Should Kiwibank move faster on being ready for open banking?

Julia Nicol, head of regulatory and public affairs at Worldline, formerly Paymark NZ, told the Commerce Commission's second day of hearings on personal banking competition that government agencies including Inland Revenue and Waka Kotahi/NZ

Transport Agency had said they won't use Worldline's online eftpos payment option until Kiwibank was ready for open banking.

Nicol said that once people use's Worldline's oneline eftpos, which enable's payments direct from a consumer's bank account using a smart phone, they tend to use it again, “but often they don't know it's there.”

Earlier, Nicol noted that NZ doesn't have real-time payments yet and asked how important it was to have instant payment capability.

Adam Gagen, head of public affairs at Resolut, a global fintech headquartered in London, addressed the conference when it began on Tuesday.

“We think that it's [real-time payments] certainly very advantageous,” but it can take time to build the systems necessary to facilitate it, Gagen answered.

Gagen said that the UK is ahead of other countries in implementing open banking and said NZ should use data on progress to transparently report progress on either a quarterly or even monthly basis.

NZ should also ensure that the end users, consumers, have a voice in the process.

Kiwibank's chief risk officer, Mike Hendricksen, told the conference that it has been common overseas for the major banks to lead the way in open banking and so there's nothing “unorthodox” in Kiwibank not wanting to be among the first movers.

“If a use case is justifiable for 85% of NZ customers, it should stand on its own feet” and it shouldn't need Kiwibank to push it along,” Hendricksen said.

The big four Australian-owned banks account for at least 85% of NZ's banking system and, based on total assets, Kiwibank is less than a third the size of the smallest of the big four and the largest, ANZ Bank NZ, is nearly five times larger.

Kiwibank's stance received surprising support from one of the big four banks.

Westpac chief executive Catherine McGrath said she has “sympathy” with Kiwibank not wanting to be distracted from improving its core banking system and that processes need to be tackled in a particular order because “otherwise you're wasting money.”

ANZ chief executive Antonia Watson said that her bank has managed to complete all the required APIs (application processing interfaces required to make open banking work) but that it was building them onto legacy systems.

ANZ had had to spend hundreds of millions of dollars on “very large regulatory programmes,” including meeting the Reserve Bank's standards on outsourcing and which have had to take priority over building the APIs.

Dosh co-founder Shane Marsh sympathised with Watson, noting he had previously worked for a large bank and that it was more difficult to adapt existing legacy systems than starting from scratch with new technology.

Marsh told the conference that Bank of NZ is the market leader in open banking and has invested in specific components to make it work. “At the other end of the scale, they're still getting their heads around a way of talking to fintechs.”

Adrian Smith at Blinkpay said some of the infrastructure the major banks are using have “systemic weaknesses” and that his company has had to find work-arounds.