The Commerce Commission has received an application from Payments NZ Limited (Payments NZ) seeking authorisation to work with API providers and third parties to develop arrangements that, according to Payments NZ, will facilitate a more well-utilised, secure and innovative open banking framework.
Open banking refers to consumers using third parties such as fintechs to send payments from their bank account, and using their banking information (eg, transaction histories) in new ways such as improved budgeting and personal finance tools. The purpose of open banking is to increase competition and innovation in banking, payments and financial data services, leading to better products and services for customers.
Open banking is usually facilitated through the use of application programming interfaces (API). An API is a set of routines, protocols, and tools for building software applications and specifying how software components should interact.
Payments NZ is seeking authorisation to jointly develop, with API providers (ie, banks) and third parties (eg, fintechs), and subsequently apply, a new partnering framework relating to the provision of API services by API providers to third parties. Payments NZ is seeking authorisation for an initial five-year period.
The proposed partnering framework for which authorisation is sought involves the joint development of (i) an accreditation scheme (including accreditation criteria) for Third Parties, and (ii) default standard terms and conditions on which API Providers would contract with Third Parties who meet the accreditation criteria. Payments NZ is not seeking authorisation for the specific accreditation criteria or the default terms and conditions themselves, but rather their joint development and application.
A public version of Payments NZ’s authorisation application is available on the Commission’s case register.
Background
Payments NZ’s objectives are to govern and manage payment system rules and standards as well as to promote 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, being financial institutions which issue bank accounts to customers, want to use standardised APIs developed using Payments NZ’s API Standards to provide services to Third Parties, and are registered as an API Provider with Payments NZ; and
- Third Parties, being entities that want to use standardised APIs developed using Payments NZ’s API Standards provided by registered API Providers and are registered as a Third Party with Payments NZ. Some API Providers may seek to receive API services from other API Providers, and may therefore also be considered Third Parties.
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.
