Open banking has transformed the way financial transactions are conducted, allowing people to manage their finances more efficiently.
While nations such as the United Kingdom (UK) have made significant strides with open banking, New Zealand is in a race to catch up.
A new legislative framework has been established, formally introducing the Consumer Data Right (CDR). The Inland Revenue (IR) has begun procuring open banking services to support tax collection.
All signs point to New Zealand being ready to jump on the open banking bandwagon that has already swept through the UK, Europe and other regions.
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The New Regulatory Foundation
New Zealand began its ambitious open banking rollout with the launch of the Customer and Product Data Act 2025 in March.
This law forms the foundation for the CDR, which enables customers to share their data with accredited third parties.
According to drafts from the Ministry of Business, Innovation and Employment, the four largest banks in the country, ANZ, ASB, BNZ and Westpac, are required to start complying with the new data-sharing and payment requirements from December 2025.
Kiwibank will follow by mid-2026, while other deposit-takers are able to opt in or out. Individuals will have more control over their banking information. Elements such as balances, transaction histories, interest charges and fees will be portable.
With consent, financial technology firms and accredited institutions can access the banking data available to build more effective financial tools.
This framework will allow consumers to initiate domestic payments through open banking channels. However, some functions, such as dual authorisation for payments, have been removed.
New Zealand is still in the process of finalising the accreditation rules, but providers will demand that providers show financial robustness, insurance cover, registration and dispute-resolution membership.
Inland Revenue Takes the Plunge
The IR became the first public sector body to head into the market for open market solutions. IR requested information earlier this year, before launching another request for proposals (RFP) in July, seeking suppliers to provide account validation and payment services.
There is a straightforward rationale behind this move. The tax authority handles millions of payments and refunds yearly.
Errors and security breaches cost time and money, with NZ$230 million in incorrect or fraudulent refunds and tax reductions nearly lost between 2023 and 2024.
Open banking’s Confirmation of Payee (CoP) service will help mitigate this issue by cross-checking payee names against account details in real-time.
Only a handful of governments have tested the open banking waters. The UK is a trendsetter, with HM Revenue & Customs (HMRC) introducing a ‘pay by account’ button for taxpayers in 2021.
HMRC expanded its use to account information services for repayments, inspiring other public bodies in the UK, such as National Savings & Investments, to follow suit. NZ’s IR hopes for similar success.
The Payments and Betting Connection
The online sports betting sector has been an early adopter of open banking. Operators in the UK and Europe have welcomed direct bank-to-bank payments to speed up deposits and withdrawals while reducing processing fees.
Thanks to open banking, players can access their winnings quickly and have fewer declined transactions. The system also improves security and reconciliation for operators.
New Zealand is still in the process of enacting its new gambling regulatory framework, and open banking is likely to be a firm fixture in the sector.
Many sports betting apps in New Zealand will use open banking for payment processing. It is also expected to be part of the government’s toolkit for oversight and control.
The CDR will enable smoother embedding of alternative payment methods in a sector where consumer protection and compliance is paramount.
New Zealand Still has Hurdles to Overcome
Despite the progress, New Zealand still has obstacles to surmount. Technical standards, which should be based on 2.3 of Payments NZ’s API Centre, have not been published.
Authorities also need to clarify liability when accredited requestors or intermediaries misuse open banking. Identity verification is another massive issue that needs to be addressed. Even after passing the Digital Identity Services Trust Framework Act in 2023, New Zealand has not specified how it will integrate with open banking.
Australia’s experience with CDR is an example of how, even with legislation in place, uptake will depend on the smooth technical implementation and the presence of a large number of accredited providers.
Despite the hurdles, coming this late to the party has some advantages. The authorities can learn from the mistakes others have made.
Regulators have better hindsight to work with, and technology vendors have developed improved solutions after refining their offerings.
Open banking represents a new way for the Kiwi government to modernise services such as tax payments and welfare, while giving consumers choice, convenience and security.
