Imagine a financial landscape where consumers in New Zealand can seamlessly access innovative banking services tailored to their needs, through a system that prioritizes competition and security. Open banking, a framework allowing third-party providers like fintechs to access consumer banking data via secure APIs with explicit consent, holds the potential to make this vision a reality. Yet, a recent report from the Commerce Commission, brought to light on September 3, 2025, exposes a significant barrier to this progress. Dominant players in the market—ANZ, ASB, BNZ, and Westpac—are accused of leveraging their substantial influence to slow the comprehensive adoption of open banking. Their actions, rooted in prioritizing proprietary interests over shared innovation, threaten to undermine the competitive benefits and consumer protections this initiative promises. As the financial sector stands at a pivotal moment, the tension between entrenched power and emerging opportunities raises critical questions about the future of banking services for all New Zealanders.
Dominance Delaying Innovation
The Commerce Commission’s findings reveal a troubling trend among New Zealand’s major banks, which appear to be stalling the full implementation of open banking. Rather than embracing standardized APIs that would enable a fairer playing field, these institutions focus on developing services that reinforce their already substantial market control. This strategic maneuver, as the report suggests, does little to advance genuine competition within the sector. The banks’ reluctance to fully integrate open banking principles means that smaller competitors, who could drive fresh ideas and better services, are left grappling with limited access to the tools necessary to challenge the status quo. This not only hampers the growth of a dynamic financial ecosystem but also delays the broader societal benefits that could arise from increased innovation and choice in banking.
Further compounding the issue is the control these major players exert over essential infrastructure, such as GetVerified, a confirmation of payee service crucial for ensuring payment accuracy. Currently, only the four dominant banks have rolled out the APIs required to support this utility, and even then, the coverage falls short of addressing all necessary use cases. This selective implementation creates a bottleneck, preventing other market participants from accessing critical systems on equal terms. The result is a perpetuation of an uneven competitive landscape where smaller entities, including fintechs, struggle to offer comparable services. Such gatekeeping tactics by the major banks highlight a systemic barrier that must be addressed to realize the full potential of open banking in New Zealand.
Security Threats to Consumers
One of the most alarming concerns raised by the Commerce Commission centers on the persistent use of outdated and insecure methods for accessing banking data, such as screen scraping. This practice, which requires consumers to share sensitive login credentials with third parties, poses significant risks in an era where digital fraud and scams are increasingly prevalent. The report underscores the urgency of transitioning to secure APIs under the open banking framework, which are designed to protect personal information while enabling innovation. Without this shift, consumers remain vulnerable to potential breaches that could compromise their financial security, eroding trust in both existing and emerging financial services.
Beyond the immediate risks, the delay in adopting secure technologies reflects a broader challenge in balancing accessibility with safety during this transitional period. While the major banks have introduced some open banking features, their slow pace in fully implementing standardized systems means that many third-party providers still rely on less secure alternatives to meet consumer demand. The Commerce Commission emphasizes that this situation is unsustainable, particularly as cyber threats continue to evolve. Addressing these security gaps is not just a technical necessity but a fundamental step toward building a financial environment where consumers can confidently engage with innovative services without fear of exploitation.
Fintechs Struggling to Compete
Fintech companies, often at the forefront of financial innovation, face significant hurdles in competing with New Zealand’s major banks under the current open banking landscape. These smaller entities, which depend heavily on open banking APIs to develop new services, lack the extensive infrastructure and access to traditional payment networks like Visa and Mastercard that the dominant banks enjoy. This disparity creates a stark competitive disadvantage, limiting their ability to reach a broad consumer base. The Commerce Commission’s report points to this imbalance as a critical barrier, noting that without equal access to essential resources, fintechs cannot effectively challenge the market leaders or deliver the diverse solutions consumers deserve.
A specific example highlighted in the report is BNZ’s forthcoming Payap product, which is set to launch with near-universal consumer coverage thanks to its integration of both open banking APIs and established payment schemes. This kind of advantage is out of reach for most fintechs, which must navigate a fragmented system with limited support during the short to medium term. Such discrepancies not only stifle the growth of smaller players but also restrict the overall innovation that open banking is intended to foster. If this trend persists, the financial sector risks becoming even more concentrated, with major banks continuing to dictate terms while emerging competitors are sidelined, unable to scale or innovate at the pace required to transform the market.
