By Lucy Craymer
WELLINGTON (Reuters) -New Zealand will introduce open banking over the next two years, the government said in a statement on Thursday, making the sector the first to have rules giving consumers full control of their financial data.
"Open banking ensures banks must share customer information if they request it, making it easier for New Zealanders to compare mortgage rates, apply for loans and switch banks," Minister of Commerce and Consumer Affairs David Clark said in a statement.
"Open banking" is already in place in a number of markets overseas, including Australia and the United Kingdom. It is the process of banks and other traditional financial institutions giving customers and third parties easy digital access to their financial data.
In July 2021, the government agreed to establish a consumer data right framework (CDR), and the banks will be the first sector to implement the mechanism, said Clark.
Proponents of "open banking" say it may allow consumers to share their banking data with other providers to get better and cheaper services than what they already have.
Clark said if customers can shop around, banks will also have to work harder to retain their customers, leading to savings for consumers.
"At a moment in time where cost of living is high around the world, consumers should have the power to shop around for better deals," he said.
Australian banks, which dominate New Zealand's banking sector, are increasing their reliance on data to approve loans and better sharing of data supports this. The ability to automate large parts of loan processing is seen by banks as a way to cut costs, which are a headwind due to rising interest rates and staff wages.
New Zealand Bankers' Association chief executive Roger Beaumont said it is important to get the open data sharing right for consumers and they needed time to implement.
"There may also be lessons from other countries the government could take into account as it develops the legal framework," he added.