lot better quality feeds, the ability to
do other things, potentially new products that you'll be able
(33:05):
to be involved in launching as well.
Speaker 2 (33:07):
The main benefit of these official open banking APIs is
that people can create that connection between the bank and
the third party product without having to enter their log
and credentials into another service. That's really at the heart
of this because other methods generally require that. So it's
more secure and more comfortable for the consumer to create
(33:30):
these links using.
Speaker 3 (33:31):
Official open banking APIs.
Speaker 2 (33:32):
In terms of the data quality, look, I think that's
going to take a while to be honest, to get
up to par with how it has worked historically, because
the way it works historically is that these connections are
interfacing with the weir or mobile APIs of the banks,
and these are the same APIs that are delivering the
data into their own experiences.
Speaker 3 (33:50):
So it does work well.
Speaker 2 (33:51):
The data quality is good, that's what you see when
you open your bank ap so we want that same
data quality with these third party open banking API. There
will be teething problems there already have been, but we
will get there. I would say there's also an increased
impetus to just build products using this regulated system rather
(34:12):
than the system we've had in this voluntary phase of
open banking. That's the real unlock from my perspective, is
that more people are coming off the sidelines building open
banking enabled products because the rules of the game look good.
Those are connection flows and the data quality. Those things
more minor in my mind in terms of adoption than
(34:33):
the fact that we now have a regulated system that
is a foundational piece that everyone can get comfortable with
and happy to invest in building products in that environment.
Speaker 1 (34:43):
And business banking obviously coming on board in mid twenty
twenty six. That's often higher value services and that so
I guess you and a lot of your colleagues in
the fintech space will be really looking forward to that
when you can start trying to appeal to farmers or
small businesses or enterprise customers with new types of financial services.
Speaker 2 (35:03):
Yeah, there's a bit of nuance on the business account coverage.
So the regulation right from start has required support for
business accounts, and in fact the voluntary phase of open
banking has required support for business acounts, but it hasn't
been well done to date. So when this regulation got finalized,
essentially the banks asked for an exemption and have received
that until the middle of next year before they have
(35:25):
to actually provide good support for business accounts. Some of
the banks do that better than others already, so you know,
we're already supporting business account connectivity with some services, but
it's not as good as it should be. So I
think it's fair to say that middle and next year
is when that coverage is expected to be good.
Speaker 1 (35:45):
At the moment of subpar And look, I think the
UK something like thirteen percent of digitally active customers are
using open banking, so it seems like slow or low uptake,
but you know, I definitely think on even on the
consumer side, once you get those sorts of innovative news
services that allow people to pay an app using their
(36:05):
bank accounts, avoiding fees, avoiding having to link it to
a credit card or something like that, I think we're
going to see hundreds of thousands of people using this.
Speaker 2 (36:13):
I would like to think that we have hundreds of
thousands of kiwis using the regulated open banking system before
the end of next year, and certainly we want to
be responsible for a lot of that traffic and driving
a lot of that traffic for the products that we support.
And we hope that other people are going to move
fast too and drive traffic to the regulated system. And
within three years I'll be disappointed if we do not
(36:33):
have a million kiwis having used it. I think that's
viable given all of the unregulated use of open banking
that currently exists, that there's a good benchmark for what
we can achieve with this regulated system.
Speaker 1 (36:44):
Well, good luck, Josh, and credit to you and some
a few peers in the industry who've done a really
good job. I think of sensibly advocating for this, and
the ComCom and the government as well for realizing maybe belatedly,
that we need action on this, so hopefully it will
pay off. It's part of what we needed to be
a small advanced nation. Other countries have done it with
(37:07):
varying degrees of success, so sometimes it pays to be
second or even to be last, so you can learn
from the mistakes others have made. So it seems like
we've done that. We're on the right track, So good
luck for what's ahead and thanks for coming on the
Business of Tech.
Speaker 3 (37:21):
Thanks Peter, appreciate.
Speaker 1 (37:22):
That that's it for this week's Business of Tech. Massive
thanks to Josh Daniel from a car who for coming
on and sharing his inside view on the new open
banking rules and what they mean for kiwis and the
(37:44):
wider thin tech sector. As Josh said, you know, around
a million kiwis have used services that rely on the
voluntary ad hoc version of open banking that is in place,
so we actually have a really good chance of getting
decent uptake with the new regime in place. That should
encourage new players to offer really compelling services that will
(38:06):
hopefully appeal to both consumers and businesses. It's going to
take a little while to bed in and those standards
to really be worked through, but I think there's a
really good opportunity here to accelerate much faster than open
banking did in other countries. We are a small country,
so that is a benefit for us in terms of
(38:27):
adopting new technology. I think this will really start to fly,
especially given that we when we do travel and go overseas,
we see how other people use banking services and we're
a little bit envious of it, so hopefully some of
that innovation will really come to New Zealand now. If
you enjoyed this episode, make sure to follow or subscribe
and tell a friend We're streaming on iHeartRadio and in
(38:49):
your favorite podcast app. Until next time, I'm Peter Griffin.
