Monday, June 24, 2024

Open banking investment set to boost competition

The Government has announced moves to increase bank competition with the introduction of open banking, Minister of Commerce and Consumer Affairs, David Clark, announced today.

Last July, the Government agreed to establish a consumer data right framework (CDR) which would require data holders like banks to ensure New Zealanders can gain access to a wider range of products and services that better meet their needs. Today the Government is announcing banks will be the first sector to implement the mechanism.  

“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,” Minister Clark said.  

“Open banking is a requirement on the Australian owned banks’ parent companies across the ditch and is a fixture of the banking system in the UK. It’s a common place tool used overseas to increase competition and make it easier for customers to get better deals.

“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 adviser of their choice– meaning more tailored and timely advice.”

The businesses and services wishing to receive this data would have to meet a number of safeguards to ensure the information could be handled safely and securely, the Minister said.

“The key point is that open banking allows customers to shop around for better deals. That means banks will also have to work harder to retain their customers, leading to savings for consumers,” he said.

“At a moment in time where cost of living is high around the world, consumers should have the power to shop around for better deals, and make sure they’re getting the best bang for buck out of their investments.

“The Prime Minister has urged banks that are reporting record profits to do what’s right for their customers and help them out in challenging times. Open banking is an additional tool to promote competition and ensure consumers are getting a fair deal.

“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. Banking was also the first sector designated in Australia so we can learn from them.

“I am also aware some banks here have proactively started building the infrastructure to facilitate a CDR,” Minister Clark said.

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