July 31, 2024 • 53 mins
"The question is, who supports the bill? Well, honestly, basically everyone."
That's what Commerce and Consumer Affairs Minister Andrew Bayly said about the Customer and Product Data (CPD) Bill at its first reading, and sure enough, every other party representative followed with their support.
The CPD Bill is the legislative force that mandates the sharing of customer data by organisations, starting with financial institutions - in other words, open banking.
So what is it about the Bill that has earned cross-party support? What changes will it bring for people across NZ? And why is NZ's open banking rollout already looking more promising than the UK's and Australia's?
Fintech leaders Josh Daniell from Akahu and Adrian Smith from BlinkPay join us to answer those questions and more.
Plus, what happened at Soul Machines, and Minister Judith Collins' big plans to bolster AI uptake.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Open banking is here, or at least the first real
version of it, with New Zealand's four biggest banks and
zed ASB B and Z and Westpac now required to
share the customer's data with trusted third parties with the
customer's authorization.
Speaker 2 (00:15):
Of course, it promises to open up innovation in everything
from faster, more convenient retail and e commerce payments to
new budgeting and investment apps.
Speaker 1 (00:24):
It could take a lot of hassle out of the
process of applying for a loan or mortgage, but.
Speaker 2 (00:28):
Will open banking really unlock the competition our highly concentrated
and vastly profitable banking sector needs.
Speaker 1 (00:36):
This week on the Business of Tech powered by two
Degrees Business, we took to two entrepreneurs on the frontlines
of open banking, hoping to take advantage of regulatory changes
to increase choice and competition in financial services.
Speaker 3 (00:49):
And the UK, it took a while for uptake off
the open banking regime and certainly the same in Australia.
I think New Zealand's going to be much faster. The
customer product data built was really well designed and an
our view as a stands today is going to be great.
Speaker 4 (01:04):
Eventually woman that was comin foundation later that everyone can
build upon and you can start thinking about, well, what
of the care you make the lines that could really
generate value, Like we're actually solving a problem that's value where.
Speaker 5 (01:16):
People are willing to pay for more on open banking.
Speaker 2 (01:19):
Coming up with our featured guests Blink Pays, Adrian Smith
and AKA Who's Josh Daniel shortly, but.
Speaker 1 (01:25):
First we look at some of the big tech stories
making headlines this week, and we start with Harold Tech
editor Chris Keel's Tech Insider piece very interesting about Soul
Machines are really promising, New Zealand's startup founded by Greg
Cross and Mark Sagar. And just as a bit of background,
Soul Machines came up with what they call it a
(01:47):
digital brain. This was Mark Saga who came out of
where a digital So the idea was to take this
incredible intelligence they created and use it to feed digital
avatars that could have really sensible conversations in a customer
service context. So we saw a lot of pilot projects
(02:07):
pop up with the likes of A and Z and
Mercedes bend And in New Zealand, and it appears as
though both those founders, Greg cross Mark Sager are actually
gone from Soul Machines.
Speaker 2 (02:20):
Bin Yeah, operationally and the directorship. They've both stepped back.
They're on an advisory role now, whatever you want to
make of that. If you are adjacent to the industry
as we are, you're kind of would have been hearing
these rumblings around Soul Machines for some time now that
it seems to have been struggling to find its feet
(02:43):
in the new world of AI. And that's kind of
what Chris Keel's story goes into the details of what
actually seems to have happened there. The question is that
people are asking is whether they were kind of disrupted
by generative AI, or whether they the tech was actually
more flash than bang, whether it actually seemed like it
(03:04):
was going to be really valuable to a lot of
consumers but ultimately just wasn't really what people were looking
for or weren't ready for.
Speaker 1 (03:11):
Perhaps, and I was sort of expecting by now we
would be interacting with these digital avatars which you can
actually see rather than just talk to, like Siri or Alexa.
I thought they'd be everywhere now, but they're not. And
in the intervening few years since Solar Machines really got
going on these digital avatars. We've seen the rise of
(03:34):
generative AI, which Solar Machines has embraced. So they are
using chat GPT to power some of their sort of
off the shelf bots that you can buy relatively cheaply
to run your customer service. The big question mark is
over the digital brain technology. Is it too expensive, is
it too cumbersome to use? Is it actually still valuable?
(03:58):
And it may well be, but so Machines appear to
be running out of money. You wrote a story this
week looking at the financial statements. They've got cash and
TERMB deposits of twelve point three million dollars with net
cash outflows of thirty eight point one million for the
year ending March thirty one.
Speaker 2 (04:17):
Yeah, that was last year, twenty twenty three, So that
was what they had then and it's been twelve months
since then. That that's probably why they've reduced their head
count from two hundred and fifty three to seventy in
that time.
Speaker 1 (04:29):
And we haven't heard anything about a significant new injection
of funding, have we?
Speaker 5 (04:34):
No?
Speaker 2 (04:35):
No, And again in that in Chris Kill's article he
talks about them potentially it looks like they've tried to
whether that was not as successful as they hoped, or
whether they couldn't quite get that off the ground, it's
not really obvious to us what actually happened. So yeah,
keeping an eye on things, and hopefully we'll hear something
a little more detailed from either the company's new CEO
(04:57):
or somebody soon, because they're keeping their cards very close
to their chest at the moment.
Speaker 1 (05:03):
I'd love to see this company really succeed in its
original mission, which sounded fantastic and drew on some great technology,
and they've put a lot of work into this all
the way since twenty sixteen, I think when they set
out on this venture. But is this unfortunately going to
be a victim of this disruptive generative AI revolution where
(05:26):
things that were very expensive and complex to create with
suddenly with natural language processing and large language models and
training those models, you can arrive at something as good
for a fraction of the price. That's the concern.
Speaker 2 (05:41):
You also have to look at just the cost to
open AI of training those models. It's billions of dollars,
and did zull Machine ever have those kinds of Microsoft
level pockets to be able to do something that would
ever challenge that level. They didn't really, but yeah, it
(06:03):
is difficult to know how big the general audience is
for face to face chatbots. Like I struggle to see
the value. And I was speaking to a former podcast guest,
Tim Warren the other day about this, and one of
the things he said to me, it's difficult when you're
facing a generation that doesn't even want to pick up
the phone and have a call to try and convince
(06:24):
them to have conversations with digital people.
Speaker 1 (06:27):
Yeah. And we were at an event with the Amazon
Australia New Zealand people last week and I was asking
one of them when to Genai sort of coming to
the Alexa, and they said, it is coming, you know,
watch out, it's not far away. So that will be
the big test. I think at the moment they're not
very useful those voice assistants really for anything other than
(06:50):
asking what the weather is or what's in my calendar.
But if they can use those large language models to
deliver much more lifelike and an intuitive answers to less
structured questions, that will be a game changer. But do
I need a digital representation of a person on a
screen fronting that for me personally. No, maybe millennials and
(07:14):
gen z don't give us stuff about that. They just
want to get a really good answer to their question,
and if it's speaking into their phone, they're happy to
do it.
Speaker 5 (07:23):
Yeah.
Speaker 2 (07:23):
And the other thing I guess is that you know,
there was a lot of hype for the metaverse that
some machines tried to ride there for a while, but
unfortunately that was a hype train without rails and didn't
gat very far.
Speaker 1 (07:37):
Yeah. Looking a bit more broadly at AI, interesting report
from Judith Collin's office as the Minister of Science, Technology
and Innovation starting to give us a little bit of
an idea as to where she is directing the government
to take artificial intelligence, both from a regulation point of view,
(07:58):
but also trying to promote update offen.
Speaker 2 (08:01):
Yeah, they proactively released a cabinet paper that Judith Collins
submitted basically talking about how she wants to try and
get New Zealand using AI. A big part of it
for the private industry is that she they basically want
to say, don't be stressed about future regulations.
Speaker 5 (08:19):
You can go and start playing now.
Speaker 2 (08:21):
We're going to take a light touch regulation and if
anything crops up outside of the current legal frameworks.
Speaker 5 (08:26):
Then we'll address that when it happens.
Speaker 2 (08:28):
So maybe that will have the intended effect and get
people a little bit more excited to dive in and
use it. I don't know if anybody was sitting there
with their finger hovering over a button just waiting for
the regulatory nod from government or not, but maybe they were.
Speaker 1 (08:45):
So this really carries on to theme I think from
the National Party and then with Judith Collins as sort
of Technology Minister and really passionate about AI light touch,
risk based approach to AIG, which is what the EU
has done, but what will happen here nowhere near is prescriptive?
(09:05):
That makes sense to me, but there's just a lot
of gray areas in our privacy law and our copyright law,
and what she's basically saying is where existing legislation can
deal with this, we will build on that if things
need to be tweaked, but we're not really looking at
(09:26):
a whole new regime which some countries and the European
Union have actually gone and introduced. So she's signaling very
much we're not going to be as heavy handed on that.
I guess the other thing the paper flags is a
role for GCD government chief Digital Officer who we had
on the show back last year. Paul James is in
(09:47):
that role at the moment. She's basically signaling to that office,
we need to get the ball rolling here. You're going
to coordinate things across government when it comes to the
uptake of AI.
Speaker 4 (10:00):
Yep.
Speaker 2 (10:00):
She refers to strong leadership as needed, and I guess
she is putting her faith in Paul James to be
that strong leader and to maybe establish a strong leadership
team as well hopefully that can get together and do this.
She wants to get all the different portfolios to basically
come back and offer some ideas about how they could
(10:22):
potentially use artificial intelligence to improve the public services that
they offer, and then put those together and create a
cross portfolio working group headed by the Chief Digital Officer
to start getting that together basically to start thinking about
how they could possibly integrate some AI to improve public services.
(10:45):
So it's a start, you know, it is a start,
and hopefully it doesn't end up in bureaucratic quagmire.
Speaker 1 (10:53):
Yeah, relatively little in there about how to really jump
start use of AI across the economy in a private sector.
I think they just haven't really got to grips with
how sort of mb AS, the agency responsible for that
sort of stuff, would go about it. Other countries have
set up, for instance, the National Center for AI and
(11:16):
Australia to really push that along. The UK is going
big on that, as is the us SO question Mike
over that, particularly when we don't really have a strong
digital strategy at the moment. There is other stuff that
is happening that is useful. The AI Forum put out
their Blueprint for AI in r Tauro last week, so
(11:37):
I think that's good and they suggested a handful of
industries we should really focus on for AI. So and
maybe that's the more appropriate place for that to come from,
which is them to tell government, if you really want
to help us, this is the areas you should focus on.
Another interesting report out last week from the Institute of
(11:57):
Directors really useful guide for governing AI boards and business
leaders actually incorporating it into their existing frameworks for governance
rather than trying to create a whole new one. So
there's pragmatic stuff. There's a lot of good stuff actually
happening in New Zealand. It's probably not happening quickly enough.
(12:17):
To enable what we need to make the most of
this technology. But in some ways it's good that we're
just not under public pressure or some need to do
something jumping straight to regulation that may not be fit
for purpose down to track.
Speaker 5 (12:31):
Yeah it's a slow start, but it's a start.
Speaker 1 (12:34):
Now. Open banking quietly arrived officially on May thirty, with
our four big banks now required to run secure channels
to third parties such as FinTechs and online retailers, allowing
customer account and transaction data to be shared.
Speaker 2 (12:49):
It's a real milestone for the fintech sector, which is
looking at the huge profitability of our big banks and
seeing ample scope. It takes some market share, if not
in the core business of taking deposits and issuing loans,
at least in the financial services that wrap around the banks,
such as online payments.