Thanks so much for listening to the business of Tech.
Welcome to the Business of Tech powered by Two Degrees Business.
I'm Peter Griffin and in this episode, we're unpacking one
of the most impactful changes coming to New Zealand's financial
landscape and years, the rollout of a mandatory open banking
regime from December. After years of frustration with the slow
pace of progress, there's finally light at the end of
(00:25):
the tunnel. New regulations set by the Ministry of Business,
Innovation and Employment are about to make open banking a
reality officially, not just a promise, but a regulated system
stitched right into the Customer and Product Data Act. What
does that mean for you? In practical terms, it's about
(00:45):
taking control. Soon you'll be able to securely connect your
bank account to budgeting apps, accounting software, and loan applications
without handing over your log in credentials. We're navigating a
web of voluntary, unsanctioned connections. For years, third party FinTechs
have worked in a sort of gray area, relying on
things like screen scraping and ad hoc contracts around things
(01:09):
like application programming interfaces. But all that's about to change.
This week. I'm joined by Josh Daniel, co founder of Akahu,
one of the local pioneers in open banking connectivity. We
break down a new regime's impacts on not only consumers,
but on competition in the banking sector. Josh explains how
(01:30):
New Zealand's approach borrows lessons from the UK and Australian particular,
where uptake has been a bit slow, and crucially why
our rules are likely to deliver faster broader adoption. The
four big banks will finally be required to provide APIs
to any accredited third party. We get into the promise
(01:51):
and the limitations of real time payments, how news services
could finally make switching banks easier and arise hopefully of
maverick companies poised to shake up the staid financial landscape.
And as with anything involved with your money, we'll tackle
the big questions of the privacy and trust, what protections
(02:12):
will be in place and what risks remain when more
companies can access your financial data. It's a fascinating look
at the pivotal tech shift that's coming to fintech and
open banking, one that hopefully will finally spare some real
innovation and better deals for key consumers. Here's my interview
(02:32):
with Okahu co founder Josh Daniel. Josh, Welcome to the
Business of Tech. Very good, please to be here, Josh,
I'm enlisting your help to try and unpack where we've
got to with open banking in New Zealand. We've been
(02:53):
talking about it for a long time. There's been a
lot of frustration that it's been slow to get going.
But in the last year eighteen months, a flurry of
activity and on December one, the open banking regulations that
the Ministry of Business, Innovation and Employment have been finalizing
will become operational. So waho about that. Still work to
(03:14):
do around standards and operationalizing open banking, but it will
soon be a mandated thing, dovetailing into the Customer and
Product Data Act. Before we get into exactly what all
of that means, Josh, give us the background of your company,
a Carho, which you co founded in December twenty twenty
with Ben Lynch. What exactly does a Carho do.
Speaker 2 (03:37):
We're in open banking intermediay, so that means that we
specialize in data integrations with New Zealand banks and other
financial service providers, and we provide that connectivity.
Speaker 3 (03:49):
To other products.
Speaker 2 (03:51):
So the way this shows up for consumers as say
you're using accounting software where you want bank feeds so
that your transaction data automatically feeds into accounting software.
Speaker 3 (04:01):
We'd be the data pipes that.
Speaker 2 (04:02):
Enable that connection with your bank account. Same for personal
budgeting tools where again you want that account information to
feed automatically in, or a loan application where you want
to share your financial data with the lender to simplify
that application process. So basically you can think about it
like programmatic connectivity with your bank account, and then you
(04:25):
as a consumer can choose whether you want to grant
that access to a third party. So you'll wear the
infrastructure layer in open banking, and we provide our services
to a little over eighty five products around New Zealand,
and we're just New Zealand focused.
Speaker 1 (04:40):
So until now, many organizations have been getting access to
customers bank data to offer a range of third party
financial services. It's probably not very transparent to the customer
what goes on in the background to make that happen.
It's unregulated. The involvement of the bank's been pretty much
voluntary to date, and there's been varying levels of enthusiasm
(05:02):
around that. I've heard of companies using methods like screen scraping,
which is effectively giving a bot access to a customer's
bank account and automatically capturing the data on the screen
in the background without the customer needing to be present,
and in using that data outside the customer's banking portal.
There's been more extensive use of so called application programming
(05:24):
interfaces APIs in conjunction with the banks too, which is great.
