New Zealand may have far more to learn from the experiences and regulatory framework of China’s Open Banking regime than the pioneering efforts of the UK, where open data standards “were originally set”, according to Westpac NZ’s Director of Open Banking, Matthew Haigh.
Speaking at the annual Future of Financial Services conference in Auckland earlier this month, Haigh said the industry-led approach adopted by New Zealand’s Open Banking authority, Payments NZ (co-owned by ANZ, ASB, BNZ, Citibank, HSBC, Kiwibank, TSB Bank, and Westpac), has more in common with the open data regimes of the “Far East” than the government-mandated schemes being implemented or already in service within the western world, including the UK and Australia.
Despite starkly different regulatory frameworks, Mainland China ranks a close second to the UK (widely considered the global benchmark for open data regimes) on EY’s Open Banking Opportunity Index, which rates countries on the progress and adoption of Open Banking.
Curiously, China’s “organic” Open Banking model (considered a more liberal and less prescriptive regime), despite having neither a mandated requirement for banks to adopt the scheme nor mandatory specifications for APIs, has seen rapid adoption by both the industry and consumers, as well as praise for its capacity to foster innovation. “China’s less regulated approach,” the report’s authors concede, “has yielded results that have defied many expectations”.
Much of this willingness to embrace Open Banking in China can be attributed to the already high levels of mobile and internet services penetration across the country, spurring the creation of direct banking offerings that have allowed consumers to effectively “set up online accounts to access banking services without ever setting foot in a branch”.
According to the report, more than 3,000 direct banks now operate in China.
With the rapid uptake of direct banking, banks sought a means to synergise and share data across disparate, though complementary, financial services platforms, leveraging application program interfaces (APIs) to do so. APIs served to expand Chinese banks’ customer service coverage, offering financial services across other lifestyle services such as e-commerce and creating a vast ecosystem of products across sectors.
“Now China’s banks are using their open banking portals to redefine their entire role, positioning themselves not just as financial institutions but as technology companies and lifestyle partners for customers,” the report said.
APIs the way forward for NZ
For Haigh, experience is critical for Kiwis to embrace Open Banking – particularly where public scepticism and uncertainty around similar open data sharing schemes have stalled such initiatives in large parts of the western world.
“I want New Zealanders to have a great experience and, if they do, open banking will flourish here,” Haigh said.
APIs will be core to facilitating these experiences; they serve as the software bridge through which customers and developers can effectively channel their data and plug in to emerging third-party services, providing unique, value-added offerings that extend beyond the bank’s service remit.
While banks have no doubt embraced the development of APIs, largely to connect backend processes, and have the capabilities and knowhow to deploy them, they often lack the customer experience-oriented focus of the bigtech players, such as Netflix and Uber.
For Haigh, existing policy and processes with banks stand as roadblocks in the development of such consumer-focused APIs.
To overcome these hurdles, Haigh urged banks to treat APIs not as projects with cost but as prized inventory that can be leveraged by customers and developers – turning banking APIs from “internal services into experiences for third parties”.
“To understand and work in an agile fashion; to understand and deploy that product, where it’s live and [functions as] our digital front door 24/7; to achieve this experiential growth, [the API] has to be managed just like any other product.
“We need to provide data [and] govern the flow of data to provide analytics, and to enable our developers to apply machine learning and AI; because open banking data is rich, it is updatable, and work very well to identify new services and innovations for New Zealanders.”
Banks today are fundamentally data players in a digital space. To establish these value-added digital partnerships, banks need only “assess whether that organisation will be able to look after this data and then to enable and use that within the policies that we already have,” he said.
“We don’t need to invent any technology; we don’t need to invent [the next fintech]. We’ve got it. It’s largely about policy and process. There are many signals on the types of new experiences that open banking will enable.
Haigh cited “a litany of examples” where global counterparts have teamed with value-adding periphery services, serving as a model for NZ’s own scheme, from Santander’s direct feed into Xero‘s cash flow and liquidity management services, to Coconut’s partnership with PrePay Solutions, one of Europe’s largest digital banks, offering accounting and tax management embedded within customers’ accounts.
While Haigh stressed the need to effectively manage data disclosure, with “robust security critical to the success” of any Open Banking project, he said banks in NZ already abide by strict standards for secure data transfer between their systems – “we rely upon them every day,” he said. Thus, digital security considerations should not hamper opportunities to partner and share data with periphery services.
Indeed, New Zealand’s ‘Eastern’ oriented Open Banking approach, he feels, offers the ideal environment to facilitate these value-added service partnerships through APIs.
“No official body exists within New Zealand’s Open Banking [framework] to determine who is allowed to receive the data and for what purpose. That is unlike the UK, for example.
“This innovative arrangement supports a substantial degree of innovation; we can iterate on making this happen but it does mean that we need to work with our consumers, the people that want to use our APIs, to come up with a pragmatic process.”
For Haigh, success in New Zealand’s emerging Open Banking regime will rely on three elements – “a triangle: for banks to make APIs available; for developers to build the apps; and for customers to use them.
“If any of those three are missing, Open Banking in New Zealand will fail,” he said.
However, he stressed, as digital organisations, the rollout of “Open Banking is not a moon shot” for local banks.
“We are fundamentally digital organisations – we provide digital experiences to our customers constantly; it is what we do and it is what our customers expect. Our teams have been building digital services for some time and they are good at it.”