Speaker 1 (13:07):
We've been slow to join the open banking party. Other
countries are frankly way ahead, but finally been we seem
to have progress on open banking APIs or application programming interfaces,
with the Big four playing ball and Kiwi Bank also
set to join the open banking regime from twenty twenty six.
Speaker 5 (13:28):
Yeah, it's coming.
Speaker 2 (13:29):
It's finally kind of here in a way, it's really
relying on the Consumer Product Bill which was recently read
before it actually gets into force legislatively. But Payments in
New Zealand and its API center have actually been doing
quite a good job at pushing ahead with the kind
of with the legislation there in the in the background,
(13:52):
saying it's coming, so let's get working on it now.
And they're the ones that have set these timeframes just
for the big four banks moment, but they do have
about a ninety five percent share of the market in
New Zealand, so it's pretty pretty dominant anyway.
Speaker 1 (14:07):
So take us through this ben there are a whole
bunch of startups out there that are just chomping at
the bit to get hold of customer data from banks
in an accessible format that allows them to do what exactly.
What are some of these companies and what are the
sorts of services they're looking to jump on the open
(14:28):
banking bandwagon to deliver to kiwis.
Speaker 2 (14:30):
You've got the likes of blink pay, who we're going
to speak to Adrian Smith shortly from blink pay quick Pay.
They similar to blink pay, where they are a payments provider,
so they can allow merchants to quickly and easily take
payments directly from people's bank accounts using an API. You've
got the likes of Akoho, So they're open banking, but
(14:53):
they are actually not actually using APIs at the moment.
You'll hear a bit about that from Josh Daniel in
the conversation. They use an older form of open banking
called screen scraping, which is a little bit controversial. And
then you've got the likes of Pocketsmith. They help with budgeting.
They provide you with insight into your bank accounts so
you can see you where your money's being spent, and
(15:15):
you can set budgets for things and do all kinds
of clever stuff. So while it sounds kind of boring
and dull and kind of like what's the point of
it all, the reality is is that the banks have
a huge amount of your data. This is data that
is about you, about the stuff that you have been
spending money on.
Speaker 1 (15:34):
We've sort of got Stockholm syndrome. I think in New Zealand.
We've been told that, you know, you need to have
a stable banking system, so they cane us on fees,
but at least it's a stable system and your bank
isn't going to collapse and take all your money. But
the consequence of that is we just haven't seen the
innovation in new services. It's not until you go to
Singapore or China or even a UK and you go,
(15:57):
my god, look at the diversity of players. They are
bigger markets, but just the sorts of services that they're
offering a lot of them at based, very accessible convenience
services that we just don't really have here. And I
think that's when people realize, wow, we're so far behind
in New Zealand. We were ahead with f poss and
that in the eighties, but we have slipped behind. So
(16:21):
that's what we definitely need to address. That's what the
legislation is aimed at. So here's Ben's interview with a
car who's Josh Daniel and Blink Pays Adrian Smith. Who
are really going to articulate for us exactly what the
promises of open banking.
Speaker 2 (16:43):
Kyodo, Hello, welcome to the Business of Tech Josh and Adrian.
Speaker 5 (16:47):
How's it going well, Kyoder?
Speaker 2 (16:49):
Very good, good, Thank you so much for joining us.
So you guys are both on the third party provider side,
of this open banking progression that we've been slowly pushing
towards over the last several years. So do you want
to just very quickly give us a quick bit of
information about what your companies do, Adrian, Oh.
Speaker 4 (17:12):
Yeah, absolutely, So blink pay we position ourselves as a
paytech because that was the first thing that has been
building open banking standards in the payment initiation APIs. But
now the account information APIs are coming along, we're going
to be repositioning ourselves as an integration player. And last
so not too the similar to the work that are
coding with Josh and Josh ok.
Speaker 3 (17:31):
Yeah. So Kahu is an open finance intermediary. We focus
our work on the New Zealand market only, so we
provide data integrations with New Zealand banks and other financial
service providers. So what we do is enable people building
consumer products to use a single API for access to
(17:51):
those data integrations. And then there are other parts of
our service that do things like transaction and Richmond other
things like that that we think that at the Ushalaya.
Speaker 2 (18:01):
Cool, thanks so much. So API actually is what we're
going to be starting a conversation with. So the technically
it stands for Application Programming Interface, I believe. But what
that basically means is it's a piece of software that
allows two different pieces of software to.
Speaker 5 (18:16):
Share data kind of freely.
Speaker 2 (18:18):
That's an oversimplification obviously, but that's kind of been the
main focus, I guess in recent times for open banking.
On May thirty we saw one standard come in for APIs.
We've got another one coming in November. So the May
thirty one was about payments. So what has that offered
in terms of capability for people who can plug into
(18:41):
those APIs.
Speaker 4 (18:42):
Yes. So one of the really cool things about the
Open Banking Paymentiation APIs is if you're connected to a
third party, like a payment gateway, you can enable your
customers to pay directly buy from their own bank accounts
and you know, as an alternative means to using cards
to make those payments in the e commerce space. And
as a consequence, because we're going outside of the card
(19:05):
scheme rails, the cost profile is materially lower than if
you're going by the card schemes. And I'm sure we
all recently saw that paper from ComCom that highlighted that
Bees and MasterCard charge about ninety five billion annually in
card payments and for the tune of about a billion
dollars in fees. So the open banking standard and the
fee structures with the banks are materially lower than that,
(19:26):
and so we have the opportunity and ability to offer
the everyday kiwis in New Zealanders a lower price point
in order to process payments and not go into debt
for that.
Speaker 5 (19:35):
Got cha, Josh, anything to add to that.
Speaker 3 (19:38):
I guess just to set the scene a little more,
a car who operates with unregulated forms of open banking
for the last three and a half years. We launched
because we felt that the regulation was coming soon and
it's taken longer than we expected. But the idea was,
let's get things moving and evolve into the purpose built
(20:00):
regulation which looks like is coming in New Zealand. So
what we do is provide data and payment connectivity. And
we have over fifty customers that made from governments, corporates
to FinTechs, and that's a range of enduring data consents,
one off data consents, and enduring payment consents. The only
(20:20):
thing we don't do is a one off payment consent.
So this first release on the thirtieth of May from
the Big four Banks is a one off payment consent API,
which is the only functionality that we don't provide, So
this first release wasn't relevant to us that looking a
head to the next release on thirtieth November, which was
a one off and enduring data consent API, that is
(20:43):
where for the Big four banks, their first release will
enable functionality for we think at least six of our
customers depending on what gets delivered in that release, out
of the optional functionality.
Speaker 2 (20:56):
So what does that mean the data that it's going
to be accessible? What is this transaction data that's supposedly
so useful?
Speaker 3 (21:05):
So I think that the canonical example in New Zealand
is zero, where if you use zero, you want your
transaction data to be hooked up into the accounting software
and you don't want to manually import it each time
you want to do bank reconciliation and zero. So there's
a whole lot of dasy use cases like that where
you as a consumer might want to grant access to
(21:26):
some third party service. So some of the common ones
are budgeting tools. So if you allow your data to
automatically flow in, a historical budget can be automatically generated
and then you can extrapolate that forward to make budgeting
more accessible and easier to tract to. You could do
nit worth tracking, which basically aggregates the balances of your
(21:48):
financial accounts and allows you to see that high level
view of how you're tracking over time accounting and text
as a really common one. One that's been in the
news recently is Prosaic, which has a tool for business
owners to find tax deductible expenses and then make it
easier to similar to claim to IID. So all of
these use cases require financial data. That's the customer's data,
(22:12):
and what open banking does is make it autable or
easily portable. And that could be a one off access
to a third party, or it could be an ongoing
access which people are familiar with from accounting software or
personal finance software.
Speaker 2 (22:26):
So that's kind of where we're at. But I think
it's also worth mentioning that this is only for the
big four.
Speaker 5 (22:31):
Banks at the moment.
Speaker 2 (22:33):
There are many banks across New Zealand, although I think
it's what is it, ninety five percent of the population
are covered by those big four, so it's a big swath.
But then we're also seeing some laggards and I guess. Also,
the question is with these API timeframes that we've got
May and then November and then maybe another six months
(22:55):
or the next one, is that getting us where we
need to be quick enough is leaving provision for other
banks to kind of slowly catch up. Does that make
sense as well?
Speaker 4 (23:06):
So the big four banks, depending on your definition, they
have anywhere from eighty five to ninety percent of the
bank to New Zealand populace. And from our perspective, for
any network to work and feed on through the platform revolution,
it's all our network effects. And in our case in
New Zealand, ninety nine percent of New Zealand is a bank.
And so for a network to really take off, obviously
having the full major banks is a really good starting point.
(23:27):
But actually we want everyone to be included and involved,
right because the value of a network comes from its participants.
So I remember when I was at university, I was
one of the first mugs to get a mobile phone
and have I guess how many people like a call?
No one, I was the only one, so that netwok
wasn't worth crack then, But then fast forwards, today everyone's
in a smartphone, right, so the more people on the network,
the more valuable it becomes. And so for us, that's
(23:48):
a pretty interesting point. And I think the other really
interesting point around major banks and sort of the other
banks and laggards is one of the really interesting things
that we've observed in the Zealand context is all it
takes for one major provider API provider to not want
to participate and it can nobble the whole thing because
when you go out and you speak to in our
(24:09):
case we're B to B two C, so we're other businesses.
We talk to them, we saill say, hey, this new thing,
it's magic du du da and they say, oh, well
call us from the Big four on and you're like, ah, okay,
well we're trying. And so that's part of the challenge
is that's the first objection always raised ball us in
the Big four on right, because as a business you
(24:31):
can understand the perspective. I don't want to have to
only get a partial solution if I'm going to commit
time of resources to a thing.
Speaker 3 (24:37):
I think we need to acknowledge that in the current environment,
there is nothing compelling the banks to offer API services
to third parties. It is voluntary, and there is regulation
coming that will compel data holders to provide these services,
but at the moment there is nothing. So if we
waited for the slowest bank to be part of this,
(25:00):
it just wouldn't happen until there is regulation. So if
you think about this from a consumer's perspective, the upgrade
that is coming from these purpose built APIs. The main
upgrade is that you can authenticate directly with your bank
and grant the consent there rather than doing that authentication
via a third party. And so we don't actually need
(25:21):
all the banks to have these services available to start
getting the benefits. Even if one bank is ready and
you can switch that customer across to the purpose built API,
those customers of that bank will have a better experience.
So we can do this on a bank by bank basis,
and for each bank integration you just upgrade to the
best API that is available, so it makes it okay
(25:44):
to do this in an editative way. I think the
thing we need to be in mind, though, is that
the functionality that these APIs do can only deliver to
so many use cases, and so we shouldn't expect this
thirty May release in the standing November release to change
the world because the functionality that's available is not at
parasy with what's a market already. So there are some
(26:07):
use cases that will not be able to migrate, yet
they will come at a later stage when iterations on
those APIs have been delivered. So we always try to
just be sober about expectations because we can't expect a
whole lot to take off if the APIs themselves can't
deliver everything that's in market already.
Speaker 4 (26:27):
Yeah. So if I could just respond to that and
challenge that the statement of the wouldn't happen, which is
a bit of an absolute statement, because I'm happy to
report that as of this afternoon we signed the last
of the big four major banks.
Speaker 2 (26:41):
Congratulations on the commercial agreement.
Speaker 4 (26:43):
Yeah. So there's a scuttle but that it requires regulation
to get this done, and that's how it worked in
the other jurisdictions I know where I did this. In
the UK, the regulator says, you nine go together, play nice.