So Josh, what exactly is now changing with this move
to the new regulated system.
Speaker 2 (05:34):
Yeah, I mean if you think about products like zero
been around for about nineteen years, Pocketsmith with personal budgeting
tools for over seventeen years. There are a whole lot
of products where consumers in New Zealand have been able
to connect their bank data to those products, but the
way that those connections of work has been unregulated. There
(05:56):
are different methods that are used in market, and they're
not optimal because the consumer doesn't have full control of
how those connections work. And any product that wants those
kind of data feeds either has to go and get
a contract with each bank in order to integrate with them,
or they have to do it in a way that
(06:17):
isn't sanctioned by the bank, so they have to connect
to bank systems in a way that is unsanctioned. So
over the last twenty years there has been a build
up of consumer demand for this type of connectivity to
a point where there's more than a million kiwis each
year in New Zealand using unregulated open banking methods. So
around the world and in New Zealand, there has been
(06:38):
this move towards regulating this because that can sweep away
the patchwork of contracts that allow all of it to
work currently and put the consumers in control. Because with
the regulated system, a product provider or an intermediary like
US can become accredited, and once you're credited under that regime,
(06:58):
as of right, you get to access these regulated open
banking APIs. So that puts the consumer more in the
driving seat, because it's now not up to each bank
to determine which products a consumer can share their data with.
It is now up to the consumer to choose, and
so that centralized accreditation is key to the whole thing.
And another key component of the regulated system is that
(07:21):
now everyone can have confidence that here are the rules
of the game and that can be enforced whereas in
the contractual the voluntary version of open banking that we've
been in, you beholden to the custom terms in each
contract and to be planted, there hasn't been much negotiating
power if you wanted to use those APIs. So what
we're seeing as open banking transitions to a regulated system
(07:46):
is increased interest from organizations that are interested in using
open banking, but they've previously been on the sidelines because
it hasn't felt like the right kind of environment for
them to jump in. But now the long term operating environment.
But this regulated system is coming and it's well designed
and everyone knows the rules of the game, and that's
(08:06):
leading to more investment and products that use open banking.
Speaker 1 (08:09):
So we've got this regulatory regime coming in. Is it
fit for purpose? Is it well designed? Because we went
the first to this, The UK went a few years ago,
Australia more recently, but still years ahead of us. Did
we learn from those experiences and putting this together?
Speaker 2 (08:25):
So the way this regulatory system hangs together. You've got
the Customer Product Data Act that was finalized in March
this year. Then you've got a secondary regulation that was
finalized last week and then NBA is currently consulting on standards,
which are like a tertiary form of the regulation that
fits in, so we know for sure what's in the
act and what's in the secondary regulation, and we think
(08:47):
it's really well designed. We're really happy with that. What
we've seen in other regulated systems around the world, like
the UK, Australia, Brazil, is that the design of the
regulated system really does matter for customer uptake. And you know,
one example is in Australia, they you know, from my perspective,
(09:09):
over engineered some aspects of that regime and as a result,
some organizations haven't actually transitioned to that regulated open banking
system yet if they need data exchange with the banks.
An example of something that made it tricky there is
that there are certain rules that follow data that you've
(09:31):
collected out of that regulated system. So if you're a
product provider and you're collecting data via different methods, there's
data that you collect out of the open banking system
in Australia has to be treated differently than the other
data that you've collected. So things like that can make
it practically hard to adopt the system. In New Zealand,
(09:52):
we think that NB really learned from those regimes that
have gone in front of us, and we think the
regulation is well designed. It's simple, it sets out a
data sharing system and it doesn't try to move into
things like data protection, which is left to the Privacy Act.
So yeah, overall we're really happy with where that's landed.
Speaker 1 (10:12):
Well, that's good to hear because you know, people like me,
we're critical of the government really trying to get it
to move, saying well, look at Australia, look at the UK,
they're already doing it. But the reality was that the
uptake hasn't been that great in those countries, so there
was something obviously fundamentally holding back the industry, both in
Australia and the UK. So do you think that we've
(10:34):
learned from those mistakes and likely to get better uptake here? Yeah.
Speaker 2 (10:38):
I think there are a few reasons why we're going
to get stronger uptake on a per capita basis, at
least than Australia and the UK. One is the design
of the regulation, which we've just talked about, where our
regulation is better than those other regimes. The second is
that the New Zealand region covers both data and payments,
and there are a lot of use cases that combine
(10:59):
both of those those functionalities. So you know the fullness
of what is going to be available in the first
couple of years of the New Zealand regime is more
than what Australia currently has, for example, So there are
more use cases that are viable. And the third factor
that I think is important here is that the banks,
at least the largest four banks, have been delivering early
(11:23):
versions of an open banking API, so they're not starting
from zero. They have been in that voluntary chapter of
open banking with open banking services and market So what
we hope is that some of the data quality or
API quality issues that have plagued the system in Australia
will be pasted. A lot of those things. There will
(11:44):
still be issues to resolve, and we're really happy that,
you know, there's going to be a regulator that can
jump on them, but we do think that the issues
are going to be fewer than what we've seen in
those regulated systems that have gone from zero to one
when the regulated system began.
