Commerce Commission Authorises Payments New Zealand To Further Develop Its Open Banking Framework

The Commerce Commission has granted Payments NZ Limited (Payments NZ) conditional authorisation 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). This is intended to make it easier for third parties to work with API providers, and accelerate the delivery of open banking in New Zealand.

The Commission may authorise an arrangement if, despite any potential detriment from the arrangement, the arrangement will likely result in a benefit to the public.

After consulting on its draft determination, the Commission has reached the view that, subject to the conditions it has imposed, the benefits of the Proposed Arrangement are likely to outweigh the 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 has authorised the Proposed Arrangement for an 18-month period, recognising that the applicants expect their discussions to take around 12 months. This time period also reflects 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 determination, which includes its reasons for granting the authorisation (subject to conditions), is available on the Commission’s case register.

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.

Other workstreams

This authorisation is one of three significant moves from the Commission which together are designed to accelerate the delivery of open banking in New Zealand. Its recommendation to the Minister of Commerce and Consumer Affairs to designate the interbank payment network under the Retail Payment System Act 2022 would, if accepted by the Minister, allow the Commission to use its tools to actively drive competition and innovation in the retail payment system and enable the development and adoption of new, safe, low cost and accessible open banking payment solutions. The final market study report into personal banking services also published today highlights the importance of open banking for competition and recommends that the Government and industry works together to accelerate and coordinate progress on open banking, setting down a recommended date to operationalise it.

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