If you don't, we'll beach out. Okay, fine, And so
it's been different not having that regulatory stick to move
every and along. So, as Josh alluded to, right, there's
going to be folks in the caravan to move slower
(27:05):
than others, and if you're trying to do it together,
it's pretty hard to do it if they are slower members.
But what I would say at all that, though, is
we got there without the regulatory stick. It may not
as been as quicker or as easy it would have liked,
but we've got them there.
Speaker 5 (27:19):
I mean, yes, you did in a way.
Speaker 2 (27:21):
But I would say that the banks have known that
there was the regulatory stick hovering just out of frame
for some time. So while that the stick wasn't necessarily
descending fast, it definitely may have been in their peripheral.
Speaker 4 (27:35):
Oh absolutely, And I'm pretty certain that's what's managed because
like the thirty may date, setting that to the side,
like as a thing, what it did was it meant
the four major banks all arrived at that date pretty
much at the same time. So one of the reasons
why we've been pretty quiet the last six seven weeks
is because we've been doing four integrations and four commercial negotiations.
It's been quite the to do. But having that line
(27:59):
in the sand caused a reaction and a response which
has actually been I think going to be net beneficial
once everyone starts to join in and get involved.
Speaker 2 (28:06):
Now so does that make you then does that make
Blink Pay the first third party outside of Worldline, which
has had them for some time to have API agreements
with all four of the big banks.
Speaker 4 (28:19):
Yes, that's correct. Although what I would say though, is
in this scenario, Worldline are the to AKNA and the
to a kind of ten relation, we are the juniors,
like Full Credit. They spent seven or eight years getting
the four major banks right, and I can understand the
concern of hey, this is this is ever going to happen,
and so we've got them there in three and so
we feel very fortunate to have done so, and we
(28:41):
think because of industry efforts as well as regularly oversight,
even though there hasn't been a really hard push, that's
allowed us to get there at less than half the
time that wild One got there.
Speaker 2 (28:51):
Great, let's talk a little bit now about I guess
what you referred to before, Josh as a unregulated open banking,
and I think the common parlance for it is screen scraping, right,
which is where you have a tool that can access
a bank account on behalf of a customer, and it
(29:12):
can read the information on that online banking and then
make changes et cetera, et cetera. The benefits that are
from that, and it's something that was talked a little
bit about in the Australian Open Banking Palava, which will
cover shortly, but it is that it's it's free, There
are no transaction fees, no any other kind of fees
(29:32):
that go.
Speaker 5 (29:33):
With it, and it seems to work.
Speaker 2 (29:35):
And there is a conversation maybe about how secure it
actually is, but there have been people have pointed out
there have been no major breaches due to screen scraping,
So why then do we need APIs if we have
a functional, serviceable approach.
Speaker 3 (29:54):
Now, yeah, it's a good question, and I guess to
give context to the uptake.
Speaker 4 (29:59):
You know, in New.
Speaker 3 (30:00):
Zealand there are more than a million kiwis that would
use in a form of unregulated open banking or screen
scraping process in a product every year, and it's similar
in other countries where there are products that use those processes.
The major drawbacks of the current methods is that, first
of all, to create the connection between bank account and
(30:22):
the third party service, you have to share your log
in credentials with a third party and that is clearly suboptimal.
You shouldn't have to do that in order to create
the connection, so that is the major upgrade. The second
important point is that with purpose built APIs you can
clearly define the scope of access that you want to
share with a third party. So those are two upgrades
(30:44):
we're going to get from purpose built APIs through the
regulatory regime or voluntary APIs that become available. But I
do think it is an autumn like this whole open
banking regulation movement has come about because of all of
the other forms of open banking that have had products
built on them for the last twenty years. So without
(31:05):
Mint dot Com in the US, without Zero and New Zealand,
without a clear show of consumer demand, we wouldn't have
had this move towards open banking regulation. And the way
I see it, like obviously all this current activity should
have migrate into the regulated system when it can, but
we do need to make the most of what has
(31:26):
been done to date to see what functionality there is
demand for and it use as a benchmark for whether
the regulated system is at parracy or doing the job
it needs to. In Australia, there's been a whole lot
of recent debate brought on by an Australian Banking Association
study about what has happened in Australian's version of regulated
(31:47):
open banking and the uptake over there, and the uptake
there hasn't been great. There hasn't been a lot of
migration from the unregulated forms into the regulated system, and
we want to avoid that in New Zealand. We want
to make sure that our regulated system is designed so
that it is compelling to use that system instead, so
that those consumer benefits are it.
Speaker 2 (32:08):
So how do we do that, agrim maybe you went
away in here. How do we make it so that
a system that is essentially more expensive becomes more attractive?
Speaker 4 (32:20):
We'll see the level of expense isn't actually been determined
because the access to the data action function. None of
the major banks have actually set the stall out around pricing,
and so as a precedent when the UK did open banking,
the bank's aid all the costs. Because let's think about
this logically, underneath the customer product Data bill and the
consumer data right whereby this is my data? Like, are
(32:42):
you going to charge me to access my data?
Speaker 1 (32:45):
Huh?
Speaker 4 (32:46):
That doesn't seem to stack up logically, and so I'd
be curious to see which way Minister Bailey and NBG
with all of this in terms of any cost profile,
because suddenly you've got your cost to get your data
from banking and then electricity and then telco and the
insurance and everyone who gets designated, and you then run
into the issues of the quality right and ten tility
Like if there'll be some socioeconomic groups I'm Maldy, so
(33:07):
I'm gonna be quite sympathetic who may not be able
to access their own data because they can't afford it.
So there's some social economic issues that play there and
titility issues. But coming back to the question around kind
of how do we get this to work? I think
one of the challenges we have we've seen the screen scraping,
and this is part of my previous experience in another
world in the UK is I would be at a
(33:29):
big major bank and i would see a screen scraper
come in and then I'd see all of the audit
logs just delete it and I'd have no idea what
they did. Clueless, I was like, what the hell has
happened here? And I would then look at it and like, well,
I don't know what the permitted purpose was, but the
amount of data that's been sort of deleted from our
logs suggested they've gone way beyond what was the original
(33:49):
permissions and authorizations for that. And so that kind of
stuff really gave me a difficult sense of can I
can I get comfortable with this? And so I spoke to
some of these young bankcine this happened in Britain. Do
you guys have that have it today? I? Oh, why
don't we talk about that? And there's various reasons and
logical other banks don't talk about that. So there are
aspects of that. And so for me, it's analogous to like, Okay,
(34:11):
I've just met you, here's the key to my house.
You're going to do that one thing and then lock up.
But then I don't know if they're rummaging through my
drawls and such. So I just can't get comfortable that
kind of as as an approach. And so and then
there's the other issue right where okay, then the regulated
version of things, the bank has to keep the consent
and you need to be no, no, what is the
concent this transparency of what it's for for how long?
(34:33):
What purpose? And you can go edit or a ment
or delete the consent at the bank or at the
third party within the screen scraping process, it'll be down
to the third party alone for that consent. And then
I don't know how many people actually know what they've
signed up to where they can go to don any
of the things that the CPD bill is going to
bring in.
Speaker 2 (34:50):
So should there be an attempt to regulate out screen
scraping once we do get the regulation come in around
data sharing?
Speaker 4 (35:00):
View? Right, I keep on talking about an orderly exodus
screen scrapping. To Josh's point, right, there are certain capabilities
in market today that is superior to what the standards
bringing in initially. And as the saying goes right, necissity
is the mother of invention, and the fact that a
million keys have engaged with these services suggests that there's
demand for it. There's linked to demand. Well, there's actual
demand for that. And so to Josh's point, which I
(35:22):
agree with, it's like, well, we can't just cut them off,
but we need to find some way to say, Look,
as we've got secure and stable and supporting methods that
allow people to access these data services in order to
do really cool things to help them be better off,
we then need to unwind the other things that aretas
stable and un and secure. So I guess that's my
view on that is, if we could have an exit
from the unsupported sort of means to do the supported means,
(35:45):
they'd be really good because I think I don't know
if you unsaw the first three of the CPD bill
where Minister Bailey spoke around banks have to get better
at making sure there's no impersonated access people coming in
and doing stuff like that seemed like a pretty strong
signal that he's putting up he's sending out a caller
cutting off to the screen scrapers that he's going to
do something about or he's going to get someone else
do something about that soon.
Speaker 2 (36:06):
Yeah, and how does that sit with you, Josh, being
you know, as you have relied on these Owen regulated
methods for some time.
Speaker 3 (36:15):
Look, we'd love to use purpose built APIs instead, and
the sooner that can happen, the better. So we support
the Customer Product Data Bill that Adri mentioned before, which
is the Consumer Data Right regime that New Zealand is developing.
We offered to banks to build APIs for them so
(36:35):
that they could do authentication in their own environment. We
do everything we can to bring about this world faster.
So yes, we definitely support that, but in my view,
we need to keep the market pressure to show demand
and it's incumbent on the data holders to come up
to speed with where the market's at rather than lose
the innovation and competition that has been driven by the
(36:58):
market over the last twenty years. So yep, I'm up
for an orderly transition at the right time and light
with the iterative approach to rolling out purpose built APIs.
It should walk hand in hand with that because more
and more use cases should be able to transition as
new iterations of the APIs are rolled out. You know,
(37:19):
in the UK it took a while for uptake of
the open banking regime and certainly the same in Australia.
I think New Zealand's going to be much faster for
a couple of reasons. One is that we've got both
read and write access probably in scope from day one,
which is for example, not the case in Australia where
it's just read access. And the second major one is
(37:40):
that the Customer Product Data bill is really well designed.
We truly have taken the lessons from the UK and
Australia and other developing regimes around the world, and an
argue that consumer Data Right regime in New Zealand as
a stands today, it's going to be great. We're excited
to use it and we think we'll bet be able
to migrate a lot of our traffic early on, which
(38:03):
will show success in the early years, which is what
we really want. We need to make the cost benefit
of this regulation worth it, and we think there is
a good chance of that at the New Zealand region.
Speaker 2 (38:20):
One kind of trump card that some people like to
pull out quite often is like mortgages. You know, the
open banking comes up and they go but mortgages, and
expect people to go, yeah, you're right, let's forget open banking.
Maybe maybe I'm exaggerating, but the argument is that you know,
people have mortgages with their banks, that this makes them
(38:40):
really sticky, so open banking isn't going to increase competition anyway,
and that mortgages are actually the key fundamental profit center
for financial services. So financial service like you guys, you
know you're not actually going to be able to make
any money from what you're doing. I compete with the
(39:01):
banks in the future do you want to kind of
talk to a little bit about the influence of mortgages
of this, the power they have over consumers, and the
whether that is a fair statement.
Speaker 3 (39:15):
Yeah, so yeah. I think there are a few things
in there, and one that I'd like to seize out
is this idea around bank switching, and I think a
lot of people conflate bank switching with open banking. I
think a lot of people get ideas around bank switching
from the talco industry, where the idea is you really
only want one number. Banking is different. It's okay to
(39:37):
have ten accounts, and if you move to a new
financial product at a different provider, it's okay to leave
your transactional banking with the provider you're already with. When
it comes to mortgages, one of the things that's been
happening over the last decade in New Zealand is an
increase in proportion of mortgages that are originated via brokers,
and as that has increased to now more than sixty percent,
(40:01):
there's an increased likelihood that the customer will switch the
provider of that home line because they're less weirdded to
just signing up with whatever is offered by the bank
that they mostly interact with. So if we just really
quickly go through how homeland process looks for an applicant
right now, most people on average are going to a
(40:23):
broken so they'll have a discussion. They'll be sent a
link to use screen scraping to simplify the application process
and fetch or clase all the financial data for the application.