Speaker 1 (11:58):
That's great, so they've been that on a voluntary basis.
In New Zealand, we talked about these regulations designate the
Big Four a did asbbns IN and west Pac as
data holders from the first of December. What does that
actually mean, you know, how does that change compared to
what was in place before.
Speaker 2 (12:18):
The key thing is that the regulations require those banks
to offer an open banking API to any accredited party,
so that that party is called an accredited requestor under
the regulation. So if you're a credited you have the
right to access an open banking API from those banks.
And by the way, QBI Bank is designated too, It's
(12:39):
just that their delivery dates fall in twenty twenty six,
so it's just as you say, the Big Four from
one December. So yeah, it makes it. It turns it
from a voluntary offering of an open banking API to
a mandatory offering. And it also means that you don't
need a contract with each bank in order to use
those APIs. You become accredited centrally and then you have
(13:00):
access to all regulated APIs in that system.
Speaker 1 (13:03):
And the Commerce Commission recommended this in twenty twenty four
Open Banking and its Banking Competition Report. So there's a
lot of other stuff going on and banking. There are
concerns about the structural makeup of the banking sector. But
they obviously thought that part of unlocking the sort of
the bottlenecks in our banking getting more competition into the sector,
(13:26):
that open banking is a key component of that.
Speaker 2 (13:29):
Yeah, we think of open banking as doing that, as
driving competition and innovation within the banking sector, which is
obviously the focus of that Commerce Commission market study. But
open banking is used for a whole lot of use
cases outside of that. So you know, at the start
of this conversation we were talking about use cases like
(13:52):
accounting and tax solutions, or personal budgeting tools, or you know,
there are a whole lot of SaaS products that use
data feeds make payments. Those use cases aren't driving competition
or innovation within the banking sector. But to narrow in
on what the Commerce Commission is talking about there in
the banking sector, good example would be if there was
(14:13):
a challenger in the banking sector that was offering fundamentally
a better rate on deposits and or loans, then they
can make it simple for people to connect their external
accounts and then switch.
Speaker 3 (14:25):
Across to those better products.
Speaker 2 (14:28):
So the Commerce Commission also pointed out in their market
study that open banking peers well with a challenger or
they refer to a maverick in their market study, because
without that maverick, you know, if you're just using open
banking to compare rates and all the rates are the same,
then you don't actually get the benefits of the competition.
But if there is a maverick, then open banking makes
(14:51):
it easier for them to go and allow people to
compare and switch to better products.
Speaker 1 (14:57):
And look, we've seen in related area areas look at
chairs ease and share broking, when you have a maverick
come in, the difference it can make and the customer experience,
the fees, everything can be dramatically better. So we're hoping
this will unlock all of that in banking as well.
The framework includes payment initiation. That's really interesting, sounds quite technical.
(15:22):
What does that enable for consumers? Are we talking about
the potential to bypass things like credit card fees, to
do app to app transactions beyond the traditional way of
paying for things.
Speaker 3 (15:34):
That's exactly right.
Speaker 2 (15:35):
So everyone is familiar with paying for things via the
card networks. Often your card is attached to your bank account,
so in a lot of people's minds. Those two things
are the same, but when you use a card it
is often using the Visa or MasterCard or MX payment
system rather than the interbank payment system. So what open
(15:58):
banking enables you to do allow third parties to initiate
payments from your bank account to another bank account. So
you see this in New Zealand already with online poly
you've got blank pay Volley when.
Speaker 3 (16:11):
Cave has a solution.
Speaker 2 (16:12):
So there are all sorts of account to account payment
solutions and they will all I would expect transition to
these regulated open banking APIs for those one off payment
use cases. To me, there are some exciting other use
cases that will be opened up through this regulation. I
often go to the example of the Uber app, where
(16:33):
you've got a card stored and then when it comes
time for payment, it just happens in the background. You
leave the Uber and the payment happens bya the card network.
Worth open banking, you can essentially put your bank account
on file, like putting a card on file, so you
can have it exactly the same experience. You leave the
Uber and you're paying via a bank payment rather than
(16:54):
a card payment. And the benefit here is a cost.
One is just cheaper to process an account to account payment.
