Kiwis sceptical about sharing bank data

The latest buzzwords in finance might be “open banking”, but not all New Zealanders are so open to sharing their financial data beyond the bank, Canstar research shows.

In simple terms, open banking is when third party technology companies create apps for people to make payments and to manage their money. The interfaces are called Application Programming Interfaces (APIs).

The open banking concept is more well known in markets such as the UK, where regulation for its use launched on 13 January this year. But open banking is gaining traction in New Zealand.

Payments NZ is currently doing a pilot project with ASB, BNZ, Datacom, Paymark, TradeMe and Westpac, to develop two payment-related APIs. The software will enable providers to make retail payments on consumers’ behalf. The trial will also help Payments NZ to establish common standards that banks and providers follow to share customer data.

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How do New Zealanders feel about sharing their financial data?

How new zealanders feel about sharing their personal data with banks

Not all New Zealanders are convinced about sharing their financial data with anyone other than their bank, mainly due to security concerns, latest Canstar research shows.

Canstar surveyed  1854 New Zealanders – who are customers of at least one bank and are 18-years-of-age or older – as part of user testing for this year’s Canstar Bank of the Year – Online Banking Award.

Of those surveyed, a clear majority (60.5%) said they are not open to sharing their information with an institution other than their bank, and feel it is not safe to do so. The next largest group (17.8%) is not sure whether they would want to share their banking data, or whether they think it would be safe to do so. Only 5.2% said they were open to sharing their information, but even they said they don’t think it is safe.

How open New Zealanders are to sharing their personal banking data

Source: www.canstar.co.nz – User Experience Study, 2018

Customers older than 50 are less willing to share their financial data, compared with other age groups, Canstar research shows.

Some 12.8% of customers older than 50 are open to sharing personal and banking data with institutions other than the bank, according to Canstar’s survey. On the other hand, more than double that (28.4%) of consumers between the ages of 31 and 40 are open to sharing their information.

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Are New Zealanders open to sharing their banking data with other institutions

Source: www.canstar.co.nz – User Experience Study, 2018

Reserve Bank keeps an open mind on open banking

The Reserve Bank said it will keep an “open mind” on open banking and cites potential advantages, as well as risks, to rolling it out in New Zealand.

“Greater sharing of customer data could also help financial services to be better tailored to customer requirements, improving the efficiency with which the banking sector’s resources are allocated and reducing the risk that customers obtain loans that they cannot repay,” the Reserve Bank says on its website.

However, the Reserve Bank also has some concerns. For example: “Increasing the number of firms that handle sensitive customer data may increase the risk of data mishandling.”

Canstar rounds up the Reserve Bank’s pros and cons of open banking:

Pros and cons of open banking

Pros Cons
Open banking could improve the efficiency of the financial system. Greater competition could weaken the profitability of banks that are slow to adapt.
It could increase competition in the providing of financial services and, in turn, reduce the cost of financial services. Increasing the number of firms that handle sensitive customer data may increase the risk of data mishandling.
Greater sharing of customer data could help financial services to be better tailored to customers. Customers could hold banks responsible if their data is compromised, even if customers gave permission for it to be shared. This could create reputational risks for the banks.
It could improve the efficiency of how the banking sector’s resources are allocated. Open banking could also increase bank’s liquidity risk, making it easier to move deposits between banks.
It could reduce the risk that customers take out loans that they can’t repay. Creating more ways for customers to access banking services could make it more difficult to manage money laundering.

Source: rbnz.govt.nz

Watch this space for any developments on open banking.

In the meantime, check out Canstar’s Online Banking report, to see what’s available in the online banking space.

Read Canstar's online banking report

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