Open banking - what it means for New Zealand's financial services sector
At our recent financial services seminars held in Auckland and Wellington, we explored open banking and how its introduction may affect other participants in New Zealand’s financial services sector.
We had the opportunity to hear from a number of guest speakers who shared their insights on what they think open banking means for New Zealand.
What is open banking?
Open banking can be described as the process by which banks share a customer’s data, via open Application Programming Interfaces (APIs), with third parties nominated by the customer, in a form that facilitates its security and use by those third parties to provide services to the customer. Ultimately, it’s about rights of ownership and use of information to give customers more and better choices.
Kara Daly, Special Counsel in our Wellington office, explored the evolution of open banking from the UK and EU to Australia and New Zealand, noting that New Zealand is taking an industry-led approach in preference to the highly regulated approach being taken in Europe and Australia. This approach is supported by government, but Minister of Commerce and Consumer Affairs, Kris Faafoi, has signalled to the banks and Payments NZ that he has not ruled out regulation if he does not see greater momentum towards the launch of open banking in New Zealand.
Kara noted that even if open banking is not expressly mandated by government, some specific regulation is likely to be required to enable open banking to operate effectively, given the complex web of financial services regulation both banks and new service providers must comply with. Examples include the need to expressly mandate a data portability right (akin to the proposed Consumer Data Right to be introduced in Australia) and regulation to allow the use of digital identity mechanisms for compliance with anti-money laundering legislation.
Steve Wiggins, CEO and Chad Haighmark, Strategy Manager, Payments NZ
Payments NZ governs the country’s core payment systems and works with the industry to promote an innovative, safe, open and efficient system. Steve Wiggins spoke at our Wellington seminar and Chad Haighmark spoke in Auckland, sharing their thoughts on open banking and the API pilot that Payments NZ is currently leading. The API pilot is part of a broader industry-led payments direction initiative that kicked off in 2015, tasked with understanding the future of payments.
Steve noted that the key focus for open banking needs to be on delivering the right outcomes to New Zealand consumers, whether it be better financial outcomes or better service delivery. He highlighted that one of the biggest obstacles for open banking that industry will need to address is earning the trust of consumers – a balance needs to be struck between ensuring that access is not too difficult and also that the integrity of the system is not undermined by untrustworthy parties.
Anand Ranchord, Head of Propositions, Experience & Design, Kiwibank
Anand Ranchord spoke at our Wellington seminar, sharing his personal perspective on the open banking opportunity, emphasising the importance of data access and the opportunities presented by open banking:
- An open playing field is vital in which customers can meet their needs and access a range of services.
- Examples include loan applications and money management which could be simplified through data sharing providing a holistic view of the customer’s financial information.
- The key challenge for banks and third party Fintechs is privacy. Trust issues must be addressed, and this is a great opportunity for the large banks to leverage their strength as trusted providers.
Ben Lynch, Creator of Jude
Ben Lynch created the “Jude” app which allow users to link all their bank accounts to its platform, enabling account management through a single digital portal. Ben addressed our Auckland seminar, discussing the opportunities available through open data. Ben posed the view that the next generation largely values access over ownership, citing the success of various access providers (i.e. Spotify, Netflix, Airbnb). Open data will allow businesses, such as Jude, to provide access to customer data through a single platform, streamlined for the customer experience, and allowing customers to own, control and profit from their own data.
Privacy – Kate Anderson and Richard Wells
Kate Anderson (in Wellington) and Richard Wells (in Auckland) wrapped up the seminars by talking about the Privacy Bill currently before Parliament, the absence of an express data portability right, and whether the Bill is therefore fit for purpose.
Kate and Richard both noted that the Privacy Commissioner, in his submission on the Privacy Bill, has recommended “bolstering the right of individuals to access their own personal information by including ‘data portability’ as a right for consumers to transfer their personal information to another service provider”. We will not know whether these submissions have resulted in further changes to the Privacy Bill until the Select Committee reports back on all submissions in October. However, it may be that a data portability right would be better expressed in a broader way under separate consumer legislation.