The broker will then assess it, provide some advice if
the applicant wants to. That broker will then send out
that financial data, usually over email, to a bunch of lenders.
(40:46):
People on the other end will get that data. They'll
spend hours going through it, come up with a view
on yes no. Here are the terms of yes, back
through the broker and back to the applicant. So with
open banking, it definitely improves that it should be more
secure and easier for the applicant to do the application form,
(41:07):
it should be easier for the broker to digitally interact
with the lenders, and the lenders should be getting machine
readable data that they can then process automatically or at
least more automatically than they currently do. Along that whole chain,
there are improvements that open banking should bring to make
the whole process of refinancing you're playing for a loan
(41:30):
easier for an applicant, which should and decrease the inertia
of movement.
Speaker 2 (41:35):
So it's not just then it's a little bit more
complicated than saying, well, people have their mortgages with X bank.
You know, your point is that under open banking that
actually becomes a lot more fluid that yes, they might
have a mortgage with the bank, but by being able
to kind of have a service that will say, hey,
you've got your mortgage with this bank, do you want
us to check around and see what else there is,
(41:56):
that could start to actually increase competition and put pressure
on the market.
Speaker 3 (42:00):
That's exactly right. And so if you're able to port
your data to another provider and say what can you
do for me, and that's a simple process, then you
should be able to switch products easily. Does it mean
you need to switch banks or wherever you have your
payment set up or wherever you receive your income. It's
the other products that may be more important, and it
should be easy to compare and switch those.
Speaker 2 (42:22):
And what about the idea of profitability that you know,
mortgages are the only way really that banks make most
of their money, and that offering financial services that don't
include hefty amounts of interest on loans isn't going to
be a profitable future for a company agent.
Speaker 4 (42:40):
The way banking works apologies that I'm teaching you on
a stuck eggsit right is banks are really preoccupied with
net interest marginal nimbs and so you know, quick explainer,
deposit in, give you tiny bit of interest, lend it out,
charge a lot of interest, and neet the difference net
interest margins. That's what they do and that's been the
banking model for hundreds of years. And when you look
(43:02):
at the New Zealand banks, you see that typically the
retail banks have a n them of about two point one percent.
Some of the clever ones have taken very particular views
on markets, like for instance, Heartland's net interests manage about
eight percent. But that's what they're doing. That's what they
used to. They used to making money off of interest,
and then they used to they also make money for
things like a fees and charges. And when I was
at Barkleys, we used to refer to that as like
(43:23):
bad income. We didn't want to make money from overdraft
charges and unplaned overdrafts and interest on all of that
sort of stuff. And so whilst banks still make moneys
in those ways and that's still the most profitable path
to banking, there's still opportunity though, because as we are
all aware right, last year the New Zealand banks that
are owned by Australia there was about seven point two
billion New Zealand dollars in profits, So there's, you know,
(43:45):
there's a pretty sizable pie out there. There's things that
can be done over and above just interest generated from
mortgage accounts. And as we're all aware right, if you're
getting in deposits into your bank accounts that you're giving
tiny interest on, those are the most cheapest forms of
capital and the world, which is why banks are very
keen for you to put money and deposit your salary
into their bank. So you have these tier one banks
(44:07):
who have a slightly insolent advantage of this size and scale,
which is hard to replicate if you don't have the
size and scale. But having settled that, there are other
ways to generate income if you can create value added
services that you can charge for. So one of the
things we're really excited about within the open banking regime
and APIs is the stuff we do at the moment
is foundational stuff. But eventually, when we've got this common
(44:28):
foundational layer that everyone can build upon, then you can
start to think about, well, what are the premium APIs
the kind of proprietary, bespoke things that Josh is talking
about that could then really generate value, like we're actually
solving a problem that's valuable that people are willing to
pay for. And so one of the things around the
mortgage example is and this is something that Minister Bailey
called out earlier on this week, is in Australia you
(44:49):
can get a mortgage and they basically as part of
that process they then access with your consent or your ID,
they then access your primary account. They then run a
full bity assessments on everything in there, they get all
transactional industry they need in order to then arrive at
a lending decision in minutes. And so that's the kind
of premium API you know from banking will eventually unlock
file toy and all. And I'm here for that. Let's go.
Speaker 2 (45:12):
I mean I think as well, it's worth noting that
a UK fintech Revolute. They just got approved as a
bank in the UK, I think it was as of
today or yesterday, and they were hundreds of millions of
dollars a year in profit and they haven't got mortgages yet,
so you know, I think there is a piece of
evidence there that we can point to.
Speaker 5 (45:33):
That's our time.
Speaker 2 (45:34):
Unfortunately, I could talk about open banking for hours, but
we do have to wrap up. So thank you so
much to Josh and Adrian for joining us and giving
us a bit of insight into what's going on leisure.
Speaker 3 (45:44):
Thanks foraming us.
Speaker 4 (45:45):
Yeah, absolutely, I reckon we could have gone on for
another couple of hours because I don't know if you've urdosed,
but Josh and I have some fairly pointed views, not
always aligned, but at least we're in the tent trying
to do something, unlike others who are outside the tent
lobbing stones and name names. But part of the reason
why the CPD bill is so important is the recent
data breach by Squirrell says, Hey, this is why this
(46:07):
stuff's important, guys, Let's get some regulation in it.
Speaker 1 (46:12):
So Ben, A big takeaway for me from that discussion
is the existing banking system when it comes to mortgages,
which you asked about. You know, I sort of thought,
you know, when you get a mortgage that sort of
locks you into a bank, and then you do your
savings and maybe your shared trading, and that's through your
bank because it's the most efficient way to do it.
(46:34):
But the reality is is that mortgage brokers account for
something like sixty percent of what new mortgages signed. So
there's this whole layer of third parties that are interacting
with the banks and the ability for them to gain
access to your transaction history, your account information massively going
(46:56):
to speed up that process. And then if you can
put that information into hand of financial advisors as well,
and maybe the rise of robo advice, which is feared
by artificial intelligence, suddenly you've got a lot of kiwis
who may see a lot of benefit and dealing with
third parties and allowing the financial data to be existed.
Speaker 2 (47:19):
Yeah, you know, we are talking about a country in
which there was a whole generation or two who when
they turned to certain age asb rolled up to their
school and said that no, give us five bucks and
we'll start you a bank account, and they never bothered
to change like that. I mean that was a massively
successful campaign for them. I was one of those kids,
and it was only by dint of my restlessness that
(47:42):
I think that I ended up leaving ASB.
Speaker 5 (47:44):
I went to National Bank.
Speaker 2 (47:46):
National Bank got eaten up by A and Z and
I wanted to not be with an Australian bank basically,
so I left again. Like you say, this lock in
that we have, this inertia that we have to moving
about is real. But with a tool like this, and
with an increasingly digitally savvy population, we can start to
(48:06):
see things become easy. I always talk about the benefit
of user interface and user experience. If you can make
something easy for people, that is when you start to
see drastic change. That's what the iPhone was all about.
That's what Zero is all about. It's what all of
these amazing companies have been all about. And I truly
think that with the advent of these APIs, with these
(48:27):
really forward thinking FinTechs who are on the cutting edge
of technology and really agile and able to make things
work for their audiences, I truly think that as long
as things are accessible and affordable, it will start to
see some drastic change that will create a more equal
playing field of people, will give people better budgeting tools,
(48:51):
will give people better access to lending that is less
predatory because they may not just google personal loan and
go with the first person and that pops up. That's
my hope, Like, that's what I would like to think anyway,
and I.
Speaker 5 (49:06):
Think that you know that.
Speaker 2 (49:07):
Hopefully Adrian and Josh would agree with me, but there
are probably a.
Speaker 5 (49:11):
Lot of people who would disagree with me.
Speaker 1 (49:13):
What does it mean? They talked about read access as
well as right access, and this includes right access which
apparently the Australian regime doesn't. So presumably read ACXISS means
you can look at account information and transaction history and
that sort of thing. Does writing it mean that you
can do something in say a dash app or something
(49:33):
like that, and then that's reflected back in someone's bank
account with one of the Big four.
Speaker 2 (49:38):
Yeah, they can kind of, I guess, make transactions on
your behalf using your bank account, which could be good
for your budgeting apps, right, because if you want to
pocketsmith or something that is able to read all of
your transaction data and say, don't let me spend more
than fifteen bucks a week on coffee or at cafes
(49:58):
and then you your pocket Smith card. But that's you
don't have to worry about topping up a wallet into
Pocketsmith to actually enact that. It can all be kind
of done more simply.
Speaker 1 (50:10):
That's great, and I could see it eventually super wraps
emerging for financial services where they become the interface for
my chers e's, my bank account, my hatch, whatever else
I'm using, and I do it all through one interface
rather than going to separate apps, and maybe it gives
me some intelligence around what is my overall financial health
(50:34):
or investment health looking at, rather than having to go
from chers E's to ASB to what's my key we
savior doing. Having all of that in one place that
would be really powerful.
Speaker 2 (50:45):
Yeah. Basically anything you do with a spreadsheet like is
what you can hopefully get automated with open banking.
Speaker 5 (50:52):
That's kind of how I like to think of it.
Speaker 1 (50:54):
Yeah, and these two guys seem really upbeat about this.
It's not like what happened in Australia.
Speaker 4 (51:01):
You know.
Speaker 1 (51:01):
They say that we've learned from that. We've got quite
an effective regime that's been outlined here. So they seem
quite upbeat on what the prospects are over the coming
years for open banking in New Zealand.
Speaker 2 (51:15):
Yeah, I think everybody is pretty upbeat about it. Like
if you go to the Customer and Product Data Bill
first reading the transcript and so you look at the
Andrew Bellies comment and he says, the question is who
supports the bill? Well, honestly basically everyone, which I think.
Speaker 5 (51:32):
Is really true.
Speaker 2 (51:33):
You scroll down and you've got Labor, Greens, Acts to
Party Maori that're all supportive of this bill. And although
you know it's a different extent and with different perspectives
around competition and about data sovereignty and all these kinds
of things, they all recognize that enabling consumers to have
(51:53):
access and control of their own data is going to
be a net good at the end of the day.
Speaker 1 (51:59):
Great bring it on and good luck to blink, pay
a carhoo dash all of them. Because we do know
already that the fintech sector is a big revenue spinner
and most of that is probably zero is counted and that,
but this is a big sector, you know, best part
of a billion dollars already. And as those two guests
(52:19):
pointed out, banking is seriously profitable in New Zealand, so
there is market share to be claimed there, there are
fees to be taken out of the system and lowered,
so it's not as though they're cannibalizing and in dussery
that's doing it tough. You know, there's a lot of
fat there to be eaten away, so credit to them.
That's where innovation and disruption will really come into its own.
Speaker 5 (52:42):
Absolutely.
Speaker 2 (52:43):
Yep. Well that's it for the Business of Tech this week.
Thank you to Adrian Smith from blink pay and Josh
Daniel from Alcohou for filling us in on the practicalities
and potential of open banking.
Speaker 5 (52:55):
We'll keep a close eye on that sector as the
regime develops.
Speaker 1 (52:58):
The Business of Tech is on all may do podcast
platforms as well as iHeartRadio, where you can stream every episode.
Show notes are in the Tech section on the Business
Desk website. Leave us a review and share it with
your friends and colleagues.