Then it is the process that same payment over the
card network, So that is the benefit, and then it's
really up to merchants to decide how does that benefit
that extra margin get allocated between the merchant and the customer.
Speaker 1 (17:15):
And can we do this in real time bank to
bank transfers that's been I think one of the barriers
to date is that we don't have that real real
time settlement between different banks. It's improved, it's happening multiple
times a day, but is that possible. If I am
using an uber type app and I want to pay
with my bank account with open banking, can I do
(17:37):
that instantly?
Speaker 2 (17:38):
The settlement timeframes are the same as if you went
into your bank cap and made the payment, So it's
basically a way to interact with that same payment system
from a third party service. So, given that that bank
payment system is not real time settlement, neither are open
banking payments. But the important thing here is that when
(17:59):
you initiate an open banking payment, so when you send
that payment request to the bank, you get statuses in
real time, and so you're basically waiting for a status
that says that payment request has been accepted and it
will cecile and so that should happen within seconds. The
merchant has the certainty that's required to release the goods
(18:19):
or services, so they shouldn't have to wait for settlement
in order to have certainty of receiving funds. They wait
for that status that they get back within seconds and
then can go ahead with the purchase. And that's good
enough for these use cases because you know, in the
Uber example, they're not actually getting settlement into their merchant
account by the card network until you overnight or some
(18:42):
periodic cadence, and so it fits in with what their
expectations are in settlement there. They just need certainty that
the payment will go through an open banking does deliver
it out that's great.
Speaker 1 (18:52):
Yeah, And there's no prospect of double dipping or anything
like that, being able to spend all this money that's
pending or something like that. That API will say this
money has left that person's bank account. It's not going
to arrive immediately in your bank, but they're not going
to be able to spend that money.
Speaker 2 (19:08):
Now, that is what it should do with any of
these new APIs. You know, we need to test them
and validate that those statuses are reliable and everyone can
be certain on the back of them. And we're not
quite there yet, so there is different behavior that we've
been observing with those payment statuses. And this is the
(19:30):
kind of issue that has been hard to resolve from
the voluntary version of open banking because there really isn't
much leverage that we can bring to be able to say, hey,
this needs to be certain. Can you please clarify what
the status means or only provide this status of xyze
have happened with the regulated system, there is a regulator
that has teeth and can enforce that kind of quality,
(19:53):
and it is essential to making it work because you know,
if that attribute of open banking payments is important for
the use case I want to wait for settlement, they
want a status within seconds, then it has to be reliable. Yeah,
i'd say where we're not quite there, but if the
system is working as designed, then we will get there
on that point.
Speaker 1 (20:11):
Yeah, and look, payments are really at the pointy end
of the financial sector, so we've got to get that right.
But yeah, give us a couple of other examples, maybe
around things that are less time sensitive, like appliqued for
a mortgage or a small business load. Those sorts of
things will be sped up and facilitated by open banking
as well. What sort of ways will that work in?
Speaker 2 (20:32):
Yeah, Like, here's an example of an applet launch recently
called Fijoa that does round ups into your qisaver. So
they get a feed of transaction data from the accounts
that you select and choose to connect to Fijoa, and
then they round up the transactions that you specify and
then they periodically make a contribution of that round up
(20:53):
amount into your kiisab. So that's a good example where
it's not so time sensitive. You don't need an immediate
payment status. It just happens on autopilot in the background.
Speaker 3 (21:02):
Yes.
Speaker 2 (21:03):
Same with the loan application experience that you mentioned. It's
really a one time pull of data to verify your
income and understand your spend and basically assess whether you
can afford to service the loan that you're applying for.
So there is time sensitivity on getting the data and
making that assessment. And there are new lenders like Indy
(21:23):
for example, that can do straight through processing with the
status automated decisioning on your loan application. But there is
a payment component necessarily with those types of use cases.
So yeah, some of these use cases are very time
sensitive and the data quality has to be great for
it to work well. Some of these use cases, you know,
(21:44):
the background processes that just run and like an accounting
app would be a good example. Your transaction data feeds in,
but you're probably only doing your reconciliation once a day
or once a week, So as long as it's relatively
up to date, that's okay. So all these use cases
have different requirement.
Speaker 1 (22:00):
It's on the system, and it'll be really basic ones
like the one that has caught me a couple of
times is settlement day when I buy or sell a
property and everything has to happen on that morning. All
the legal papers have to be signed, the money has
to be transferred. And I had a situation last time
I moved where the moving man was sitting there with
all my furniture in the truck wasn't allowed into the
(22:20):
property until all the paperwork had been done. And that
was literally just bureaucratic process is slowing everything down and
costing me money. That's a center for open banking, where
the feeds, all the data is authenticated, the deal has
been done, the money is transferred, you get this notification
that the money has transferred, hand over the keys exactly.
