Open banking a step closer to gaining scale, as ASB and POLi strike deal - is the Govt’s competition push working?

The Government hopes open banking will spur more competition in the banking sector. Photo / 123rf

• ASB has signed a major deal with POLi to advance open banking, allowing easier online payments.
• ASB customers can authorise payments via banking apps, bypassing the need to enter details manually.
• The Government is pushing banks to partner with fintechs, aiming to enhance competition and standardise terms.

Open banking is a step closer to gaining scale in New Zealand, with ASB signing a major deal with established payment provider POLi.

Over the next few months, ASB customers who use POLi to make payments online will be able to do so without typing in their customer numbers and passwords.

Rather, they’ll be able to authorise payments via their ASB banking apps.

The deal is significant because of the sheer number of merchants and government departments, including Air New Zealand and the New Zealand Transport Agency, that use POLi to give customers the option of making payments for free. The alternative is to use another payment provider or credit card, which incurs a fee.

POLi processed 5.5 million transactions worth nearly $2 billion last year.

Banks typically don’t like POLi getting people in the habit of sharing their bank details with third parties, fearing that making people comfortable doing so makes them more susceptible to being scammed.

However, banks have been slow to allow financial technology companies to officially plug into their systems using application programming interfaces (APIs) to enable “open banking”.

Banks worry this enables fintechs that offer banking services to compete with them.

It also means banks have to invest in ensuring the transfer of information required to process transactions, for example, is safe and secure.

Up until recently, when the Government put real pressure on banks to facilitate open banking to enhance competition in the sector, banks have put high hurdles in front of fintechs seeking partnerships.

However, the Ministry of Business, Innovation and Employment (MBIE) will soon require ANZ, ASB, BNZ and Westpac (in the initial instance) to partner with fintechs it accredits.

While POLi offers payment services, other fintechs have other offerings, like enabling customers to consolidate their financial information from various institutions in one place.

POLi’s commercial director, Andrew Simmonds, hoped the ASB deal would help inform the standardised terms and conditions being created for the MBIE-administered regime.

He praised ASB, as well as the Government, Commerce Commission and MBIE for pushing banks to get open banking up and running.

ASB’s general manager of everyday banking, Michael Maclean, said the bank wasn’t charging POLi transaction fees for at least the first year of its partnership.

The Government wants to cap the fees banks charge fintechs that plug into their systems at 5 cents per transaction.

Maclean said this was too low to make it worth ASB’s while charging POLi.

Simmonds said the price cap was a gamechanger, as POLi had been quoted uneconomic fees from banks in the past, some of which surpassed the fees POLi charged the merchants who used its service.

Simmonds hoped POLi would be able to strike deals with the other major Australian-owned banks before the end of the year.

This way more POLi customers would be able to authorise payments from within their banks’ systems.

Smaller banks are still working towards readying their systems for open banking.

Pinch points to date have included figuring out how to share risk and liability between banks and fintechs.

Banks are also mindful of ensuring the transactions made via third parties don’t breach anti-money laundering rules or sanctions.

Jenée Tibshraeny is the Herald’s Wellington Business Editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.