Speaker 2 (53:12):
Get in touch with feedback, ideas, topics and guest suggestions.
You can email me Ben at business apps dot co
dot NZAD. We'll find both of us on LinkedIn and x.
Speaker 1 (53:21):
You'll find the next episode of the Business of Tech
in your podcast app. Bright and early next Thursday, we'll
catch you there.
Open banking is here, or at least the first real
version of it, with New Zealand's four biggest banks and
zed ASB B and Z and Westpac now required to
share the customer's data with trusted third parties with the
customer's authorization.
Speaker 2 (00:15):
Of course, it promises to open up innovation in everything
from faster, more convenient retail and e commerce payments to
new budgeting and investment apps.
Speaker 1 (00:24):
It could take a lot of hassle out of the
process of applying for a loan or mortgage, but.
Speaker 2 (00:28):
Will open banking really unlock the competition our highly concentrated
and vastly profitable banking sector needs.
Speaker 1 (00:36):
This week on the Business of Tech powered by two
Degrees Business, we took to two entrepreneurs on the frontlines
of open banking, hoping to take advantage of regulatory changes
to increase choice and competition in financial services.
Speaker 3 (00:49):
And the UK, it took a while for uptake off
the open banking regime and certainly the same in Australia.
I think New Zealand's going to be much faster. The
customer product data built was really well designed and an
our view as a stands today is going to be great.
Speaker 4 (01:04):
Eventually woman that was comin foundation later that everyone can
build upon and you can start thinking about, well, what
of the care you make the lines that could really
generate value, Like we're actually solving a problem that's value where.
Speaker 5 (01:16):
People are willing to pay for more on open banking.
Speaker 2 (01:19):
Coming up with our featured guests Blink Pays, Adrian Smith
and AKA Who's Josh Daniel shortly, but.
Speaker 1 (01:25):
First we look at some of the big tech stories
making headlines this week, and we start with Harold Tech
editor Chris Keel's Tech Insider piece very interesting about Soul
Machines are really promising, New Zealand's startup founded by Greg
Cross and Mark Sagar. And just as a bit of background,
Soul Machines came up with what they call it a
(01:47):
digital brain. This was Mark Saga who came out of
where a digital So the idea was to take this
incredible intelligence they created and use it to feed digital
avatars that could have really sensible conversations in a customer
service context. So we saw a lot of pilot projects
(02:07):
pop up with the likes of A and Z and
Mercedes bend And in New Zealand, and it appears as
though both those founders, Greg cross Mark Sager are actually
gone from Soul Machines.
Speaker 2 (02:20):
Bin Yeah, operationally and the directorship. They've both stepped back.
They're on an advisory role now, whatever you want to
make of that. If you are adjacent to the industry
as we are, you're kind of would have been hearing
these rumblings around Soul Machines for some time now that
it seems to have been struggling to find its feet
(02:43):
in the new world of AI. And that's kind of
what Chris Keel's story goes into the details of what
actually seems to have happened there. The question is that
people are asking is whether they were kind of disrupted
by generative AI, or whether they the tech was actually
more flash than bang, whether it actually seemed like it
(03:04):
was going to be really valuable to a lot of
consumers but ultimately just wasn't really what people were looking
for or weren't ready for.
Speaker 1 (03:11):
Perhaps, and I was sort of expecting by now we
would be interacting with these digital avatars which you can
actually see rather than just talk to, like Siri or Alexa.
I thought they'd be everywhere now, but they're not. And
in the intervening few years since Solar Machines really got
going on these digital avatars. We've seen the rise of
(03:34):
generative AI, which Solar Machines has embraced. So they are
using chat GPT to power some of their sort of
off the shelf bots that you can buy relatively cheaply
to run your customer service. The big question mark is
over the digital brain technology. Is it too expensive, is
it too cumbersome to use? Is it actually still valuable?
(03:58):
And it may well be, but so Machines appear to
be running out of money. You wrote a story this
week looking at the financial statements. They've got cash and
TERMB deposits of twelve point three million dollars with net
cash outflows of thirty eight point one million for the
year ending March thirty one.
Speaker 2 (04:17):
Yeah, that was last year, twenty twenty three, So that
was what they had then and it's been twelve months
since then. That that's probably why they've reduced their head
count from two hundred and fifty three to seventy in
that time.
Speaker 1 (04:29):
And we haven't heard anything about a significant new injection
of funding, have we?
Speaker 5 (04:34):
No?
Speaker 2 (04:35):
No, And again in that in Chris Kill's article he
talks about them potentially it looks like they've tried to
whether that was not as successful as they hoped, or
whether they couldn't quite get that off the ground, it's
not really obvious to us what actually happened. So yeah,
keeping an eye on things, and hopefully we'll hear something
a little more detailed from either the company's new CEO
(04:57):
or somebody soon, because they're keeping their cards very close
to their chest at the moment.
Speaker 1 (05:03):
I'd love to see this company really succeed in its
original mission, which sounded fantastic and drew on some great technology,
and they've put a lot of work into this all
the way since twenty sixteen, I think when they set
out on this venture. But is this unfortunately going to
be a victim of this disruptive generative AI revolution where
(05:26):
things that were very expensive and complex to create with
suddenly with natural language processing and large language models and
training those models, you can arrive at something as good
for a fraction of the price. That's the concern.
Speaker 2 (05:41):
You also have to look at just the cost to
open AI of training those models. It's billions of dollars,
and did zull Machine ever have those kinds of Microsoft
level pockets to be able to do something that would
ever challenge that level. They didn't really, but yeah, it
(06:03):
is difficult to know how big the general audience is
for face to face chatbots. Like I struggle to see
the value. And I was speaking to a former podcast guest,
Tim Warren the other day about this, and one of
the things he said to me, it's difficult when you're
facing a generation that doesn't even want to pick up
the phone and have a call to try and convince
(06:24):
them to have conversations with digital people.
Speaker 1 (06:27):
Yeah. And we were at an event with the Amazon
Australia New Zealand people last week and I was asking
one of them when to Genai sort of coming to
the Alexa, and they said, it is coming, you know,
watch out, it's not far away. So that will be
the big test. I think at the moment they're not
very useful those voice assistants really for anything other than
(06:50):
asking what the weather is or what's in my calendar.
But if they can use those large language models to
deliver much more lifelike and an intuitive answers to less
structured questions, that will be a game changer. But do
I need a digital representation of a person on a
screen fronting that for me personally. No, maybe millennials and
(07:14):
gen z don't give us stuff about that. They just
want to get a really good answer to their question,
and if it's speaking into their phone, they're happy to
do it.
Speaker 5 (07:23):
Yeah.
Speaker 2 (07:23):
And the other thing I guess is that you know,
there was a lot of hype for the metaverse that
some machines tried to ride there for a while, but
unfortunately that was a hype train without rails and didn't
gat very far.
Speaker 1 (07:37):
Yeah. Looking a bit more broadly at AI, interesting report
from Judith Collin's office as the Minister of Science, Technology
and Innovation starting to give us a little bit of
an idea as to where she is directing the government
to take artificial intelligence, both from a regulation point of view,
(07:58):
but also trying to promote update offen.
Speaker 2 (08:01):
Yeah, they proactively released a cabinet paper that Judith Collins
submitted basically talking about how she wants to try and
get New Zealand using AI. A big part of it
for the private industry is that she they basically want
to say, don't be stressed about future regulations.
Speaker 5 (08:19):
You can go and start playing now.
Speaker 2 (08:21):
We're going to take a light touch regulation and if
anything crops up outside of the current legal frameworks.
Speaker 5 (08:26):
Then we'll address that when it happens.
Speaker 2 (08:28):
So maybe that will have the intended effect and get
people a little bit more excited to dive in and
use it. I don't know if anybody was sitting there
with their finger hovering over a button just waiting for
the regulatory nod from government or not, but maybe they were.
Speaker 1 (08:45):
So this really carries on to theme I think from
the National Party and then with Judith Collins as sort
of Technology Minister and really passionate about AI light touch,
risk based approach to AIG, which is what the EU
has done, but what will happen here nowhere near is prescriptive?
(09:05):
That makes sense to me, but there's just a lot
of gray areas in our privacy law and our copyright law,
and what she's basically saying is where existing legislation can
deal with this, we will build on that if things
need to be tweaked, but we're not really looking at
(09:26):
a whole new regime which some countries and the European
Union have actually gone and introduced. So she's signaling very
much we're not going to be as heavy handed on that.
I guess the other thing the paper flags is a
role for GCD government chief Digital Officer who we had
on the show back last year. Paul James is in
(09:47):
that role at the moment. She's basically signaling to that office,
we need to get the ball rolling here. You're going
to coordinate things across government when it comes to the
uptake of AI.
Speaker 4 (10:00):
Yep.
Speaker 2 (10:00):
She refers to strong leadership as needed, and I guess
she is putting her faith in Paul James to be
that strong leader and to maybe establish a strong leadership
team as well hopefully that can get together and do this.
She wants to get all the different portfolios to basically
come back and offer some ideas about how they could
(10:22):
potentially use artificial intelligence to improve the public services that
they offer, and then put those together and create a
cross portfolio working group headed by the Chief Digital Officer
to start getting that together basically to start thinking about
how they could possibly integrate some AI to improve public services.
(10:45):
So it's a start, you know, it is a start,
and hopefully it doesn't end up in bureaucratic quagmire.
Speaker 1 (10:53):
Yeah, relatively little in there about how to really jump
start use of AI across the economy in a private sector.
I think they just haven't really got to grips with
how sort of mb AS, the agency responsible for that
sort of stuff, would go about it. Other countries have
set up, for instance, the National Center for AI and
(11:16):
Australia to really push that along. The UK is going
big on that, as is the us SO question Mike
over that, particularly when we don't really have a strong
digital strategy at the moment. There is other stuff that
is happening that is useful. The AI Forum put out
their Blueprint for AI in r Tauro last week, so
(11:37):
I think that's good and they suggested a handful of
industries we should really focus on for AI. So and
maybe that's the more appropriate place for that to come from,
which is them to tell government, if you really want
to help us, this is the areas you should focus on.
Another interesting report out last week from the Institute of
(11:57):
Directors really useful guide for governing AI boards and business
leaders actually incorporating it into their existing frameworks for governance
rather than trying to create a whole new one. So
there's pragmatic stuff. There's a lot of good stuff actually
happening in New Zealand. It's probably not happening quickly enough.
(12:17):
To enable what we need to make the most of
this technology. But in some ways it's good that we're
just not under public pressure or some need to do
something jumping straight to regulation that may not be fit
for purpose down to track.
Speaker 5 (12:31):
Yeah it's a slow start, but it's a start.
Speaker 1 (12:34):
Now. Open banking quietly arrived officially on May thirty, with
our four big banks now required to run secure channels
to third parties such as FinTechs and online retailers, allowing
customer account and transaction data to be shared.
Speaker 2 (12:49):
It's a real milestone for the fintech sector, which is
looking at the huge profitability of our big banks and
seeing ample scope. It takes some market share, if not
in the core business of taking deposits and issuing loans,
at least in the financial services that wrap around the banks,
such as online payments.
Speaker 1 (13:07):
We've been slow to join the open banking party. Other
countries are frankly way ahead, but finally been we seem
to have progress on open banking APIs or application programming interfaces,
with the Big four playing ball and Kiwi Bank also
set to join the open banking regime from twenty twenty six.
Speaker 5 (13:28):
Yeah, it's coming.