Implications for the wider financial services sector
If open banking means that we each own, or have the right to open access to the data held by banks about us, then the same principles must apply in respect of information held by other services firms that we obtain services from (e.g. telcos and energy companies, but also fund managers, insurers and finance companies)
We recommend that financial services firms follow closely the development of open banking in New Zealand, because fintech innovation in the way in which all financial services are delivered is already upon us.
Once open banking is successfully rolled out in New Zealand, it is not inconceivable to think that customers will demand open access to their data held by other financial services firms in order to access third party digital services offered by customer facing start ups, either as an adjunct to those existing financial services, or in direct competition.
Global approaches to open banking, including the approach taken by banks in New Zealand, will provide useful testing ground for the ways in which other financial services firms can adapt to the digital economy.
We will watch with interest progress towards the launch of open banking in New Zealand, and the parallel issues of government mandated open access to data and digital identity verification.
If you have any questions in relation to open banking please contact our team.
Who can help
Chair and Partner - Financial Services
Chair of the MinterEllisonRuddWatts partnership and ranked Band 1 for Investment Funds by Chambers Asia Pacific, Lloyd is a highly regarded opinion-leader on financial services and an expert in corporate governance.
Lloyd is acclaimed by commentators and clients in international research publications.
In recognition for his work on financial markets law reform, Lloyd was made a Fellow of the Institute of Finance Professionals New Zealand Inc. (INFINZ), the first lawyer to receive the accolade. His expertise is proven by being the co-author of Morison’s Company and Securities Law and MinterEllisonRuddWatts’ Corporate Governance White Paper. Lloyd is also a former member of the New Zealand Securities Commission.
Lloyd advises institutions and boutiques on investment funds, equity and debt offerings, and managed investment schemes of all types, specialising in public offers, M&A, and restructuring projects. He advises on securities regulation including Financial Markets Conduct Act, Financial Advisers Act, AML/CFT, and directors’ duties.
Partner - Financial Services
Jeremy is a specialist financial services and investment lawyer. He works with retail and wholesale fund managers (including KiwiSaver and superannuation), trustee companies, derivatives issuers, FinTech (including crowdfunding and peer-to-peer lending platforms), insurers and start-ups. He is also one of New Zealand’s leading lawyers advising on cryptocurrencies, initial coin offerings (ICOs) and digital tokens – working closely with the Financial Markets Authority and other regulators in relation to the treatment of coins, tokens, schemes and exchanges under New Zealand law.
Jeremy advises on all aspects of the Financial Markets Conduct Act 2013 (FMCA), in particular managed investment schemes and all required licences. He also advises on all other financial services legislation (including financial service provider registration, non-bank deposit takers (NBDTs), insurance prudential supervision, financial advice and broking).
Jeremy enjoys working with alternative assets and structures across private equity, venture capital, hedge funds, property investment vehicles, marinas and innovative platforms and products. He is a limited partnerships expert, having established numerous private equity and venture capital funds, including negotiating with significant cornerstone investors such as the New Zealand Venture Investment Fund (NZVIF), New Zealand Super Fund, ACC and Maori investors.
Jeremy also spent several years working in offshore funds for a major offshore law firm, and is admitted to the bar in both Guernsey and the Cayman Islands.
Partner - Corporate and Commercial
Richard is a commercial lawyer with particular expertise in technology, media and telecommunications law, intellectual property, commercial contracting and sport.
He advises clients on issues arising at all stages in the product lifecycle and is an expert legal draftsperson and troubleshooter. Richard is sought after to help establish new ventures and to commercialise new technology both in New Zealand and overseas.
As well as his technology practice, with a background in commercial and IP law, Richard is recognised as a leading Sports and Events lawyer ranked as Band 1 by international research directory Chambers Asia Pacific. He has broad experience working with event hosts, sponsors and stakeholders to deal with issues arising in relation to major events in New Zealand.
Special Counsel - Financial Services
Kara has more than 25 years’ experience as a commercial, banking, financial services, securities and insurance lawyer. She regularly advises on legal issues surrounding financial services regulation, insurance law, information technology, business ventures, capital markets, insolvency and general commercial law.
