The pinch-point is commercial - on what terms, and at what cost, should banks share their customers’ data, should their customers request this? And who is liable if something goes wrong?
Banks are currently having these discussions with fintechs on a case-by-case basis.
Merco - the owner of the popular payment provider, POLi - claims banks are quoting quite different rates to link up with fintechs.
“We’ve received API pricing proposals as diverse as 50 per cent of our revenue to 5 cents an API call. The former would, incidentally, result in our insolvency,” Merco director Allister Hunter said.
But the real kicker, from Hunter’s perspective, is that the terms and conditions banks would require Merco to meet are uneconomic and over-the-top.
He claimed banks want to control both the technology and who fintechs do business with.
“It’s just not viable. It’s ridiculous,” he said.
Furthermore, banks want to create default terms and conditions to apply to open banking, and run their own accreditation scheme to decide which fintechs can connect to their systems.
Payments NZ, a bank-owned company that’s been working on operationalising open banking for some years, has asked the Commerce Commission to allow it to work with banks and third parties to set up this framework.
Without this authorisation from the commission, Payments NZ could be accused of acting anti-competitively under the Commerce Act.
Payments NZ argues a framework will make it easier for third parties to work with banks, and therefore get open banking off the ground more quickly.
It doesn’t believe the framework should detail what third parties should have to pay to connect to banks’ systems, but is of the view “consistent pricing structures and principles will achieve the objective of fair and transparent pricing that does not unduly restrict access”.
However, Hunter can’t see this working in practice.
“How could we viably run a business where a core solution component has differing price points for the same input?” he told the commission.
“There is no recognition in the Payments NZ submission that APIs are not competitive. How can they be? If you want a Westpac API you can’t, for example, go to BNZ and get a Westpac API.”
Shane Marsh, a co-founder of another fintech - Dosh - believes an independent organisation, like the Financial Markets Authority, should oversee open banking.
“Payments NZ is conflicted in such a role and would further add to a power imbalance that already exists in the market,” Marsh said.
Similarly, Squirrel chief operating officer Dave Tyrer said, “Squirrel believes the Commerce Commission should reject the bid by Payments NZ in favour of a government-led alternative.
“The objectives of this organisation should be to move at a speed that’s deemed safe and delivers services beneficial to NZ Inc in promoting innovation and competition, ultimately, across industries.”
The Commerce Commission is expected to reach a decision on Payments NZ’s application by July 10.
The elephant in the room is that while the commission wants banks to share their data to improve competition, banks are urging their customers to protect themselves from scammers by not sharing their banking information.
Indeed, banks are forking out to both prevent fraud and reimburse some scam victims.
While they may be accused of trying to prevent innovation and disruption in their sector, they could argue they are being risk averse for good reason.
Jenée Tibshraeny is the Herald’s Wellington business editor, based in the parliamentary press gallery. She specialises in Government and Reserve Bank policymaking, economics and banking.