Speaker 2 (13:29):
It's finally kind of here in a way, it's really
relying on the Consumer Product Bill which was recently read
before it actually gets into force legislatively. But Payments in
New Zealand and its API center have actually been doing
quite a good job at pushing ahead with the kind
of with the legislation there in the in the background,
(13:52):
saying it's coming, so let's get working on it now.
And they're the ones that have set these timeframes just
for the big four banks moment, but they do have
about a ninety five percent share of the market in
New Zealand, so it's pretty pretty dominant anyway.
Speaker 1 (14:07):
So take us through this ben there are a whole
bunch of startups out there that are just chomping at
the bit to get hold of customer data from banks
in an accessible format that allows them to do what exactly.
What are some of these companies and what are the
sorts of services they're looking to jump on the open
(14:28):
banking bandwagon to deliver to kiwis.
Speaker 2 (14:30):
You've got the likes of blink pay, who we're going
to speak to Adrian Smith shortly from blink pay quick Pay.
They similar to blink pay, where they are a payments provider,
so they can allow merchants to quickly and easily take
payments directly from people's bank accounts using an API. You've
got the likes of Akoho, So they're open banking, but
(14:53):
they are actually not actually using APIs at the moment.
You'll hear a bit about that from Josh Daniel in
the conversation. They use an older form of open banking
called screen scraping, which is a little bit controversial. And
then you've got the likes of Pocketsmith. They help with budgeting.
They provide you with insight into your bank accounts so
you can see you where your money's being spent, and
(15:15):
you can set budgets for things and do all kinds
of clever stuff. So while it sounds kind of boring
and dull and kind of like what's the point of
it all, the reality is is that the banks have
a huge amount of your data. This is data that
is about you, about the stuff that you have been
spending money on.
Speaker 1 (15:34):
We've sort of got Stockholm syndrome. I think in New Zealand.
We've been told that, you know, you need to have
a stable banking system, so they cane us on fees,
but at least it's a stable system and your bank
isn't going to collapse and take all your money. But
the consequence of that is we just haven't seen the
innovation in new services. It's not until you go to
Singapore or China or even a UK and you go,
(15:57):
my god, look at the diversity of players. They are
bigger markets, but just the sorts of services that they're
offering a lot of them at based, very accessible convenience
services that we just don't really have here. And I
think that's when people realize, wow, we're so far behind
in New Zealand. We were ahead with f poss and
that in the eighties, but we have slipped behind. So
(16:21):
that's what we definitely need to address. That's what the
legislation is aimed at. So here's Ben's interview with a
car who's Josh Daniel and Blink Pays Adrian Smith. Who
are really going to articulate for us exactly what the
promises of open banking.
Speaker 2 (16:43):
Kyodo, Hello, welcome to the Business of Tech Josh and Adrian.
Speaker 5 (16:47):
How's it going well, Kyoder?
Speaker 2 (16:49):
Very good, good, Thank you so much for joining us.
So you guys are both on the third party provider side,
of this open banking progression that we've been slowly pushing
towards over the last several years. So do you want
to just very quickly give us a quick bit of
information about what your companies do, Adrian, Oh.
Speaker 4 (17:12):
Yeah, absolutely, So blink pay we position ourselves as a
paytech because that was the first thing that has been
building open banking standards in the payment initiation APIs. But
now the account information APIs are coming along, we're going
to be repositioning ourselves as an integration player. And last
so not too the similar to the work that are
coding with Josh and Josh ok.
Speaker 3 (17:31):
Yeah. So Kahu is an open finance intermediary. We focus
our work on the New Zealand market only, so we
provide data integrations with New Zealand banks and other financial
service providers. So what we do is enable people building
consumer products to use a single API for access to
(17:51):
those data integrations. And then there are other parts of
our service that do things like transaction and Richmond other
things like that that we think that at the Ushalaya.
Speaker 2 (18:01):
Cool, thanks so much. So API actually is what we're
going to be starting a conversation with. So the technically
it stands for Application Programming Interface, I believe. But what
that basically means is it's a piece of software that
allows two different pieces of software to.
Speaker 5 (18:16):
Share data kind of freely.
Speaker 2 (18:18):
That's an oversimplification obviously, but that's kind of been the
main focus, I guess in recent times for open banking.
On May thirty we saw one standard come in for APIs.
We've got another one coming in November. So the May
thirty one was about payments. So what has that offered
in terms of capability for people who can plug into
(18:41):
those APIs.
Speaker 4 (18:42):
Yes. So one of the really cool things about the
Open Banking Paymentiation APIs is if you're connected to a
third party, like a payment gateway, you can enable your
customers to pay directly buy from their own bank accounts
and you know, as an alternative means to using cards
to make those payments in the e commerce space. And
as a consequence, because we're going outside of the card
(19:05):
scheme rails, the cost profile is materially lower than if
you're going by the card schemes. And I'm sure we
all recently saw that paper from ComCom that highlighted that
Bees and MasterCard charge about ninety five billion annually in
card payments and for the tune of about a billion
dollars in fees. So the open banking standard and the
fee structures with the banks are materially lower than that,
(19:26):
and so we have the opportunity and ability to offer
the everyday kiwis in New Zealanders a lower price point
in order to process payments and not go into debt
for that.
Speaker 5 (19:35):
Got cha, Josh, anything to add to that.
Speaker 3 (19:38):
I guess just to set the scene a little more,
a car who operates with unregulated forms of open banking
for the last three and a half years. We launched
because we felt that the regulation was coming soon and
it's taken longer than we expected. But the idea was,
let's get things moving and evolve into the purpose built
(20:00):
regulation which looks like is coming in New Zealand. So
what we do is provide data and payment connectivity. And
we have over fifty customers that made from governments, corporates
to FinTechs, and that's a range of enduring data consents,
one off data consents, and enduring payment consents. The only
(20:20):
thing we don't do is a one off payment consent.
So this first release on the thirtieth of May from
the Big four Banks is a one off payment consent API,
which is the only functionality that we don't provide, So
this first release wasn't relevant to us that looking a
head to the next release on thirtieth November, which was
a one off and enduring data consent API, that is
(20:43):
where for the Big four banks, their first release will
enable functionality for we think at least six of our
customers depending on what gets delivered in that release, out
of the optional functionality.
Speaker 2 (20:56):
So what does that mean the data that it's going
to be accessible? What is this transaction data that's supposedly
so useful?
Speaker 3 (21:05):
So I think that the canonical example in New Zealand
is zero, where if you use zero, you want your
transaction data to be hooked up into the accounting software
and you don't want to manually import it each time
you want to do bank reconciliation and zero. So there's
a whole lot of dasy use cases like that where
you as a consumer might want to grant access to
(21:26):
some third party service. So some of the common ones
are budgeting tools. So if you allow your data to
automatically flow in, a historical budget can be automatically generated
and then you can extrapolate that forward to make budgeting
more accessible and easier to tract to. You could do
nit worth tracking, which basically aggregates the balances of your
(21:48):
financial accounts and allows you to see that high level
view of how you're tracking over time accounting and text
as a really common one. One that's been in the
news recently is Prosaic, which has a tool for business
owners to find tax deductible expenses and then make it
easier to similar to claim to IID. So all of
these use cases require financial data. That's the customer's data,
(22:12):
and what open banking does is make it autable or
easily portable. And that could be a one off access
to a third party, or it could be an ongoing
access which people are familiar with from accounting software or
personal finance software.
Speaker 2 (22:26):
So that's kind of where we're at. But I think
it's also worth mentioning that this is only for the
big four.
Speaker 5 (22:31):
Banks at the moment.
Speaker 2 (22:33):
There are many banks across New Zealand, although I think
it's what is it, ninety five percent of the population
are covered by those big four, so it's a big swath.
But then we're also seeing some laggards and I guess. Also,
the question is with these API timeframes that we've got
May and then November and then maybe another six months
(22:55):
or the next one, is that getting us where we
need to be quick enough is leaving provision for other
banks to kind of slowly catch up. Does that make
sense as well?
Speaker 4 (23:06):
So the big four banks, depending on your definition, they
have anywhere from eighty five to ninety percent of the
bank to New Zealand populace. And from our perspective, for
any network to work and feed on through the platform revolution,
it's all our network effects. And in our case in
New Zealand, ninety nine percent of New Zealand is a bank.
And so for a network to really take off, obviously
having the full major banks is a really good starting point.
(23:27):
But actually we want everyone to be included and involved,
right because the value of a network comes from its participants.
So I remember when I was at university, I was
one of the first mugs to get a mobile phone
and have I guess how many people like a call?
No one, I was the only one, so that netwok
wasn't worth crack then, But then fast forwards, today everyone's
in a smartphone, right, so the more people on the network,
the more valuable it becomes. And so for us, that's
(23:48):
a pretty interesting point. And I think the other really
interesting point around major banks and sort of the other
banks and laggards is one of the really interesting things
that we've observed in the Zealand context is all it
takes for one major provider API provider to not want
to participate and it can nobble the whole thing because
when you go out and you speak to in our
(24:09):
case we're B to B two C, so we're other businesses.
We talk to them, we saill say, hey, this new thing,
it's magic du du da and they say, oh, well
call us from the Big four on and you're like, ah, okay,
well we're trying. And so that's part of the challenge
is that's the first objection always raised ball us in
the Big four on right, because as a business you
(24:31):
can understand the perspective. I don't want to have to
only get a partial solution if I'm going to commit
time of resources to a thing.
Speaker 3 (24:37):
I think we need to acknowledge that in the current environment,
there is nothing compelling the banks to offer API services
to third parties. It is voluntary, and there is regulation
coming that will compel data holders to provide these services,
but at the moment there is nothing. So if we
waited for the slowest bank to be part of this,
(25:00):
it just wouldn't happen until there is regulation. So if
you think about this from a consumer's perspective, the upgrade
that is coming from these purpose built APIs. The main
upgrade is that you can authenticate directly with your bank
and grant the consent there rather than doing that authentication
via a third party. And so we don't actually need
(25:21):
all the banks to have these services available to start
getting the benefits. Even if one bank is ready and
you can switch that customer across to the purpose built API,
those customers of that bank will have a better experience.
So we can do this on a bank by bank basis,
and for each bank integration you just upgrade to the
best API that is available, so it makes it okay
(25:44):
to do this in an editative way. I think the
thing we need to be in mind, though, is that
the functionality that these APIs do can only deliver to
so many use cases, and so we shouldn't expect this
thirty May release in the standing November release to change
the world because the functionality that's available is not at
parasy with what's a market already. So there are some
(26:07):
use cases that will not be able to migrate, yet
they will come at a later stage when iterations on
those APIs have been delivered. So we always try to
just be sober about expectations because we can't expect a
whole lot to take off if the APIs themselves can't
deliver everything that's in market already.
Speaker 4 (26:27):
Yeah. So if I could just respond to that and
challenge that the statement of the wouldn't happen, which is
a bit of an absolute statement, because I'm happy to
report that as of this afternoon we signed the last
of the big four major banks.
Speaker 2 (26:41):
Congratulations on the commercial agreement.
Speaker 4 (26:43):
Yeah. So there's a scuttle but that it requires regulation
to get this done, and that's how it worked in
the other jurisdictions I know where I did this. In
the UK, the regulator says, you nine go together, play nice.
If you don't, we'll beach out. Okay, fine, And so
it's been different not having that regulatory stick to move
every and along. So, as Josh alluded to, right, there's
going to be folks in the caravan to move slower
(27:05):
than others, and if you're trying to do it together,
it's pretty hard to do it if they are slower members.