(22:43):
So that's a good one. I guess a lot of
people will be listening thinking, Josh, this sounds great, but
I'm basically authorizing handing over my bank data to third parties.
And there are a lot of them there, names Dosh, Revolute,
(23:05):
a lot of them popping up offering really cool services.
Will be going all in on open banking. What about
the privacy concerns? Are they genuine? And this is so
called accredited companies? What do they have to go through
to be given the right to access our banking data?
Speaker 2 (23:24):
So an accredited party under the regulated system will have
obligations around fit and proper people, insurance requirements, security or requirements,
and other things that you would expect with that kind
of vessing system. But like I would still say that
on your first point, people absolutely need to consider the
party that they're dealing with and decide whether they trust
(23:46):
them with sensitive.
Speaker 3 (23:48):
Data and regulator.
Speaker 2 (23:49):
Open banking doesn't change the decision they need to make there.
They're still going to have a third party that has
access to sensitive information or the ability to make payments
from their bank account. They need to trust that party
in order to grant that access. One of the things
that we see time and time again across the products
that we support is that consumers basically make a decision
(24:11):
based on how much value they're going to get from
sharing their data. So trust is one component, but the
value that they're going to get is really critical to
their decision. And if you think about Zero nineteen years
ago launching a product, one of the things that made
that product better was bank feeds, the ability to link
your bank data into the accounting software so you don't
have to manually import it each time you want to
(24:32):
do bankreck. And so consumers look at something like that
and go, Okay, well that's valuable, happy to go through
this process if they trust that party and regulated open banking.
I mean, you could make an argument that there is
obligations of the regime and therefore kind of a stick
hanging over the direct participants in that regime. But really
(24:53):
from a consumer's perspective, I think they not in the
detail there, and they're still making a decision about do
they trust third party with the access that they're requesting,
and do they actually think they're going to get value
from it, and that's what drives your decision to link
their data in some way.
Speaker 1 (25:08):
The Big Four and Kiwi Bank, you know, for better
or worse, you know, are trusted institutions and that's why
we have a very stable banking sector. But this isn't
necessarily going to be bad for them, right, It's not
as tho we're going to see all these new banks emerge,
because you still need to have the capital requirements. You
have to meet a very high regulatory threshold to be
(25:30):
a bank in New Zealand. But you are going to
see that data that banks hold on our behalf feeding
all these other innovations, and presumably that's going to force
the banks to innovate as well totally.
Speaker 2 (25:42):
I mean, we've been talking in this conversation about banks
providing open banking APIs, but absolutely they will. We think
at least a couple of the larger banks will start
consuming them next year as well. And the obvious places
and own applications. So if you apply for a loan
with a bank, they can allow you to share data
from other banks using official open banking APIs. That's an
(26:04):
obvious one. Another obvious one would be account aggregation so
that you can link those external accounts and then they
can basically present offers if they can do you a
better deal on your deposits or your loans. And other
example would be if you are a bank, you know
that most of your customers have relationships with other financial
service providers, so they might be non bank can we
(26:25):
save providers or other banks. So if you allow someone
to link that data and get a full picture of
their financial life in your applications, then you're the home
base and you want to be the owner of that
experience layer because that's where people are making decisions or
stay in touch with their financial life. So yeah, there
are a lot of use cases that we think banks
(26:47):
will adopt over time, so they'll be suppliers into the
system but also consumers of it.
Speaker 1 (26:51):
Yeah, and if you look at a country like China
which has we Pay and reach Out, which is just incredible.
You know the big Chinese banks who are well integrated
into there, but so too our e commerce providers, health providers,
insurance providers. It's all one unified experience. When you pay
for anything, it's just a scanner for QR code. I
(27:12):
know the guys from Dash came back from Singapore with
that same sort of vision. What are we going to
have to do to enable that frictionalist sort of financial world.
So I guess we have the building blocks. It's going
to take a while, isn't it for it to roll out,
to get all the pieces together? But are you pretty
confident that what has been put in place here and
(27:32):
will roll out next year is particularly when you see
those standards, is it going to sort of enable that future?
Speaker 3 (27:38):
Yeah, I am confident of that.
Speaker 2 (27:39):
I mean, my starting point on adoption is looking at
the more than million kiwis that use unregulated forms of
open banking every year, and that activity should transition across
to this regulated system within the first year or two.
Certainly the traffic that a car who is responsible for
will transition next year. For the big four banks, then
there is new activity because we don't just want the
(28:02):
system to facilitate the existing activity. We want it to
spur on new products that are going to bring new
competition and invasion.
