Commission Issues Draft Determination On Payments New Zealand’s Application To Further Develop Open Banking Framework

The Commerce Commission (Commission) has reached a preliminary view that it should grant conditional authorisation to Payments NZ Limited (Payments NZ) to work with current and future API providers (ie, banks) and third parties (eg, fintechs) to develop and apply a partnering framework relating to the provision of API services by API providers to third parties (the Proposed Arrangement).

The Commission’s preliminary view is based on its assessment of the likely benefits and detriments arising from the Proposed Arrangement. The Commission considers that, subject to the proposed conditions, the potential benefits of the Proposed Arrangement are likely to outweigh the potential detriments. The benefits include the potential to reduce the transaction costs associated with partnering between API Providers and Third Parties for access to API Services, and the development of more efficient contract terms for such partnering. The potential detriments, which the conditions are designed to address, primarily relate to potential conflicts of interest in the partnering framework’s decision-making processes.

The Commission is proposing to authorise the Proposed Arrangement for an 18-month period, recognising that the applicants expect their discussions to take around 12 months and the anticipated timing of regulatory interventions that will likely deliver some of the same potential benefits as the Proposed Arrangement.

A copy of the Commission’s draft determination is available on the Commission’s case register here.

The Commission seeks submissions from interested parties in relation to its draft determination. Submissions can be sent by email to registrar@comcom.govt.nz with the reference “Payments NZ Authorisation Application” in the subject line. Any submissions by interested parties should be received by close of business on 15 July 2024, with cross-submissions due by close of business on 22 July 2024.

Background

An application programming interface (API) is a set of routines, protocols, and tools for building software applications and specifying how software components should interact.

Payments NZ, which is owned by banks, governs and manages payment system rules and standards as well as promoting interoperable, innovative, safe, open, and efficient payments systems. Payments NZ has a business unit called the API Centre, which develops, maintains and publishes API Standards, and governs their use by registered API Providers and Third Parties. The API Standards are standards and protocols which inform the development of standardised (or common) APIs, with the purpose of enabling Third Parties to connect with API Providers in a consistent way.

Other parties involved in the proposed partnering framework and for whom Payments NZ is seeking authorisation on behalf of are:

• API Providers (current and future): these are banks and other financial institutions. They want to use standardised APIs to provide API services to Third Parties, which will in turn allow Third Parties to provide services to their customers; and
• Third Parties (current and future): these are fintechs and other companies wanting to use standardised APIs provided by API Providers in order to provide services to customers which have accounts with API Providers. Some of the financial institutions which are API Providers may also seek to become Third Parties and thus receive API services from other API Providers.

A public version of Payments NZ’s authorisation application is available on the Commission’s case register.

Authorisation requirements

The Commission may grant authorisation under section 58 of the Commerce Act 1986 (the Act) for agreements that may otherwise breach the Act if it is satisfied that the agreement will in all the circumstances result, or be likely to result, in such a benefit to the public that the conduct should be permitted.

The Commission’s Authorisation Guidelines explain when anti-competitive agreements that may lessen competition or which contain a cartel provision can be authorised under section 58 of the Act, and our process for determining applications.

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