Open Banking - all your questions answered

You might have heard the term Open Banking - but what does it actually mean? REDnews answers all your questions about what's coming, what's already here, and how Open Banking will change the banking landscape in New Zealand.

What is Open Banking?  

Open Banking is a system that enables financial apps and technologies to connect securely and directly with customers’ bank accounts with the customer’s consent.  

Once enabled, this allows approved businesses to connect to our system and offer new products and services. These could be anything from an app that enables quick and easy payments to a budgeting service that looks at your accounts and helps track your spending.  

The possibilities are huge – we’re looking forward to seeing what uses and ideas are developed by third parties (independent companies) and fintechs (financial technology companies). 

So you’re not developing any Open Banking apps yourself? 

No, not currently. We’ve developed a secure method for third parties to connect to our system - but it’s up to those external companies to make the products that customers use.  

It’s kind of like when Apple released the App Store - it was a platform that allowed other companies to develop innovative new solutions that worked in with their technology. We’ve developed secure access to our system so third parties can come up with new financial tools for our customers to use. 

What are some examples of Open Banking people may have seen already – how is it being used and what products or companies are using it? 

Open Banking is still new but the first three companies we’ve connected with are Blink Pay, Qippay, and Volley. They are all payment providers at this stage.   

Volley has a good explainer video of their app in use. Say you go out to dinner with friends and one of you pays the bill. With Volley, you’ll be able to request your friends’ share of the bill and with a few taps, they’ll be able to pay from their online banking account with Volley filling in all the details. 

BlinkPay builds payment solutions for other companies so if you’ve ever used Sharesies’ Instant bank transfer feature, that’s BlinkPay opening up a secure transfer straight from your account to the app. 

Qippay also offers direct-from-bank payments, primarily from online shopping retailers. Their flagship service is Qip PayBy, a "Pay by Bank" feature that provides an efficient alternative to card-based payments. 

What else could be coming and what’s currently being done overseas? 

The next step in Open Banking is the ability to share data. This is being opened up from the 30 November 2024. This development will enable increased insights from your bank account and will be used by apps such as budgeting or financial management tools.  

In the future, we’re also expecting to see apps that make applying for loans easier. Currently you need to download your transaction history from your bank and send this to your broker or lender. With Open Banking, you’ll be able to share this information directly from your account making the experience more convenient, more secure, and decrease the time it takes to obtain an approval. 

These tools have proven to be popular in both Australia and the UK, where customers have had information from multiple bank accounts and credit cards being shown in the one tool, providing you with actionable insights to help manage money.       

All this data sharing sounds risky. Is it? And what if I don’t want to use Open banking? 

We currently all share data when we do things like filling out forms or entering our details into webpages. With Open Banking, data is shared directly from the bank to provider so there are fewer  places where it “lives” and less chance of it being intercepted. 

While Open Banking provides a secure way for Westpac to share data with an approved third party, through a secure connection, customers will need to make their own assessments of how the third party protects your data once they receive it.  

One practical step to help customers make this assessment is by reviewing the third-party’s privacy policy, along with any information on how they protect customer data. 

You can always opt to not use an Open Banking service – it does not affect the way any of your existing bank products or services operate if you choose not to use it.  

What is Impersonated Access or Screen Scraping and how is it different from Open Banking?  

Until now, some payment-from-bank-account services may have looked like Open Banking but they were actually what we call “impersonated access”. This is sometimes referred to as “screen scraping”.   

With impersonated access, a customer puts their online banking details into a website’s “pay direct from account” service portal. While it looks like a direct payment, your online details are held and used by the service to log into online banking and complete the payment on your behalf.   

By comparison, a payment made via Open Banking opens a direct connection to your online banking where you approve the payment request without sharing your log on details. It’s more direct and therefore safer.  

I trust the bank’s security but how about the third parties that use Open Banking – will the bank vouch for them? How do I know they’re safe? 

While Westpac completes a high level of due diligence as part of the onboarding requirements for any third-party provider, this is more focused on ensuring the connection is secure and there is an acceptable use case for the service rather than validating the service itself.

These are independent businesses and like any new service you undertake, you’ll need to carefully research the service so you can make your own informed decision.  

We will continue to show a list of up to date Third Parties who we have integrated with Open banking. (westpac.co.nz), if you want further information on how to find other parties who are part of the wider industry you may also be interested in reviewing Find a provider or third party | API Centre (paymentsnz.co.nz) 

How will Open Banking affect scams and fraud?  

The introduction of Open Banking will not prevent impersonator websites or scams but it will provide more security in payments. Open Banking payments are direct so customers won’t have to send bank account numbers to each other – and we’ve seen in the past that this is one process where scammers sometimes insert themselves and steal funds.  

We have some great information on staying safe at Safety and security | Westpac NZ 

What’s happening next in Open Banking?  

Our teams are busy building and preparing for the November release, to learn more about Open banking at Westpac visit Open banking. (westpac.co.nz) or here for a wider industry view Home | API Centre (paymentsnz.co.nz)