But what I would say at all that, though, is
we got there without the regulatory stick. It may not
as been as quicker or as easy it would have liked,
but we've got them there.
Speaker 5 (27:19):
I mean, yes, you did in a way.
Speaker 2 (27:21):
But I would say that the banks have known that
there was the regulatory stick hovering just out of frame
for some time. So while that the stick wasn't necessarily
descending fast, it definitely may have been in their peripheral.
Speaker 4 (27:35):
Oh absolutely, And I'm pretty certain that's what's managed because
like the thirty may date, setting that to the side,
like as a thing, what it did was it meant
the four major banks all arrived at that date pretty
much at the same time. So one of the reasons
why we've been pretty quiet the last six seven weeks
is because we've been doing four integrations and four commercial negotiations.
It's been quite the to do. But having that line
(27:59):
in the sand caused a reaction and a response which
has actually been I think going to be net beneficial
once everyone starts to join in and get involved.
Speaker 2 (28:06):
Now so does that make you then does that make
Blink Pay the first third party outside of Worldline, which
has had them for some time to have API agreements
with all four of the big banks.
Speaker 4 (28:19):
Yes, that's correct. Although what I would say though, is
in this scenario, Worldline are the to AKNA and the
to a kind of ten relation, we are the juniors,
like Full Credit. They spent seven or eight years getting
the four major banks right, and I can understand the
concern of hey, this is this is ever going to happen,
and so we've got them there in three and so
we feel very fortunate to have done so, and we
(28:41):
think because of industry efforts as well as regularly oversight,
even though there hasn't been a really hard push, that's
allowed us to get there at less than half the
time that wild One got there.
Speaker 2 (28:51):
Great, let's talk a little bit now about I guess
what you referred to before, Josh as a unregulated open banking,
and I think the common parlance for it is screen scraping, right,
which is where you have a tool that can access
a bank account on behalf of a customer, and it
(29:12):
can read the information on that online banking and then
make changes et cetera, et cetera. The benefits that are
from that, and it's something that was talked a little
bit about in the Australian Open Banking Palava, which will
cover shortly, but it is that it's it's free, There
are no transaction fees, no any other kind of fees
(29:32):
that go.
Speaker 5 (29:33):
With it, and it seems to work.
Speaker 2 (29:35):
And there is a conversation maybe about how secure it
actually is, but there have been people have pointed out
there have been no major breaches due to screen scraping,
So why then do we need APIs if we have
a functional, serviceable approach.
Speaker 3 (29:54):
Now, yeah, it's a good question, and I guess to
give context to the uptake.
Speaker 4 (29:59):
You know, in New.
Speaker 3 (30:00):
Zealand there are more than a million kiwis that would
use in a form of unregulated open banking or screen
scraping process in a product every year, and it's similar
in other countries where there are products that use those processes.
The major drawbacks of the current methods is that, first
of all, to create the connection between bank account and
(30:22):
the third party service, you have to share your log
in credentials with a third party and that is clearly suboptimal.
You shouldn't have to do that in order to create
the connection, so that is the major upgrade. The second
important point is that with purpose built APIs you can
clearly define the scope of access that you want to
share with a third party. So those are two upgrades
(30:44):
we're going to get from purpose built APIs through the
regulatory regime or voluntary APIs that become available. But I
do think it is an autumn like this whole open
banking regulation movement has come about because of all of
the other forms of open banking that have had products
built on them for the last twenty years. So without
(31:05):
Mint dot Com in the US, without Zero and New Zealand,
without a clear show of consumer demand, we wouldn't have
had this move towards open banking regulation. And the way
I see it, like obviously all this current activity should
have migrate into the regulated system when it can, but
we do need to make the most of what has
(31:26):
been done to date to see what functionality there is
demand for and it use as a benchmark for whether
the regulated system is at parracy or doing the job
it needs to. In Australia, there's been a whole lot
of recent debate brought on by an Australian Banking Association
study about what has happened in Australian's version of regulated
(31:47):
open banking and the uptake over there, and the uptake
there hasn't been great. There hasn't been a lot of
migration from the unregulated forms into the regulated system, and
we want to avoid that in New Zealand. We want
to make sure that our regulated system is designed so
that it is compelling to use that system instead, so
that those consumer benefits are it.
Speaker 2 (32:08):
So how do we do that, agrim maybe you went
away in here. How do we make it so that
a system that is essentially more expensive becomes more attractive?
Speaker 4 (32:20):
We'll see the level of expense isn't actually been determined
because the access to the data action function. None of
the major banks have actually set the stall out around pricing,
and so as a precedent when the UK did open banking,
the bank's aid all the costs. Because let's think about
this logically, underneath the customer product Data bill and the
consumer data right whereby this is my data? Like, are
(32:42):
you going to charge me to access my data?
Speaker 1 (32:45):
Huh?
Speaker 4 (32:46):
That doesn't seem to stack up logically, and so I'd
be curious to see which way Minister Bailey and NBG
with all of this in terms of any cost profile,
because suddenly you've got your cost to get your data
from banking and then electricity and then telco and the
insurance and everyone who gets designated, and you then run
into the issues of the quality right and ten tility
Like if there'll be some socioeconomic groups I'm Maldy, so
(33:07):
I'm gonna be quite sympathetic who may not be able
to access their own data because they can't afford it.
So there's some social economic issues that play there and
titility issues. But coming back to the question around kind
of how do we get this to work? I think
one of the challenges we have we've seen the screen scraping,
and this is part of my previous experience in another
world in the UK is I would be at a
(33:29):
big major bank and i would see a screen scraper
come in and then I'd see all of the audit
logs just delete it and I'd have no idea what
they did. Clueless, I was like, what the hell has
happened here? And I would then look at it and like, well,
I don't know what the permitted purpose was, but the
amount of data that's been sort of deleted from our
logs suggested they've gone way beyond what was the original
(33:49):
permissions and authorizations for that. And so that kind of
stuff really gave me a difficult sense of can I
can I get comfortable with this? And so I spoke to
some of these young bankcine this happened in Britain. Do
you guys have that have it today? I? Oh, why
don't we talk about that? And there's various reasons and
logical other banks don't talk about that. So there are
aspects of that. And so for me, it's analogous to like, Okay,
(34:11):
I've just met you, here's the key to my house.
You're going to do that one thing and then lock up.
But then I don't know if they're rummaging through my
drawls and such. So I just can't get comfortable that
kind of as as an approach. And so and then
there's the other issue right where okay, then the regulated
version of things, the bank has to keep the consent
and you need to be no, no, what is the
concent this transparency of what it's for for how long?
(34:33):
What purpose? And you can go edit or a ment
or delete the consent at the bank or at the
third party within the screen scraping process, it'll be down
to the third party alone for that consent. And then
I don't know how many people actually know what they've
signed up to where they can go to don any
of the things that the CPD bill is going to
bring in.
Speaker 2 (34:50):
So should there be an attempt to regulate out screen
scraping once we do get the regulation come in around
data sharing?
Speaker 4 (35:00):
View? Right, I keep on talking about an orderly exodus
screen scrapping. To Josh's point, right, there are certain capabilities
in market today that is superior to what the standards
bringing in initially. And as the saying goes right, necissity
is the mother of invention, and the fact that a
million keys have engaged with these services suggests that there's
demand for it. There's linked to demand. Well, there's actual
demand for that. And so to Josh's point, which I
(35:22):
agree with, it's like, well, we can't just cut them off,
but we need to find some way to say, Look,
as we've got secure and stable and supporting methods that
allow people to access these data services in order to
do really cool things to help them be better off,
we then need to unwind the other things that aretas
stable and un and secure. So I guess that's my
view on that is, if we could have an exit
from the unsupported sort of means to do the supported means,
(35:45):
they'd be really good because I think I don't know
if you unsaw the first three of the CPD bill
where Minister Bailey spoke around banks have to get better
at making sure there's no impersonated access people coming in
and doing stuff like that seemed like a pretty strong
signal that he's putting up he's sending out a caller
cutting off to the screen scrapers that he's going to
do something about or he's going to get someone else
do something about that soon.
Speaker 2 (36:06):
Yeah, and how does that sit with you, Josh, being
you know, as you have relied on these Owen regulated
methods for some time.
Speaker 3 (36:15):
Look, we'd love to use purpose built APIs instead, and
the sooner that can happen, the better. So we support
the Customer Product Data Bill that Adri mentioned before, which
is the Consumer Data Right regime that New Zealand is developing.
We offered to banks to build APIs for them so
(36:35):
that they could do authentication in their own environment. We
do everything we can to bring about this world faster.
So yes, we definitely support that, but in my view,
we need to keep the market pressure to show demand
and it's incumbent on the data holders to come up
to speed with where the market's at rather than lose
the innovation and competition that has been driven by the
(36:58):
market over the last twenty years. So yep, I'm up
for an orderly transition at the right time and light
with the iterative approach to rolling out purpose built APIs.
It should walk hand in hand with that because more
and more use cases should be able to transition as
new iterations of the APIs are rolled out. You know,
(37:19):
in the UK it took a while for uptake of
the open banking regime and certainly the same in Australia.
I think New Zealand's going to be much faster for
a couple of reasons. One is that we've got both
read and write access probably in scope from day one,
which is for example, not the case in Australia where
it's just read access. And the second major one is
(37:40):
that the Customer Product Data bill is really well designed.
We truly have taken the lessons from the UK and
Australia and other developing regimes around the world, and an
argue that consumer Data Right regime in New Zealand as
a stands today, it's going to be great. We're excited
to use it and we think we'll bet be able
to migrate a lot of our traffic early on, which
(38:03):
will show success in the early years, which is what
we really want. We need to make the cost benefit
of this regulation worth it, and we think there is
a good chance of that at the New Zealand region.
Speaker 2 (38:20):
One kind of trump card that some people like to
pull out quite often is like mortgages. You know, the
open banking comes up and they go but mortgages, and
expect people to go, yeah, you're right, let's forget open banking.
Maybe maybe I'm exaggerating, but the argument is that you know,
people have mortgages with their banks, that this makes them
(38:40):
really sticky, so open banking isn't going to increase competition anyway,
and that mortgages are actually the key fundamental profit center
for financial services. So financial service like you guys, you
know you're not actually going to be able to make
any money from what you're doing. I compete with the
(39:01):
banks in the future do you want to kind of
talk to a little bit about the influence of mortgages
of this, the power they have over consumers, and the
whether that is a fair statement.
Speaker 3 (39:15):
Yeah, so yeah. I think there are a few things
in there, and one that I'd like to seize out
is this idea around bank switching, and I think a
lot of people conflate bank switching with open banking. I
think a lot of people get ideas around bank switching
from the talco industry, where the idea is you really
only want one number. Banking is different. It's okay to
(39:37):
have ten accounts, and if you move to a new
financial product at a different provider, it's okay to leave
your transactional banking with the provider you're already with. When
it comes to mortgages, one of the things that's been
happening over the last decade in New Zealand is an
increase in proportion of mortgages that are originated via brokers,
and as that has increased to now more than sixty percent,
(40:01):
there's an increased likelihood that the customer will switch the
provider of that home line because they're less weirdded to
just signing up with whatever is offered by the bank
that they mostly interact with. So if we just really
quickly go through how homeland process looks for an applicant
right now, most people on average are going to a
(40:23):
broken so they'll have a discussion. They'll be sent a
link to use screen scraping to simplify the application process
and fetch or clase all the financial data for the application.
The broker will then assess it, provide some advice if
the applicant wants to. That broker will then send out
that financial data, usually over email, to a bunch of lenders.
