How banks are undermining open banking

The idea of open banking is to give customers control of who can access their financial information.

Instead of this data being available exclusively to your bank, you can give access to accredited third parties who can provide new products and services to help you better understand your finances.

Open banking was supposed to pave the way for new financial technology companies or ‘fintechs’ to enter the market. Fintechs are companies that apply innovative technologies to financial services. In open banking, these fintechs might provide personal financial management tools, help gather your information for affordability checks for loans, or help avoid surcharges when making payments.

The theory is that fintechs could disrupt the status quo by weakening the relationship between the banks and their customers. As new financial management apps expose us to the possibilities that lie beyond our banks when it comes to savings, investments, or loans, the banks will be forced to compete by improving services and lowering prices.

But, one year after the launch of open banking in New Zealand, the benefits have yet to materialise.

Banks retain control over our ability to share our information by charging fintechs for access. This represents a barrier to entry for the businesses that are supposed to be disrupting the banking sector, stifling innovation.

In other markets, banks cannot charge fintechs for access, and we believe these charges will lead to a watered-down open banking experience for New Zealanders, and one with limited ability to drive competition in the banking industry.

Bank’s fees for open banking are too high

Our data is the primary resource in open banking. Consumers give third parties the ability to access their data through information requests known as API calls.

In the United Kingdom, European Union and Australia, open banking information requests are free. However, in New Zealand, the banks have been allowed to charge fees for them.

For open banking to work, a wide array of software systems need to be able to interact with each other. To do this, in New Zealand, the industry, led by Payments NZ, has developed standardised methods of operation known as application programming interfaces or APIs.

APIs are like pipelines between banks and third parties. Once a third party is accredited as an open banking participant, they can connect themselves to the pipeline and request information through API calls. By charging fees for these API calls, banks can control how much data flows through the pipeline to third parties.

There are two primary types of API call involved in open banking.

• Account information API call: used for personal budgeting services or affordability assessments when lending money. These requests allow a third party to see a customer’s account information.

• Payment initiation API call: used to make payments.

Banks can’t charge their customers for open banking services, but they can charge fintechs for API calls made on a customer’s behalf.

It’s tough to put a figure on precisely how much each bank charges for API calls – they all charge different fees and have different payment structures for account information and payment initiation requests.

In December, the Commerce Commission reported that, with payment averages of around $80, payment initiation API call fees could range from 5¢ to 30¢ per payment.

Some New Zealand banks have announced they will not charge API fees for limited timeframes. ASB are waiving fees until December 2025 with ANZ waiving fees for account information API calls for 12 months from April 2025. Westpac are waiving fees for new partners for the first 12 months of the relationship, and for existing partners for the next 12 months.

Kiwibank has said it will never charge for API calls, though it won’t have open banking up and running until May 2026.

BNZ are not waiving API fees, but access to API calls is free while fintechs develop their business.

These are positive developments, allowing businesses some bathing space as they build their open banking propositions.

Yet, as we will show, fees for account information API calls will present significant challenges for the viability of some applications of open banking. For these fintechs, a one-year grace period will simply not address the long-term structural issues affecting the viability of their products.

Government has stepped in, but proposed fees remain too high

The banks’ self-set prices for open banking participation are prohibitively high – so high the government has felt the need to intervene.

Late last year, the Commerce Commission acknowledged it was concerned the price of open banking was limiting fintechs’ ability to offer competitive products and services.

The government has since announced it will introduce caps on the cost of API calls charged to fintechs. These caps will be in place from 1 December 2025.

• Payment initiation API calls will be capped at 5¢ per payment.

• Account information API calls will be capped at 1¢ per call, to a maximum of $5 per month per customer.

At face value, this is an improvement.

Consumer NZ believes the 5¢ cap on payment initiation API calls is appropriate.

Even if these costs are passed onto the consumer, a 5¢ fee is significantly lower than the surcharges New Zealanders pay on a daily basis.

However, we believe that account information API calls should be free.

The ability to control who can access our financial information is at the heart of open banking. Yet, by implementing charges for account information API calls, banks retain control over our data.

