Global open banking and New Zealand

Lessons and use cases from around the world

At FinTechNZ’s Hui Taumata 2023 in Auckland in February, open banking was one of the hottest topics in the house! It was my pleasure to lead a round table on the topic of: “Global open banking and New Zealand –lessons and use cases from around the world.” In case you missed it, here are the highlights.

A global glossary – data, payments and identity

A thriving open banking ecosystem has a triangulation of critical co-dependencies between banks, fintechs and consumers, with consented data sharing at its core.

Banks must deliver quality data in a timely fashion, fintechs need a viable business case to invest in innovative new apps, and consumers must have a good consent flow experience or else they will give up halfway through.

Moreover, when action initiation is included - whether for payments or other actions such as switching - interoperability becomes essential and digital identity enters the discussion.

Globally, there is now a trend towards open finance, so that non-bank loans, personal investments, insurance and pensions could also be included in regulated data sharing.

Eyes on the UK - 7 million people can’t be wrong!

According to news published in February 2023, the UK has now reached 7 million monthly active users of Open Banking who are benefiting from innovative financial management and payment tools.

For fintechs, some of the most interesting points to note about the UK’s Open Banking regime are:

  • benefit of strong industry (CMA9) and government collaboration via a lead regulator (OBIE)
  • advantages of having an existing legal framework for privacy in GDPR
  • boon to adoption from functional depth in banking data and payments
  • pros and cons of having action initiation in the absence of an interoperable digital ID and trust framework
  • future aspirations around open finance and open data.

Across the ditch - Australia’s ground-breaking Consumer Data Right (CDR)

There was a requirement baked into Australia’s CDR to have a statutory review after two years and lawyer Elizabeth Kelly’s final report was published in September 2022.

The review found that the CDR's statutory framework has been broadly effective in supporting the CDR's rollout, is sufficiently flexible and robust to accommodate further changes to achieve policy objectives and has scope to further explore its limits as the CDR develops.

From a fintech perspective, the most interesting issues raised in the statutory review include:

  • risk of exclusion of smaller players when there is a high reliance on traditional feedback and consultation methods
  • paramountcy of data quality coming from data holders
  • crucial role of the consumer consent experience for adoption
  • balance of liability and incentives for data recipients
  • double-edged sword of reciprocity.

Initially, the only way to receive open banking data in Australia was to become a fully Accredited Data Recipient. With Version 3 of the CDR Rules introduced from late 2021 onwards, alternative pathways to access CDR data became available - such as the CDR Representative model - which is proving to be very popular with fintechs.

The classics never date – open banking’s key use cases

Account aggregation is probably the most common use case for open banking whereby you can let your customers see all their account balances in the same place, regardless of which bank holds the account.

Aggregation is the cornerstone of most Personal Financial Management (PFM) apps that build on this bank data to offer insights, such as where you are spending your money and predictions of upcoming bills, as well as tools such as building a budget and setting a savings goal.

Lending is sometimes described as open banking’s “killer” use case. This stems from the benefits of pulling near real-time bank transaction, credit card and loan data digitally, then running an analytics algorithm to categorise income & expenses and determine affordability.

Roundups are a popular use case whereby an extra amount is added on top of your customer’s spend and then allocated to savings, investments or charity. Similarly, you can also give rewards based on that spending, so that your customer doesn’t have to pull out a loyalty card at the till.

Innovation never sleeps - exciting emerging use cases

Some innovative and exciting use cases currently emerging are in the green finance space, whereby algorithms analyse expenses to track carbon footprints and audit ESG outcomes.

In proptech, landlords can use open banking data to streamline tenant applications for rental properties.

And in the fintech for good space, open banking data can be used to predict mortgage stress, so that lenders can reach out to borrowers proactively and get on top of any problems early.

Your open banking success starts here

With so much opportunity in open banking, it can be hard for fintech startups and banks alike to know where and how to start.

Envestnet | Yodlee is helping those conversations, facilitating connections, and supporting open banking success with our proven data & analytics products and innovation tools such as our sandbox.

If you’d like more information about the best way for your business to access financial data & analytics in Australia and New Zealand, please contact our team.