(40:46):
People on the other end will get that data. They'll
spend hours going through it, come up with a view
on yes no. Here are the terms of yes, back
through the broker and back to the applicant. So with
open banking, it definitely improves that it should be more
secure and easier for the applicant to do the application form,
(41:07):
it should be easier for the broker to digitally interact
with the lenders, and the lenders should be getting machine
readable data that they can then process automatically or at
least more automatically than they currently do. Along that whole chain,
there are improvements that open banking should bring to make
the whole process of refinancing you're playing for a loan
(41:30):
easier for an applicant, which should and decrease the inertia
of movement.
Speaker 2 (41:35):
So it's not just then it's a little bit more
complicated than saying, well, people have their mortgages with X bank.
You know, your point is that under open banking that
actually becomes a lot more fluid that yes, they might
have a mortgage with the bank, but by being able
to kind of have a service that will say, hey,
you've got your mortgage with this bank, do you want
us to check around and see what else there is,
(41:56):
that could start to actually increase competition and put pressure
on the market.
Speaker 3 (42:00):
That's exactly right. And so if you're able to port
your data to another provider and say what can you
do for me, and that's a simple process, then you
should be able to switch products easily. Does it mean
you need to switch banks or wherever you have your
payment set up or wherever you receive your income. It's
the other products that may be more important, and it
should be easy to compare and switch those.
Speaker 2 (42:22):
And what about the idea of profitability that you know,
mortgages are the only way really that banks make most
of their money, and that offering financial services that don't
include hefty amounts of interest on loans isn't going to
be a profitable future for a company agent.
Speaker 4 (42:40):
The way banking works apologies that I'm teaching you on
a stuck eggsit right is banks are really preoccupied with
net interest marginal nimbs and so you know, quick explainer,
deposit in, give you tiny bit of interest, lend it out,
charge a lot of interest, and neet the difference net
interest margins. That's what they do and that's been the
banking model for hundreds of years. And when you look
(43:02):
at the New Zealand banks, you see that typically the
retail banks have a n them of about two point one percent.
Some of the clever ones have taken very particular views
on markets, like for instance, Heartland's net interests manage about
eight percent. But that's what they're doing. That's what they
used to. They used to making money off of interest,
and then they used to they also make money for
things like a fees and charges. And when I was
at Barkleys, we used to refer to that as like
(43:23):
bad income. We didn't want to make money from overdraft
charges and unplaned overdrafts and interest on all of that
sort of stuff. And so whilst banks still make moneys
in those ways and that's still the most profitable path
to banking, there's still opportunity though, because as we are
all aware right, last year the New Zealand banks that
are owned by Australia there was about seven point two
billion New Zealand dollars in profits, So there's, you know,
(43:45):
there's a pretty sizable pie out there. There's things that
can be done over and above just interest generated from
mortgage accounts. And as we're all aware right, if you're
getting in deposits into your bank accounts that you're giving
tiny interest on, those are the most cheapest forms of
capital and the world, which is why banks are very
keen for you to put money and deposit your salary
into their bank. So you have these tier one banks
(44:07):
who have a slightly insolent advantage of this size and scale,
which is hard to replicate if you don't have the
size and scale. But having settled that, there are other
ways to generate income if you can create value added
services that you can charge for. So one of the
things we're really excited about within the open banking regime
and APIs is the stuff we do at the moment
is foundational stuff. But eventually, when we've got this common
(44:28):
foundational layer that everyone can build upon, then you can
start to think about, well, what are the premium APIs
the kind of proprietary, bespoke things that Josh is talking
about that could then really generate value, like we're actually
solving a problem that's valuable that people are willing to
pay for. And so one of the things around the
mortgage example is and this is something that Minister Bailey
called out earlier on this week, is in Australia you
(44:49):
can get a mortgage and they basically as part of
that process they then access with your consent or your ID,
they then access your primary account. They then run a
full bity assessments on everything in there, they get all
transactional industry they need in order to then arrive at
a lending decision in minutes. And so that's the kind
of premium API you know from banking will eventually unlock
file toy and all. And I'm here for that. Let's go.
Speaker 2 (45:12):
I mean I think as well, it's worth noting that
a UK fintech Revolute. They just got approved as a
bank in the UK, I think it was as of
today or yesterday, and they were hundreds of millions of
dollars a year in profit and they haven't got mortgages yet,
so you know, I think there is a piece of
evidence there that we can point to.
Speaker 5 (45:33):
That's our time.
Speaker 2 (45:34):
Unfortunately, I could talk about open banking for hours, but
we do have to wrap up. So thank you so
much to Josh and Adrian for joining us and giving
us a bit of insight into what's going on leisure.
Speaker 3 (45:44):
Thanks foraming us.
Speaker 4 (45:45):
Yeah, absolutely, I reckon we could have gone on for
another couple of hours because I don't know if you've urdosed,
but Josh and I have some fairly pointed views, not
always aligned, but at least we're in the tent trying
to do something, unlike others who are outside the tent
lobbing stones and name names. But part of the reason
why the CPD bill is so important is the recent
data breach by Squirrell says, Hey, this is why this
(46:07):
stuff's important, guys, Let's get some regulation in it.
Speaker 1 (46:12):
So Ben, A big takeaway for me from that discussion
is the existing banking system when it comes to mortgages,
which you asked about. You know, I sort of thought,
you know, when you get a mortgage that sort of
locks you into a bank, and then you do your
savings and maybe your shared trading, and that's through your
bank because it's the most efficient way to do it.
(46:34):
But the reality is is that mortgage brokers account for
something like sixty percent of what new mortgages signed. So
there's this whole layer of third parties that are interacting
with the banks and the ability for them to gain
access to your transaction history, your account information massively going
(46:56):
to speed up that process. And then if you can
put that information into hand of financial advisors as well,
and maybe the rise of robo advice, which is feared
by artificial intelligence, suddenly you've got a lot of kiwis
who may see a lot of benefit and dealing with
third parties and allowing the financial data to be existed.
Speaker 2 (47:19):
Yeah, you know, we are talking about a country in
which there was a whole generation or two who when
they turned to certain age asb rolled up to their
school and said that no, give us five bucks and
we'll start you a bank account, and they never bothered
to change like that. I mean that was a massively
successful campaign for them. I was one of those kids,
and it was only by dint of my restlessness that
(47:42):
I think that I ended up leaving ASB.
Speaker 5 (47:44):
I went to National Bank.
Speaker 2 (47:46):
National Bank got eaten up by A and Z and
I wanted to not be with an Australian bank basically,
so I left again. Like you say, this lock in
that we have, this inertia that we have to moving
about is real. But with a tool like this, and
with an increasingly digitally savvy population, we can start to
(48:06):
see things become easy. I always talk about the benefit
of user interface and user experience. If you can make
something easy for people, that is when you start to
see drastic change. That's what the iPhone was all about.
That's what Zero is all about. It's what all of
these amazing companies have been all about. And I truly
think that with the advent of these APIs, with these
(48:27):
really forward thinking FinTechs who are on the cutting edge
of technology and really agile and able to make things
work for their audiences, I truly think that as long
as things are accessible and affordable, it will start to
see some drastic change that will create a more equal
playing field of people, will give people better budgeting tools,
(48:51):
will give people better access to lending that is less
predatory because they may not just google personal loan and
go with the first person and that pops up. That's
my hope, Like, that's what I would like to think anyway,
and I.
Speaker 5 (49:06):
Think that you know that.
Speaker 2 (49:07):
Hopefully Adrian and Josh would agree with me, but there
are probably a.
Speaker 5 (49:11):
Lot of people who would disagree with me.
Speaker 1 (49:13):
What does it mean? They talked about read access as
well as right access, and this includes right access which
apparently the Australian regime doesn't. So presumably read ACXISS means
you can look at account information and transaction history and
that sort of thing. Does writing it mean that you
can do something in say a dash app or something
(49:33):
like that, and then that's reflected back in someone's bank
account with one of the Big four.
Speaker 2 (49:38):
Yeah, they can kind of, I guess, make transactions on
your behalf using your bank account, which could be good
for your budgeting apps, right, because if you want to
pocketsmith or something that is able to read all of
your transaction data and say, don't let me spend more
than fifteen bucks a week on coffee or at cafes
(49:58):
and then you your pocket Smith card. But that's you
don't have to worry about topping up a wallet into
Pocketsmith to actually enact that. It can all be kind
of done more simply.
Speaker 1 (50:10):
That's great, and I could see it eventually super wraps
emerging for financial services where they become the interface for
my chers e's, my bank account, my hatch, whatever else
I'm using, and I do it all through one interface
rather than going to separate apps, and maybe it gives
me some intelligence around what is my overall financial health
(50:34):
or investment health looking at, rather than having to go
from chers E's to ASB to what's my key we
savior doing. Having all of that in one place that
would be really powerful.
Speaker 2 (50:45):
Yeah. Basically anything you do with a spreadsheet like is
what you can hopefully get automated with open banking.
Speaker 5 (50:52):
That's kind of how I like to think of it.
Speaker 1 (50:54):
Yeah, and these two guys seem really upbeat about this.
It's not like what happened in Australia.
Speaker 4 (51:01):
You know.
Speaker 1 (51:01):
They say that we've learned from that. We've got quite
an effective regime that's been outlined here. So they seem
quite upbeat on what the prospects are over the coming
years for open banking in New Zealand.
Speaker 2 (51:15):
Yeah, I think everybody is pretty upbeat about it. Like
if you go to the Customer and Product Data Bill
first reading the transcript and so you look at the
Andrew Bellies comment and he says, the question is who
supports the bill? Well, honestly basically everyone, which I think.
Speaker 5 (51:32):
Is really true.
Speaker 2 (51:33):
You scroll down and you've got Labor, Greens, Acts to
Party Maori that're all supportive of this bill. And although
you know it's a different extent and with different perspectives
around competition and about data sovereignty and all these kinds
of things, they all recognize that enabling consumers to have
(51:53):
access and control of their own data is going to
be a net good at the end of the day.
Speaker 1 (51:59):
Great bring it on and good luck to blink, pay
a carhoo dash all of them. Because we do know
already that the fintech sector is a big revenue spinner
and most of that is probably zero is counted and that,
but this is a big sector, you know, best part
of a billion dollars already. And as those two guests
(52:19):
pointed out, banking is seriously profitable in New Zealand, so
there is market share to be claimed there, there are
fees to be taken out of the system and lowered,
so it's not as though they're cannibalizing and in dussery
that's doing it tough. You know, there's a lot of
fat there to be eaten away, so credit to them.
That's where innovation and disruption will really come into its own.
Speaker 5 (52:42):
Absolutely.
Speaker 2 (52:43):
Yep. Well that's it for the Business of Tech this week.
Thank you to Adrian Smith from blink pay and Josh
Daniel from Alcohou for filling us in on the practicalities
and potential of open banking.
Speaker 5 (52:55):
We'll keep a close eye on that sector as the
regime develops.
Speaker 1 (52:58):
The Business of Tech is on all may do podcast
platforms as well as iHeartRadio, where you can stream every episode.
Show notes are in the Tech section on the Business
Desk website. Leave us a review and share it with
your friends and colleagues.
Speaker 2 (53:12):
Get in touch with feedback, ideas, topics and guest suggestions.
You can email me Ben at business apps dot co
dot NZAD. We'll find both of us on LinkedIn and x.
Speaker 1 (53:21):
You'll find the next episode of the Business of Tech
in your podcast app. Bright and early next Thursday, we'll
catch you there.
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