Commerce Commission has authorised Payments NZ to develop its open banking framework further.
The Commerce Commission has granted Payments NZ Limited (Payments NZ) conditional authorisation to work with current and future API providers (e.g., banks) and third parties (e.g., fintech) to develop and apply a partnering framework for API providers' provision of API services to third parties (the Proposed Arrangement).
An application programming interface (API) is a set of routines, protocols, and tools for building software applications and specifying how software components should interact. This will facilitate third-party collaboration with API providers and accelerate open banking delivery in New Zealand.
After consulting on its draft determination, the Commission has concluded that subject to the conditions it has imposed, the benefits of the Proposed Arrangement are likely to outweigh the detriments.
These benefits include the potential to reduce the transaction costs associated with partnering between API Providers and Third Parties for access to API Services and the development of more efficient contract terms.
The conditions have been designed to address potential detriments primarily related to potential conflicts of interest in the partnering framework’s decision-making processes.
The Commission has authorised the Proposed Arrangement for 18 months, recognising that the applicants expect their discussions to take around 12 months. This period also reflected the anticipated timing of regulatory interventions that will likely deliver some of the same potential benefits as the Proposed Arrangement.
The Commission’s case register contains a copy of its determination, which includes its reasons for granting the authorisation (subject to conditions).
Other parties involved in the proposed partnering framework and for whom Payments NZ has sought authorisation on behalf of are:
API Providers (current and future): banks and other financial institutions. They want to use standardised APIs to provide API services to Third Parties, which will, in turn, allow Third Parties to provide services to their customers
Third Parties (current and future): Fintech and other companies want to use standardised APIs provided by API Providers to provide services to customers with accounts with API Providers. Some financial institutions that are API Providers may also seek to become Third Parties and thus receive API services from other API Providers.
This authorisation is one of three significant moves from the Commission designed to accelerate open banking delivery in New Zealand. Its recommendation to the Minister of Commerce and Consumer Affairs to designate the interbank payment network under the Retail Payment System Act 2022 would, if accepted by the Minister, allow the Commission to use its tools to actively drive competition and innovation in the retail payment system and enable the development and adoption of new, safe, low cost and accessible open banking payment solutions.
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