Scrutiny on BNZ’s Approach
Despite being recognized as a leader in advancing open banking initiatives, BNZ has come under specific criticism from the Commerce Commission for certain restrictive practices. The bank has taken a firm stance against partnering with third-party providers that continue to use less secure data access methods, even in scenarios where fully secure APIs are not yet available. BNZ justifies this position by prioritizing customer safety, arguing that collaborating with entities unwilling to abandon risky practices could expose consumers to unnecessary vulnerabilities. While this commitment to security is commendable, it creates friction during the transitional phase of open banking adoption, limiting access for some service providers.
The Commerce Commission, however, views BNZ’s rigid approach as a setback to broader progress, expressing disappointment given the bank’s otherwise strong track record. This disagreement underscores a deeper tension between maintaining high security standards and ensuring practical accessibility in the interim. While BNZ’s caution reflects a protective mindset, the Commission argues that a more flexible strategy could better support the ongoing shift to a fully secure open banking environment. This critique of BNZ highlights the complex challenges of aligning individual bank policies with the collective goal of fostering a competitive and safe financial ecosystem in New Zealand.
Regulatory Steps and Deadlines
On the regulatory front, significant measures are being put in place to accelerate the adoption of open banking across New Zealand’s financial sector. The Ministry of Business, Innovation and Employment’s Consumer Data Right regime establishes clear compliance deadlines, with major banks required to adhere by December 1, 2025, and Kiwibank following suit by June 1, 2026. Smaller banks and deposit takers are given the option to join voluntarily, with a targeted API deployment timeline set for 2027. This structured approach aims to create a cohesive framework that ensures all players, regardless of size, contribute to building a more open and competitive banking system over time.
To refine this timeline and ensure it meets diverse needs, the Commerce Commission is actively seeking input from smaller financial institutions. Their feedback is deemed essential to crafting a balanced implementation plan that avoids overburdening less resourced entities while maintaining momentum toward widespread API adoption. This regulatory push signals a commitment to breaking down the barriers erected by major banks, fostering an environment where innovation can thrive. By setting firm deadlines and encouraging dialogue, authorities aim to address current disparities and pave the way for a financial landscape that prioritizes both consumer benefits and equitable market access.
Bridging Gaps with a Hybrid Model
To navigate the challenges of transitioning to a fully realized open banking system, the Commerce Commission advocates for a hybrid model that temporarily accommodates both secure APIs and less secure data access methods. This interim solution is designed to ensure that consumers continue to have access to essential services while the necessary infrastructure is developed. A proposed “sunset date” for this model, set at least six months after all major banks have delivered the required APIs, provides a clear endpoint for phasing out outdated practices, balancing immediate needs with long-term security goals.
This hybrid approach also serves to maintain competitive pressure on bank-owned products by allowing fintechs and other third-party providers to operate during the transition. Without such a framework, there’s a risk of significant disruptions in service availability, which could undermine public confidence in open banking. The Commission’s strategy reflects a pragmatic effort to support innovation while mitigating consumer risks associated with insecure methods. By enabling a gradual shift rather than an abrupt cutoff, this model aims to smooth the path toward a financial ecosystem where secure, standardized APIs are the norm, ensuring that all market participants can contribute to and benefit from a more dynamic banking environment.
Path to a Competitive Financial Future
Reflecting on the Commerce Commission’s insights, it’s evident that major banks in New Zealand have been using their entrenched power to shape the trajectory of open banking in ways that preserve their dominance. Their focus on proprietary services over standardized systems has delayed the competitive advantages this framework was meant to deliver. Meanwhile, consumer security has been jeopardized by the persistence of risky data access methods, and fintechs have faced significant obstacles in challenging the market leaders. The regulatory deadlines and hybrid model proposed aim to address these imbalances, setting a foundation for change.
Looking ahead, the next steps involve sustained collaboration between regulators, banks, and smaller players to ensure fair access to critical infrastructure and a swift transition to secure technologies. Policymakers must remain vigilant in enforcing compliance with upcoming deadlines while supporting fintechs through targeted initiatives that level the playing field. For consumers, the focus should be on education about the benefits and safeguards of open banking, empowering them to make informed choices. As New Zealand’s financial sector evolves, continuous monitoring and adaptation of strategies will be crucial to overcoming past barriers and fostering an environment where innovation and trust can flourish together.
