The conversation around open finance has recently picked up steam in NZ. There are a few reasons for that:
We need a regulatory framework that works. This article presents a view on how the NZ fintech community can engage during this critical period.
If you’re new to the topic of open finance, here’s a quick background.
Let’s dive in.
In July 2021, the Government confirmed that it will develop CDR legislation. MBIE is leading this policy-making process, and has already carried out one round of public consultation. We expect at least one more round of public consultation during 2022 before the draft legislation is finalised. Just to note, this will be high level “primary legislation”, which won’t include any sector-specific rules.
As CDR is developing, the fintech community should:
I think it'll be about 3 years before CDR offers a viable connectivity option for open finance-enabled products. This rough estimate is based on ~one year to enact the primary legislation, ~one year to designate and write rules for the first sector (which I’ve assumed will be banking), and another ~one year for bank compliance deadlines.
If compliance deadlines are phased in over time like in Australia and the UK, then it may take even longer before important features like write access, joint accounts, and business accounts fall within the scope of CDR.
While we wait for CDR to rollout and mature, there are a few existing options to deliver open finance-enabled products right now:
Some markets like the US already have a thriving open finance ecosystem. 1 in 4 US adults has connected bank accounts via a single intermediary called Plaid, which has opened up new functionality in apps like Venmo, Cash App, Coinbase, and Robinhood. The US is more advanced in open finance uptake than the UK, even without specific regulations or widely adopted standards. So we shouldn’t use NZ’s lack of regulations as an excuse to be behind other countries.
In my mind, the most important way to bring open finance to life in NZ is through great products like Xero, where bank account connectivity has significantly improved the UX of accounting.
This may be a controversial point, but I think it’s a wasted effort to try and “educate consumers about open finance” unless that information is relevant to a specific product. Instead, we should build great products, and help consumers to make informed decisions about account connectivity once they’re clear about the specific value they’ll get from that product.
Here’s my view on the practical things that will help our local fintech market to deliver great products:
This really is a critical time to help craft the future of open finance in NZ. If you have views, please make sure that they’re heard.
And if you have comments on this article, I’m keen to hear. Hit me up on firstname.lastname@example.org.
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