Open finance momentum expected to gather pace in 2025
New regulations dictating how open finance works for the banking sector could be in place by the end of the year with advisers encouraged to start thinking about how developments could change the way they do business.
Monday, January 20th 2025, 9:20AM
by Kim Savage
New regulations dictating how open finance works for the banking sector could be in place by the end of the year with advisers encouraged to start thinking about how developments could change the way they do business.
Towards the end of the last year, four of the main banks achieved their latest milestone in the journey to open banking, declaring they had met the deadline for delivering Payments NZ’s Account information API standard. An API, or application processing interface, allows software systems to communicate with one another, giving third-parties access to consumers’ data.
Josh Daniell, founder and chief operating officer of open finance infrastructure fintech Akahu, expects rapid progress on regulated open finance over the next year or two but warns it will be some time before we see data flowing freely between all financial services companies.
At the moment, each third-party participant signs a contract with the bank to access their API and while regulation will make those contracts obsolete, there will still be limitations for years to come.
“This regulation will only apply initially at least, to the largest five banks.
“So a customer of another bank, if they wanted to share their data, or if they wanted to connect data from Sharesies or Hatch or Simplicity or whoever else, they would have to use an unregulated form of open banking.
“So we will live in this world for many years, we expect, until the regulation broadens out and covers a wider range of data holders.”
The Consumer and Product Data Bill will set out the legal framework for open finance while MBIE is responsible for drafting the detailed regulations. The formalisation will mean consumers no longer need to share their login credentials with third-party apps and the new rules will also outline liability, fees, what data can be accessed and the standard of performance expected from APIs.
Many advisers are already using unregulated open banking processes in their businesses, says Daniell, and the benefits are obvious. 
“It surfaces opportunities, for example, if the data indicates that there should be a conversation regarding insurance because there's been a material change in income or something else changes in the data that makes it worth the conversation,” he says.
“That is the type of opportunity that would not be uncovered unless and until the client shared information at some review point with that adviser.”
However, Josh Daniell says advisers need to consider how they can make the most out of clients’ raw data.
“It needs to be assigned a homogenous set of types and categorised before it becomes useful for plugging into a UMI calculator if you're going to send that data to a bank, to understand whether you can meet the various thresholds of a particular lender.
“So there's a whole lot of work that gets done on top of the raw data to make it useful and in New Zealand, we have noticed that advisers are crying out for better solutions.”
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