Commerce Commission calls for more innovation in payment options

  • Legal update

    23 February 2024

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The Commerce Commission issued an open letter to participants in New Zealand’s retail payments system yesterday, emphasising the lack of innovation to current payment options which would allow New Zealander’s to make payments quickly and securely between bank accounts.

A link to the media release can be found here and a copy of the open letter can be found here.

Who should read this? Why?

The open letter is directed to all those who participate in New Zealand’s retail payment system. It is likely to be of interest to registered banks, third party payment providers and businesses who operate in the interbank payment network, and consumers. 

What does it cover?

The letter comes after the Commerce Commission announced last year that it was looking at ways to remove barriers to allow more innovative API (application programming interface) enabled payment options between bank accounts. These new payment methods – called “open banking” – provide a new way for consumers to use their banking services for faster and cheaper payments.

The open letter represents the next phase of the Commerce Commission’s move toward enabling a thriving API-enabled payments ecosystem in New Zealand. The Commission had already observed a lack of innovation in payments between bank accounts – one of the cheapest forms of payment methods available - and noted that more efficient payment methods were needed to reduce reliance on third party payment providers, and costs associated with these methods. 

Alternative payment options between bank accounts, for example the use of QR codes or mobile applications, have already proven successful overseas and the Commission considered advances like this could be adopted in New Zealand. The Commission also noted that enabling more efficient payment options complemented the Government’s development of a consumer data right (CDR) regime.

The letter sets out the ways in which the Commission might consider use of its regulatory powers (e.g. by way of designation) to encourage and incentivise the payments industry to advance and deliver on open banking in New Zealand. The range of potential interventions that the Commission could utilise are set out in more detail in the letter, including setting expectations to drive industry behaviour in a particular way, to amending rules or setting regulations to impose additional requirements on the industry.

Our view

The landscape for payments in New Zealand (and globally) is evolving at a fast pace. New Zealand needs to continue to evolve its regulatory landscape and market participants need to work together to bring great user experiences to the public. We continue to work closely with fintech start-ups, international players and local financial institutions to help with this.

What’s next?

The Commerce Commission is clearly keen on progressing an API-enabled payments ecosystem and is concerned that the industry is not focussed on driving this forward in a timely manner. It plans to begin a formal consultation in the coming months on whether to recommend the interbank payment network for designation. We encourage those who are interested or affected by the open letter to keep an eye out for the consultation and make a submission to the Commission. If you have any questions, please contact one of our experts. 

This article was co-authored by William Ma, a Solicitor in our Banking and Financial Services team.