Neil Sands
The government is pushing legislation that enables open banking though Parliament under urgency, as new Commerce and Consumer Affairs Minister Scott Simpson pursues an ambitious timetable to introduce competition to the banking sector.
Simpson says he wants the Customer and Product Data Bill passed by the end of March, so that open banking can be fully operational by the end of the year. This is six months earlier than originally envisaged by the Commerce Commission.
“This is a transformative piece of legislation that has the potential to reshape our economy,” Simpson told this week’s FinTech NZ forum in Auckland.
“The legislation lays the foundation for ‘open banking’ and eventually ‘open electricity’, ‘open insurance’, ‘open telecommunications’ and more. The possibilities are immense.”
He took over the Commerce and Consumer Affairs portfolio last month after Andrew Bayly quit.
Simpson also said he was committed to continuing the comprehensive work program started by Bayly, which includes reviewing competitions law and the Companies Act, as well as financial services sector reform.
“I want to be clear that from a policy perspective it is full steam ahead and there is no intention to slow down or change direction,” he said.
Scott Simpson
Simpson said the government was “moving as fast as we can” on open banking and on Tuesday included the consumer data bill on a list of proposed laws that are being dealt with under urgency.
“Soon after the bill passes, we will be applying it on a sector-by-sector basis through regulations. Banking will be the first cab off the rank and my team is working with industry to develop the banking regulations.”
‘Common sense’
Open banking gives consumers greater control of their own data, making it easier to switch financial institutions or use services such as budgeting apps and comparison tools when looking for a better deal.
It will allow third parties such as fintechs to safely access consumer data, which is currently closely held by banks, so they can and offer services and provide comparisons by using customers’ actual data.
The goal is to involve smaller, nimble players into banking services so they can disrupt the oligopoly enjoyed by the Big Four bank – ANZ, Westpac, BNZ and ASB – which control about 80% of the market.
The Commerce Commission has pinned its hopes of introducing more competition into the banking sector on open banking, calling it a “game-changer”, although banks have been accused of dragging their feet on introducing the reform.
Just this week, former ANZ chief economist Cameron Bagrie told Parliament’s inquiry into banking competition: “You’ve got to turbo-charge open banking and it’s got to be government-led. It can’t be bank-led.”
Simpson said the Customer and Product Data Bill underpins the efforts to open up banking and other sectors by creating a “consumer data right”.
NZ First MP Tanya Unkovich, who was on the select committee which examined the bill, told Parliament during its second reading that consumers would have greater control over their own data.
“So they… [will] be able to hand everything over and say to someone else, ‘Please give me the information that I need so that I can make the decisions I need’. That is what this bill does. It’s common sense,” she said.
“It is about being able to have your data transferred safely to another organisation so that you can make decisions yourself with the right information.”
Overseas mistakes
Labour’s Helen White said the bill would remove hurdles for smaller players and ultimately benefit consumers.
“There has been a tendency of our big entities to hold information like this for anti-competitive purpose,” she said.
“So the little players, who come in and disrupt and do a good job of really challenging that competition and giving us cheaper prices, they couldn’t actually access the information they needed… [the bill means] the consumer gets the benefit of a system that was more open.
“That’s a really important difference in our society from perhaps 50 years ago. Information is flowing and when it stops flowing, when we have these kinds of anti-competitive actions, it’s the consumer who misses out.
“So it’s very important to things like the price of electricity, and it’s very important to the prices that we pay in our banks, our interest rates and all the fees we pay.”
Despite open banking’s potential to boost competition, consumers have proved reluctant to adopt it in markets such as the United Kingdom and Australia.
Simpson acknowledged the issue and urged fintechs at the Auckland forum to work with officials to help avoid the problems experienced overseas.
“I am conscious that open banking has the potential to over-promise and under-deliver and I know that uptake in other jurisdictions has been underwhelming,” he said.
“The single greatest benefit of being slow is that we can learn from others’ mistakes and there are some important differences in our approach compared to Australia, for example.
“But this doesn’t mean we have all the answers. For open banking to deliver on the promise of increased competition and greater consumer choice, we need your buy in… Let’s do it once and do it right.”
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