The Ministry of Business, Innovation and Employment (MBIE) is now consulting on the content of potential designation regulations under the Customer and Product Data Bill (the Bill) relating to the banking and the electricity sectors.
Background
The Bill, which supports the creation of a “consumer data right” in New Zealand, is working its way through the Select Committee process. The Bill creates a legislative framework that anticipates that data in certain sectors will be “designated” through regulations as being subject to the Bill. See our previous article that provides an overview of the Bill.
This latest announcement signals that MBIE is working though the next level of detail in seeking feedback on designation regulations relating to banking and electricity.
This comes hot on the heels of the publication by the Commerce Commission (Commission) of its final report into competition in the personal banking sector, which was released on 21 August 2024. One of the Commission’s key recommendations was that industry and the Government commit to ambitious milestones to ensure open banking is fully operational by June 2026. This consultation supports that ambitious timeline. See our previous article that provides an overview of the Commissions’ report.
What’s new
Banking
The banking sector has been the flagged by MBIE for a number of years as the first sector likely to be designated.
Banks and fintechs have been working on voluntary open banking for some time. Progress has been made, through the Payments NZ’s API Centre, on creating APIs to support the secure transfer of banking data and to enable payments to be made.
These activities would become regulated if a designation under the Bill came into effect. Under the current MBIE proposal, this would mean that the data holders (certain banks) would be required, with customer consent, to provide an accredited requestor (usually a fintech) access to data about that customer’s transactions (for example). The bank would also be required to provide data about their own products, such as term deposit rates.
The designation is intended to enable customers to obtain innovative new services, such as budgeting advice or product switching suggestions, and cheaper payment processing.
This consultation in relation to the banking sector seeks feedback on:
- the scope of the open banking designation regulations (including which entities and which data should be captured);
- the accreditation criteria that should be applied to accredited requestors of data (such as the technology companies who will use customer and product data to make product comparison and switching recommendations to customers, or provide payment processing services);
- appropriate fees and relevant standards (including the technical standards, such as the APIs) necessary for a functioning regime; and
- costs, benefits and risks associated with an open banking designation.
MBIE’s proposal on the scope of the banking designation captures ANZ, BNZ, ASB and Westpac beginning 1 December 2025, with Kiwibank coming in scope on 1 December 2026. It does not currently propose capturing other banks or deposit takers.
This scheme more realistically aligns with the progress that the various large banks have made, and have planned to make, towards open banking as captured through plans made through each bank’s participation in the API Centre. Kiwibank’s feedback to the Commission in relation to its markets study into personal banking was that Kiwibank (unlike the other big four) would not be able to meet the ambition of having open banking fully operational by June 2026, as to do so would distract from its important programme to transform its core banking system – an activity that it says is also necessary to support its ability to compete.
Unsurprisingly, MBIE proposes that designated banks be required to implement APIs that meet certain technical standards issued by the API Centre. This aligns with what MBIE has signalled for some time, that it will seek to adopt industry solutions if they are workable.
Electricity
Progress by the electricity sector, on the other hand, appears more nascent. MBIE has previously flagged (and most recently in the Bill itself) that the electricity sector was likely to be the next sector to be designated, after banking.
MBIE’s discussion paper indicates that this decision is driven by the fact that the price of electricity has been increasing and that therefore it is important that no customer is paying more than they need to, by not being on the best plan for their needs.
A customer and product data right in the electricity sector could, for example, enable a customer to obtain their usage data from their current electricity supplier, provide it to a comparison service, who could pull in product data from the various electricity suppliers, match the customer with the most appropriate plan and recommend or activate a switch to that supplier.
The consultation in relation to the electricity sector seeks feedback on:
- experiences in accessing consumer and product data in the electricity sector currently;
- the design of a consumer data right for electricity (including which data could be in scope, who could be designated data holders, and any actions that could be designated);
- the potential costs and benefits of an electricity sector designation, including for different types of consumers; and
- any other views on potential accreditation, consent, and standards development that could occur in an electricity designation.
MBIE says its preliminary thinking is that all electricity retailers would be designated as data holders. This means that, with customer consent, they would be required to provide customers or accredited requestors access to data about that customer’s electricity usage (for example). It also means that electricity retailers would be required to provide data about their own products to accredited requestors, such as tariff / pricing plans.
Assuming the decision to designate progresses, further consultation will be required in due course on the associated technical regulations and standards in relation to the electricity sector. MBIE notes that, if designated, the sector would be expected to come in scope in 2026.
Who should take an interest in this?
Although, initially, it is proposed by MBIE that only the four biggest banks and the electricity retailers will be designated, it seems likely that the regime will be extended to other banks and deposit takers, or other holders of data in the electricity sector, in due course.
It would, therefore, be in the interests of these potential data holders to input into this consultation, as it is likely to shape the regime that will impact them going forward.
There will be a compliance burden on designated data holders, and so calibrating the requirements appropriately will be important from their point of view.
Fintechs, as potential accredited requestors, will be paying particular attention to providing feedback on ensuring the scope is sufficiently broad to enable their use cases and on the nature of the accreditation criteria they will need to meet to be able to participate in the regulated regime.
Next steps
Anyone interested in providing feedback on the consultation should visit the MBIE website:
- Exploring a consumer data right for the banking sector | Ministry of Business, Innovation & Employment (mbie.govt.nz)
- Exploring a consumer data right for the electricity sector | Ministry of Business, Innovation & Employment (mbie.govt.nz)
Consultation on these two potential designations closes 5pm Thursday, 10 October 2024.
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