Open banking will touch many parts of financial services. And it will enable embedded finance in organisations that have not historically provided financial services. Below are the features, products, and businesses that we’d love to see built on top of open banking infrastructure in New Zealand.
If you’re working in this space, we’d love to chat.
If you see other opportunities, please add your voice in the comments.
If you randomly arrived at this article and want some context, here’s the lay of the open banking land in NZ. And if you're new to application programming interfaces (APIs), here's an awesome intro article.
Let’s dive in.
Lending
- Automate the application process by connecting bank accounts with lenders to enable them verify income, verify expenses, and assess affordability. Some lenders already offer this functionality. Better and Lendi are international examples of loan application processes that have been redesigned from a blank canvas.
- New law will soon require lenders to ensure the ongoing suitability of a loan over the lifetime of the customer (rather than just at the time of sale). Automate the recurring processes involved in assessing suitability for consumers (as well as for the lender and any intermediary that’s involved).
- Continuously scan the market for better loan terms on behalf of the customer.
- Use bank data to support “new to credit” or “thin file” customers.
Personal finance
- Aggregate your balance and transaction data into 3rd party apps.
- Enrich and categorise transaction data so a consumer can easily understand their spend (across multiple banks if relevant). For example a merchant can be enriched with a logo, trading name, location, and website to make a transaction more easily understandable.
- Automatically build a budget, and then track against it.
- Connect a bank account to surface any recurring subscriptions and make it simple to cancel unwanted ones. Like Truebill.
- Make each dollar work hard by ensuring it’s automatically held in the most favourable interest-bearing account.
- Set a target amount in a dedicated emergency fund account, then automatically move any excess into a selected investment on a daily basis. Our sister company Jude already does this, but it should be a common feature across banks and personal finance apps.
- Automatically round up transactions and add the excess to a selected investment.
- Aggregate or consolidate debt and then optimise repayments.
- Prevent overdraft, dishonour, and other fees by setting up protective rules.
- Provide financial assistance for senior family members. Like Golden.
Payments
If you missed it, MBIE is currently considering the implementation of regulatory caps for interchange fees (merchant service fees in NZ are very high by comparable international standards).
- API-driven payments should replace direct debit payments. They’re preferable because they give the consumer visibility and control over any recurring consent, and they avoid overdraft / dishonour fees by querying the available balance before processing a payment instruction. Energy and telco companies (and their customers) have some easy wins in this area. As do providers like TAB who can identify at-risk customers and target engagement with education or spending limits.
- Marketplaces should allow users to initiate bank-to-bank payments from connected accounts, which would reduce transactions costs to almost zero. For example the transaction costs incurred by merchants on Trade Me should be almost zero when Trade Me can programmatically interact with a purchaser’s bank account to initiate a payment.
- Buy now, pay later providers should process bank-to-bank payments rather than running payments through card schemes. That would dramatically reduce the cost of BNPL services, which would put more money back in merchants’ hands (and push back against general inflation as a result).
- Any app with a digital NZD wallet should offer in-app funding. For example Sharesies should enable a user to fund their Sharesies wallet by giving a one-off or recurring payment instruction within the Sharesies app. For new users, this also serves as a process to verify the owner of the account and ensure automatic reconciliation whenever funds are received from that account. (For people in the AML world, this also reduces the real ML/TF risk because any money entering or leaving the system will be exchanged via a verified NZ bank account which is held in the name of the customer and operated by a regulated reporting entity).
- Peer-to-peer payments like Venmo, Cash App, Vipps, and others.
Wealth management
- Automate the fact find process. Make it faster and more accurate (because you’re using historical bank data rather than client estimates).
- Give your clients an aggregated view of their finances (including Kiwisaver and other investments), and a reason to spend more time in your app.
- Learn more about each client’s financial life, and tailor your engagement.
- Digitise more advice through nudges based on client goals or market benchmarking.
- Enable a client to initiate one-off or recurring payments within your app. A client could set a “maximum” for their nominated bank account, with any amount above that level automatically transferred on a weekly or monthly basis into a selected investment product. Enable round-up payments into a selected investment product. Create a win-win by automating a positive habit for the client while increasing AUM.
Identity
- Download a recent bank statement to verify address.
- Verify account number.
- Verify that the user is a holder on the account.
- Link the customer to their claimed identity to meet AML obligations for electronic onboarding in the IVCOP (see clauses 14 and 15).
- Carry out enhanced customer due diligence by assessing income history regarding the source of wealth/funds.
Payroll
- Pay employees on a daily basis. This helps to avoid cashflow issues and aligns the timing of payment and work.
- Introduce features that help employees to optimise their pay and general financial health. Wagestream is an interesting example.
Banking
- Give your users an aggregated view of their finances, and a reason to spend more time in your app.
- Improve categorisation functionality (for example by being able to recognise inter-bank transfers between a user’s accounts).
- Make it easier to both extend credit and monitor loan book risk.
Insurance
- Automatically assess product suitability over the lifetime of a customer through recurring financial snapshots.
- Continuously scan the market for better insurance terms on behalf of the customer.
- Dynamically adjust the excess based on available balance in a selected account (to minimise the cost of a policy when the customer’s cash position allows).
- Digitise advice through nudges based on transaction alerts or market benchmarking.
- Automatically add expensive asset purchases to contents cover.
Comparison
- Combine address data with historical spend for internet, mobile, electricity, gas. Use that to surface more favourable deals. If the customer is happy to provide enduring consent, deliver this service on an ongoing basis.
- Offer “one click switch” by passing customer details to the new provider and setting up bank-to-bank recurring payment initiation.
Loyalty
- Automate loyalty programs through accurate merchant detection, regardless of payment method. No need to carry another card or scan a QR code at the point of sale. Encourage customer use of lower cost payment methods which still generate rewards for the customer.
If you’re working on these (or other) areas, we’d love to help with resources or connections. You can find us here.
