We’ll break down what these fees are, how they’ll hurt everyday New Zealanders and stifle local innovation—and ask how on earth we ended up here, in the darkest timeline for open banking. But first: are the banks really the good guys?
In our 17 years building PocketSmith, we’ve seen banks repeatedly act against the interests of their customers. From misleading and overcharging customers, to charging higher fees to New Zealanders and taking advantage of groups of people, we’ve seen it all. All this amid the backdrop of year-on-year record profits being earned by Australian-owned banks, while cost-of-living soars.
The Consumer Data Right gave the banks the opportunity to do something good for New Zealanders. Break out of the mold, and adhere to some of the principles they espouse in their marketing. Give their customers open access to their own data, so that they can improve their own financial lives through tools like ours.
But really, when given a chance to design legislation, can we be surprised they didn’t take the high road?
As it stands, each bank will set its own fees to third-party applications for customers to access their data via bank feeds – 1 cent per API request call, up to a maximum of $5 per month.
An API call represents a single data request–so checking your account balance would cost 1 cent, each time, for each account. Check for recent transactions? 1 cent. If you have 5 accounts at a bank, PocketSmith would hit that 500-request-per-month maximum in less than 15 days.
Tools like PocketSmith are only useful with up-to-date data, so much so that half our customer support team is dedicated to ensuring that bank feeds are working for our users. Up-to-date data means a lot of data update requests, so it’s safe to assume that each connected bank feed would reach that $5 maximum per month.
45% of New Zealand PocketSmith users have one bank feed; that’s $5 extra to their bank. About 25% have two feeds - say a mortgage at BNZ and a credit card at ANZ. For them it’ll cost $10. The 12% with 3 connections? That’s $15 thanks. And for the 16% of users who have more than 3 connections… well, you can do the maths – it gets fairly grim for households who have multiple logins to a single bank.
It is hard to see the bank charges as anything but a design to hobble demand on both demand and supply sides.
Small fintechs can’t afford to compete with big banks that might absorb the cost. And those who try to pass it on risk excluding the very people who need it most - the ones who can least afford it.
Back in 2010, we were a bootstrapped startup that could still afford the bank feed license fees that gave us the ability to build a unique product for Kiwis and a global audience.
Today, providers like Akahu continue to open doors by enabling secure access to consumer financial data for a fair price. This has created a fertile ground for innovation and the creation of products and services designed to make Kiwis’ lives better.
The proposed fee structures under the CDR would not only make existing businesses untenable in NZ, but stop further innovation in its tracks. Consumers would end up paying sky-high prices for apps to help them manage their money. Both outcomes defeat the purpose of a Consumer Data Right, which is to increase competition and improve consumer outcomes.
New Zealanders will continue to be worse off than other countries, with a financial system bogged down with antiquated technology and a lack of innovation. We’d be moving into yet another generation where the banks are holding all the cards and sending their hoard of profits overseas.
We’ve had a front-row seat to open banking rollouts around the world, through our thousands of customers across the globe. The rubber hit the road in the UK and EU in 2019 with the PSD2, and CDR in Australia was usable for our Australian customers in 2022. We’ve seen nearly all major banks in the United States transition to new open banking data access, and Canada is well underway with their own legislation.
What’s been completely absent from all these rollouts? Per-user access fees.
None of these rollouts have had per-user access fees. None. Even in the United States – the throne of capitalism – banks do not charge fees for access to customer data.
We’re dumbstruck that the government is allowing banks to charge money for what should be a basic consumer right. This is completely at odds with every successful open banking rollout in the western world. CDR is being twisted into a product to be sold, not a right to be protected. And let’s be honest, ‘CDP’ just doesn’t have the same ring to it.
New Zealand is completely alone here. So how did we arrive at the darkest timeline for open banking in New Zealand?
PaymentsNZ—an industry body wholly owned by the banks—who has been working with (or, working over) the government to guide and shape how CDR takes form in New Zealand. The result? A predictably bank-friendly model that puts corporate interests ahead of consumers. The Commerce Commission raised concerns about the conflict of interest with PaymentsNZ administering CDR open banking. This looks to be bearing fruit.
It appears that the MBIE are willing to outsource the public policy need of a CDR, to the private interests of PaymentsNZ. There has been a missed opportunity for the New Zealand government to take a stronger role in shaping the CDR regime, as every other western government has taken advantage of. One perspective might be that this has jump-started CDR in New Zealand, but in fact things are still dragging out over the coming 2 years. And still, individual consumers will be footing the bill.
Having an entity owned by profit-driven banks to significantly shape the CDR future of New Zealand is akin to giving cigarette companies the power to draft public health legislation.
Change doesn’t come from silence. If we want a fair and open financial future, we need to speak up, and push back. Open banking was meant to unlock opportunity, not pad profit margins. Let’s call this what it is, and call for something better.
If you’re feeling as mad as we are about how the CDR is shaping up, please share this post so that more people know what is at stake.
James is mad, and is the CTO and co-founder at PocketSmith. He loves tech from software to hardware to music, and is passionate about technology being a net-positive in people’s lives. He lives off-grid with three humans, one axolotl, one dog, and too many possums.
