Australia and New Zealand have taken significantly different approaches to Open Banking. Like their rugby teams, these differences are due to the challenges in the local market and the strategies the leaders are adopting to resolve them.
Australia’s Approach:
Australia launched its open banking framework in 2020 under the Consumer Data Right (CDR) regime, aiming for broad-based data sharing across banks and third‐party providers. The objective was to break down traditional banking silos, drive competition, and spark innovation across a range of financial products, but particularly lending where the big 4 banks have held an overwhelming market share for a long time. The key challenge here is in loan decisioning. The big 4 banks, with so much data can respond faster to loan enquiries whereas the smaller banks take time to get statement data from customers and process them. However, the rapid, wide‐scale rollout has faced challenges such as high compliance costs, low consumer engagement, and inconsistent sustained data-sharing practices. In essence, the Australian strategy focuses on disrupting the traditional banking landscape by immediately opening up vast amounts of financial data, albeit with a complex implementation journey.
New Zealand’s Approach (Updated Focus on Payments):
New Zealand’s open banking evolution has taken a markedly more payments-centric direction. Initially, the country experimented with industry-driven standards, and these efforts have since coalesced around the Payments NZ API Centre. Unlike Australia’s broad-based data access initiative, New Zealand’s framework is built around standardising payment-related APIs—with the country’s largest banks required to implement these standards (by 30 May 2024) to ensure a seamless, secure, and consistent approach to digital payments. This deliberate focus on upgrading the payments ecosystem is designed to drive transformative improvements in everyday financial transactions—such as faster, more secure online purchases, bill splitting, and innovative banking apps—while still fostering a spirit of controlled innovation and consumer protection.
Why the Differences?
The divergence in approaches stems largely from distinct government priorities and the nuances of each financial ecosystem. Australia’s aggressive framework was intended to rapidly dismantle legacy systems and boost lending competition through massive data sharing. The focus was broad, aiming to transform an array of financial services, even if this has led to challenges in execution. On the other hand, New Zealand’s strategy reflects the benefits of a more measured, payments-focused model. By concentrating on payment APIs and streamlining digital transactions, New Zealand not only improves consumer convenience but also creates an environment that encourages innovation in one of the most critical touchpoints of everyday banking. This targeted approach helps ensure stability and builds trust among users and institutions, as it addresses immediate consumer and merchant needs more directly.
Digital Impact
Australian banks must craft expansive, secure digital ecosystems that support a variety of financial products, driven by consumer control over diverse financial data. In contrast, New Zealand banks are tasked with delivering an optimised, highly efficient digital payments experience that meets immediate, everyday transactional needs. These strategic differences not only influence the types of digital platforms banks must build but also dictate where they concentrate their technological investments and customer engagement efforts.
Either way, banks on both sides of the Tasman must consider their technology partners capabilities to deploy API centric, microservices based architectures to meet the expectations of customers and the regulators.