This goes against the principles of open banking. We believe it will have significant negative consequences for the quality and affordability of open banking services for New Zealanders. It is likely to affect adoption, and ultimately, open banking’s ability to disrupt the banking industry.

We told the Ministry of Business, Innovation and Employment (MBIE) about our concerns. Glen Hildreth, consumer policy manager, at MBIE said:

“At present, banks have no cap on what fees they can charge for open banking transactions. The regulations will introduce a fee cap, preventing banks from charging data requestors excessive fees for accessing customer data. The aim is to limit open banking fees to an appropriate level for data requestors and banks’ customers.

“Enabling banks to still charge some fees, rather than prohibiting them entirely, ensures there are commercial incentives for banks to invest in maintaining and improving their open banking systems. It also helps ensure those systems are used efficiently.

“MBIE is aware of some fintechs’ concerns about the fee caps. We are considering additional information provided by those businesses and will provide further advice to the minister on these matters in due course.”

API fees stifle innovation

The proposed caps for API calls don’t sound like much. However, API calls are the primary resource for a new fintech business that performs a narrow function like payments or personal budgeting. The cost of using API calls can make or break the viability of a business.

And this might be why innovation in open banking is off to an underwhelming start.

In New Zealand, one year since its establishment, there are just 25 registered third parties that can provide open banking services. Of the 25, many are established household names such as Visa, Mastercard, Windcave and POLi.

After one year in the United Kingdom, where API calls have always been free, there were 67 registered third parties providing open banking services.

Of course, the United Kingdom is a much bigger market than New Zealand, and we could expect to find a bigger open banking ecosystem there.

However, it was also the first market in which open banking was implemented. Businesses internationally, and within New Zealand, have had years to develop and refine their open banking services for the New Zealand market. They should be queuing up to take advantage of the opportunity in open banking.

API charges will damage open banking services

Some of the most innovative and consumer-friendly examples of open banking we’ve seen overseas require multiple API calls a day. The charges for these information requests, which help people budget their finances, add up quickly, damaging the viability of these new services.

Carl Thompson is the chief executive and co-founder of SortMe, a New Zealand-based personal financial management app. The service aims to help users save money through better financial management. SortMe says its recommendations could save the average user over $2,371 a year.

For Thompson, the impact of charges for API calls is straightforward.

“These API charges would increase the cost of goods and services in our business model by about 300%. We would have to significantly increase our prices to make the business model work. But we know from experience this just isn’t viable,” he said.

SortMe provides a free service, but access to its most useful features costs $29 a month. However, under the proposed caps, Thompson estimates the $29 monthly fee would increase drastically, reaching between $49 and $80 per month.

“I guarantee you, no one will pay $49 a month for a tool to help them be better with money. It just doesn’t work. The numbers don’t make sense,” Thompson said.

We were also keen to get an overseas perspective. We asked Scott Mowbray, the co-founder of Snoop, a UK-based personal financial management app, about the impact MBIE’s proposed price caps would have had on his business when it launched.

“On average, our customers have 3 banks connected. We make requests to each bank connected a minimum of twice a day, with more requests for some customers on demand,” Mowbray said.

“It’s highly unlikely we could have launched a free version of Snoop based on these [price caps proposed for New Zealand]. It would have been a very different business case and customer proposition. Additional revenue-generating features would need to have been included to have come up with anything close to viable.”

The costs of open banking will be passed onto consumers

Banks are prohibited from charging their customers for using open banking. But, it’s almost certain banks’ charges to third parties for API calls will be passed onto consumers.

“This is a tariff, and we’ve seen what tariffs do. They increase the cost of goods, and that gets passed onto the customer. We can’t just absorb such a significant increase in cost. With the numbers we’re talking about, it would put us out of business,” Thompson said.

Open banking is considered by many to be New Zealand’s first example of a consumer data right. It is an acknowledgement that the personal data held by businesses belongs to the customer not the business.

If charges are passed onto consumers, and if they are as high as Thompson suggests they will be, the most advanced open banking services – and the ability to control who accesses your data, and how often – will be out of reach for many.

The impact of API fees will significantly damage the spirit of open banking, and its ability to drive competition in the banking industry.