Kara advises on a range of business ventures, business structures, transactional advice, and governance issues, and on all aspects of banking and financial services transactions and regulation.
Kara’s hands-on pragmatic approach means she is often sought by organisations to provide special counsel.
Special Counsel - Financial Services
Shane has more than 25 years’ experience in the financial services area, with particular expertise in advising corporate trustees. He regularly advises licensed trustee companies on all facets of the corporate trustee role, including retail, wholesale, listed and un-listed debt issues, establishing and administering managed investment schemes and securitisation structures covering residential mortgage receivables, asset-backed receivables and motor vehicle receivables. Shane also advises on compliance issues arising under the Financial Markets Conduct Act 2013 and recently has assisted trustee companies with analysing (and submitting on) the new Trusts Bill.
Shane is a Special Counsel in our managed funds team, having joined us in mid-2016 from Guardian Trust where he was Head of Legal – Corporate Trusts. Shane joined Guardian Trust after 23 years at another national law firm, where he was Special Counsel from 2008 to 2015.
Shane is recognised by the New Zealand market as one of the market-leading corporate trustee lawyers, with excellent and long-standing relationships with each of the licensed supervisor/trustee companies: Guardian Trust, Covenant, Public Trust and Trustees Executors.
Senior Associate - Financial Services
Andrew is a Senior Associate in the Banking and Financial Services Team. Andrew is a financial services specialist and has broad experience in all areas of New Zealand’s capital markets, with a particular expertise in financial services regulation, funds management, private capital raisings, stock exchange rules and listed financial products. Andrew has worked with many of New Zealand’s major financial institutions assisting with reviewing and drafting offer documents, trust deeds, investment management agreements and other capital markets documentation as well as advising on a range of issues related to offering securities and operating financial services or financial advisory businesses in New Zealand. Andrew has previously worked in‑house at NZX in New Zealand and the London Stock Exchange.
Senior Associate - Banking and Finance
Ian specialises in banking and financial services. Ian acts for senior and mezzanine lenders and borrowers on property acquisition and development facilities, and for both lenders and borrowers in relation to a full range of corporate debt facilities, including acquisition finance. He also acts for lenders in the film finance and structured finance space, as well as acting for issuers in relation to debt capital markets transactions.
Ian advises a number of financial institutions and large corporates on regulatory compliance, with a particular focus on anti-money laundering, financial markets conduct, consumer credit and personal property securities regulation.
Ian is admitted in New South Wales and holds a current New South Wales practising certificate.
Senior Associate - Corporate and Commercial
Kate is a Senior Associate in the Wellington Corporate team, with experience in technology based contracts and transactions. She has excellent project management and client relationship skills, providing day-to-day support on all aspects of a project.
Kate works on a variety of corporate and commercial transactions, reviewing supply and sale and purchase agreements, and advising on ICT contracts. She also advises on corporate compliance issues, Overseas Investment Office (OIO) applications and consumer protection.
Kate joined MinterEllisonRuddWatts as a law clerk in 2009, and has worked in the Corporate team on a variety of matters. In 2010 she completed a six month secondment to MinterEllison in Canberra, where she worked primarily in the International Trade and Competition team.
Senior Associate - Financial Services
Maria is a Senior Associate in the Banking and Financial Services team, and is a financial services specialist. She has particular expertise in financial services regulation, assisting with reviewing and drafting offer documents, trust deeds, custody agreements and investment management agreements. She also advises on a range of issues related to offering securities and operating financial services or financial advisory businesses in New Zealand.
Maria works with retail and wholesale fund managers, trustee companies, insurers and other major financial institutions, advising on all aspects of the Financial Markets Conduct Act 2014 (particularly in relation to discretionary investment management services and managed investment schemes), the Insurance (Prudential Supervision) Act 2010, as well as financial advice and broking services regulation.
Maria started her legal career with Chapman Tripp, before working in offshore funds and banking for a Guernsey law firm. Returning to New Zealand at the end of 2016, Maria joined our firm in August of that year.