Speaker 3 (28:10):
And we are seeing more people.
Speaker 2 (28:13):
Interested in using open banking because this regulated system is
close to becoming operational. So we are seeing a good
new use case that we didn't think about until this year.
Is can we save a hardship applications where the applicant
is sharing financial information to evidence that they are in
financial hardship and that information needs to be collected somehow,
(28:35):
and open banking is a great method for doing that.
So over time there'll be new use cases like that
that pop up. But I think that, you know, in
terms of new activity, the most exciting thing is those
organizations that have been on the sidelines thinking open banking.
It's been sort of too shaky in this voluntary phase,
but the regulatory phase looks good. We know the rules,
that's the long term operating environment, so we build for
(28:56):
that environment that's going to be the long term, and
they are waking up and making decisions about what they're
going to do now.
Speaker 1 (29:03):
Recently I had Paul James, the Chief Digital Government, Chief
Digital Officer, I think he's called on the show talking
about the All of Government app, the Digital Trust Framework
that's going into authenticate our identity as citizens. So you
can imagine a future scenario as an opt in thing
they've said it will be. But if you are dealing
with inland revenue MSD or whatever, through that app, you
(29:26):
could plug into your bank account information as well to
facilitate your interaction and hopefully the services that you get
from the government. So you know, it's probably a while away,
but this is the start of sort of unified not
having silos of data about yourself, whether it be health data,
government data, financial data. It's bringing that together in a
safe way.
Speaker 2 (29:46):
Totally agree that that digital identity piece fits in nicely
with a lot of open banking use cases, and to
make that tangible.
Speaker 3 (29:54):
There are a lot of people that have.
Speaker 2 (29:56):
Not optimized the products that they're in with their deposits
and their loans, and part of the inertia there is
comparing offers and making the decision to switch. But then
the next piece of inertia is actually signing up with
that new provider if you're not already on board with them,
And that's where the digital identity comes in. So if
you've got a service that in the background compare and
(30:18):
recommend other financial products suit you better, they're just fundamentally
better rates, and then you can tap a couple of
buttons to share your identity and onboard seamlessly to a
new provider. Then all of a sudden there'll be a
great optimization of the financial products that people are in
and that is worth billions of dollars each year in
terms of money that is left on the table from
(30:40):
people earning zero interests on their deposits or being in
loan accounts that are not at the best market rate.
Speaker 1 (30:47):
And Josh, at some point a couple of months ago,
there was a lot of consternation that the fees that
may be involved in this new regime. I think the
banks were able to charge quite a big fee for
these API calls and that sort of thing. I think
there's been progress on there. Where is that landed in
terms of what this is actually going to cost open
banking participants.
Speaker 2 (31:07):
Yeah, So the background here was that in May there
was the release of some information about the secondary regulation,
and at that point, the policy was that banks would
be able to charge API fees up to a certain
per customer, and for some use cases they would have
been absorbable. For a loan application, for example, where there
(31:28):
are good margins and you're only doing a one off
pool of data, those fees that were proposed there would
have been viable, but a lot of use cases they
would not have been viable. And so there's a reaction
from a number of open banking enabled services that have
either got products in market or planning to deliver products
that were saying, hey, we won't be able to use
the regulated system if banks do charge fees up to
(31:51):
those caps, you know, to the government's credit, they really
listen to that feedback, reconsidered and changed their position, so
that new position came out last week and it's really simple.
There is a prohibition on banks charging API fees for
use of regulated open banking APIs. And to be clear,
that's the same as how it works in the UK
or Australia or Brazil, so it's not like New Zealand's
(32:14):
gone out and done something different than other regulated systems
around the world. But it was a change from the
original policy position. And the upshot is that the regulated
system will now be viable for much broader range of
products and as a result, there will be better customer
uptake because there are broad range of products available. So yeah,
the policy intents here is to drive competition and innovation.
(32:37):
So if you're going to maximize that policy objective, you
know it does need to enable all those products brilliant.
Speaker 1 (32:43):
Well, I'm glad sense prevailed there, because that is what
the Commerce Commission was actually talking about. So that's great.
What does it mean for Akahu? Obviously we've got eighty
five connections or products that you're facilitating, so I guess
you'll get a lot better quality feeds, the ability to
do other things, potentially new products that you'll be able
(33:05):
to be involved in launching as well.
Speaker 2 (33:07):
The main benefit of these official open banking APIs is
that people can create that connection between the bank and
the third party product without having to enter their log
and credentials into another service. That's really at the heart
of this because other methods generally require that. So it's
more secure and more comfortable for the consumer to create
(33:30):
these links using.
Speaker 3 (33:31):
Official open banking APIs.
