As with other areas of financial regulation, payment systems are heading for more extensive regulation. The Reserve Bank has recognised the economy's heavy reliance on certain key financial market infrastructures (FMIs), including payment systems, such as NZ Clear and the Exchange Settlement Account System, and in June 2019 it will release an exposure draft of the legislative framework aimed at regulating those 'systemically important' FMIs.
Internationally (Australia, UK and the EU), the trend has been towards heavier economic regulation of payment systems, including to promote competition.
Open banking refers to technology (typically APIs) used by banks and financial institutions to share customer data with third party service providers, enabling them to provide a range of different services, from alternative payment mechanisms to enhanced budgeting and accounting software. Open banking has the potential to increase competition in the financial services industry and give customers greater control over their personal data. However, open banking also raises concerns around privacy and cyber-security, which require careful consideration.
The UK, EU and Australia have already taken steps to implement open banking, and the New Zealand Government has been watching closely. The Minister of Commerce and Consumer Affairs has been encouraging the industry to continue its progress towards developing an open banking framework. This led to Payments NZ releasing its API Centre, an industry driven initiative designed to centralise payment API standards in New Zealand and provide a sandbox environment for developers to test their open banking products against those standards. Earlier this year, the New Zealand Government confirmed its decision to establish a Consumer Data Right (CDR) framework for New Zealand, with legislation to be introduced as soon as 2022.