New Zealand Moves Towards Open Banking Framework

November 15, 2022
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Following in Australia’s footsteps, the New Zealand government has begun working with banks on formulating a Consumer Data Right (CDR) framework for the country’s banking industry.

Following in Australia’s footsteps, the New Zealand government has begun working with banks on formulating a Consumer Data Right (CDR) framework for the country’s banking industry.

The New Zealand government has now begun working on an open banking framework, having previously passed its CDR legislation in July 2021.

Mirroring a similar implementation strategy as Australia, policymakers had designated banking as the first sector to take advantage of the CDR framework in August this year.

This initial legislation contained basic obligations that can be applied to any sector, and it was intended for subsequent legislation to outline more detailed and sector-specific obligations.

The Ministry of Business, Innovation and Employment said it is currently working on the design elements of a CDR framework for the banking sector, with its key goals being safety, simplicity and cost-effectiveness — both for participants and government.

During this process, the ministry said there will be industry engagement and consultation activities, including the release of an exposure draft bill in future.

David Clark, minister of commerce and consumer affairs, said he believes that banking is a natural fit for the CDR, and will offer new benefits and cost-savings measures for both consumers and businesses alike.

“Open banking ensures banks must share customer information if they request it, making it easier for New Zealanders to compare mortgage rates, apply for loans and switch banks,” he said.

“Under open banking, if somebody wanted to re-fix their mortgage at a lower interest rate, they could ask their bank to securely share transaction information with a competitor.

“They could also instruct their bank to share specific data with a financial advisor of their choice, meaning more tailored and timely advice.”

In New Zealand, as in other jurisdictions, the businesses and services that wish to receive this data will have to meet a number of safeguards to ensure the information can be handled safely.

These checks and balances will be discussed during the government’s consultations with the banking industry.

Learning from Australia

Clark pointed out that open banking is already a requirement in Australia, which passed its first CDR legislation in 2017. He also noted that open banking is active and is evolving quickly in the UK.

“The banking sector is a natural starting point for rolling out consumer data rights, as the industry has already made significant progress towards open banking on their own,” he said.

“Banking was also the first sector designated in Australia so we can learn from them. I am also aware that some banks here have proactively started building the infrastructure to facilitate a CDR.

Last month, Australia's Treasury announced that it is seeking comment on draft legislation that would introduce new rules for “action initiation” within the country’s open banking framework.

According to the Treasury, the proposed legislation would create a new channel for consumers to instruct businesses to initiate actions on their behalf and with their consent.

Such actions could include making payments, opening and closing accounts, switching providers and updating personal details across providers.

The Treasury said the benefits of action initiation can be seen in the success of payment initiation in the UK, which in August totalled 6.5m transactions, according to the Open Banking Implementation Entity (OBIE).

Earlier this year, in July, Australia also received its first fine from a bank for an alleged breach of CDR rules.

The Australian Competition and Consumer Commission (ACCC) issued an infringement notice to Queensland Bank, alleging non-compliance with the new open data rules.

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