Speaker 2 (33:32):
In terms of the data quality, look, I think that's
going to take a while to be honest, to get
up to par with how it has worked historically, because
the way it works historically is that these connections are
interfacing with the weir or mobile APIs of the banks,
and these are the same APIs that are delivering the
data into their own experiences.
Speaker 3 (33:50):
So it does work well.
Speaker 2 (33:51):
The data quality is good, that's what you see when
you open your bank ap so we want that same
data quality with these third party open banking API. There
will be teething problems there already have been, but we
will get there. I would say there's also an increased
impetus to just build products using this regulated system rather
(34:12):
than the system we've had in this voluntary phase of
open banking. That's the real unlock from my perspective, is
that more people are coming off the sidelines building open
banking enabled products because the rules of the game look good.
Those are connection flows and the data quality. Those things
more minor in my mind in terms of adoption than
(34:33):
the fact that we now have a regulated system that
is a foundational piece that everyone can get comfortable with
and happy to invest in building products in that environment.
Speaker 1 (34:43):
And business banking obviously coming on board in mid twenty
twenty six. That's often higher value services and that so
I guess you and a lot of your colleagues in
the fintech space will be really looking forward to that
when you can start trying to appeal to farmers or
small businesses or enterprise customers with new types of financial services.
Speaker 2 (35:03):
Yeah, there's a bit of nuance on the business account coverage.
So the regulation right from start has required support for
business accounts, and in fact the voluntary phase of open
banking has required support for business acounts, but it hasn't
been well done to date. So when this regulation got finalized,
essentially the banks asked for an exemption and have received
that until the middle of next year before they have
(35:25):
to actually provide good support for business accounts. Some of
the banks do that better than others already, so you know,
we're already supporting business account connectivity with some services, but
it's not as good as it should be. So I
think it's fair to say that middle and next year
is when that coverage is expected to be good.
Speaker 1 (35:45):
At the moment of subpar And look, I think the
UK something like thirteen percent of digitally active customers are
using open banking, so it seems like slow or low uptake,
but you know, I definitely think on even on the
consumer side, once you get those sorts of innovative news
services that allow people to pay an app using their
(36:05):
bank accounts, avoiding fees, avoiding having to link it to
a credit card or something like that, I think we're
going to see hundreds of thousands of people using this.
Speaker 2 (36:13):
I would like to think that we have hundreds of
thousands of kiwis using the regulated open banking system before
the end of next year, and certainly we want to
be responsible for a lot of that traffic and driving
a lot of that traffic for the products that we support.
And we hope that other people are going to move
fast too and drive traffic to the regulated system. And
within three years I'll be disappointed if we do not
(36:33):
have a million kiwis having used it. I think that's
viable given all of the unregulated use of open banking
that currently exists, that there's a good benchmark for what
we can achieve with this regulated system.
Speaker 1 (36:44):
Well, good luck, Josh, and credit to you and some
a few peers in the industry who've done a really
good job. I think of sensibly advocating for this, and
the ComCom and the government as well for realizing maybe belatedly,
that we need action on this, so hopefully it will
pay off. It's part of what we needed to be
a small advanced nation. Other countries have done it with
(37:07):
varying degrees of success, so sometimes it pays to be
second or even to be last, so you can learn
from the mistakes others have made. So it seems like
we've done that. We're on the right track, So good
luck for what's ahead and thanks for coming on the
Business of Tech.
Speaker 3 (37:21):
Thanks Peter, appreciate.
Speaker 1 (37:22):
That that's it for this week's Business of Tech. Massive
thanks to Josh Daniel from a car who for coming
on and sharing his inside view on the new open
banking rules and what they mean for kiwis and the
(37:44):
wider thin tech sector. As Josh said, you know, around
a million kiwis have used services that rely on the
voluntary ad hoc version of open banking that is in place,
so we actually have a really good chance of getting
decent uptake with the new regime in place. That should
encourage new players to offer really compelling services that will
(38:06):
hopefully appeal to both consumers and businesses. It's going to
take a little while to bed in and those standards
to really be worked through, but I think there's a
really good opportunity here to accelerate much faster than open
banking did in other countries. We are a small country,
so that is a benefit for us in terms of
(38:27):
adopting new technology. I think this will really start to fly,
especially given that we when we do travel and go overseas,
we see how other people use banking services and we're
a little bit envious of it, so hopefully some of
that innovation will really come to New Zealand now. If
you enjoyed this episode, make sure to follow or subscribe
and tell a friend We're streaming on iHeartRadio and in
(38:49):
your favorite podcast app. Until next time, I'm Peter Griffin.
Thanks so much for listening to the business of Tech.
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