The power of open banking

March 2, 2023
Mike Brough

Innovation in open banking is changing the level of investment needed to deliver meaningful benefits for customers. It is also paving the way for other industries. In this post, I explore what open banking is, how Octave uses it to deliver value, and where it might lead us in the future.

What is open banking?

Open banking enables consumers to share their personal banking data with a third party in a safe and secure way. It has been available in the UK and Australia for a couple of years and in these markets, has led to innovation across the Financial Services, Payments and Insurance industries.    

NZ has been lagging behind these markets, but the recent announcement by David Clark on open banking should accelerate innovation and make the likes of applying for a home loan and making payments easier and more cost effective.

Products like Akahu and Credit Sense have been working around the limitations of open banking, and typically use a direct connection to a customer’s internet banking. 

Open banking in practice

A good example of the potential of open banking is what Xero has been doing for businesses for the last 10 years. Xero has automated the process of combining banking and accounting data together which has made it easier for businesses to manage the financial side of their business.

It sounds simple, but it was hard mahi to make this happen and involved Xero negotiating individual agreements with every major bank in Aotearoa, as well as setting up the technology to make this happen. 

Thankfully, Rod Drury and the Xero team had plenty of capital behind them, and in the first couple of years, Xero had to pay the banks a monthly fee to access this data. 

Open banking will make it much easier for small startups to deliver innovative products, saving them and their consumers time and money.

Octave’s FinTech experience

Once you understand the make up of the Octave team, you’ll see why open banking is so exciting to us.

Prior to founding Octave and DOT Loves Data, I worked in financial services for over 10 years and held senior leadership positions at Kiwibank in digital, product, and marketing.  

More recently, Claire Jaycock joined us from BNZ where she was the Creative Director for the Digital Team.

Logan Hodgson, our client director, has worked with both ANZ and Kiwibank on digital strategy and delivery. Rosie Woodcock, who recently joined our client service team, has also worked on the Kiwibank account.

How Octave uses the technology

We currently work with Payments NZ, a member-based organisation who are responsible for leading the charge on open banking. Payments NZ is a member-based organisation for Financial Service providers in Aotearoa, and are creating the standards and protocols needed to ensure fast and secure data sharing that will underpin open banking. As their digital partner, we are supporting them to develop the API centre which will be used as the hub for open banking.  

Octave works with a number of Financial Providers helping them improve their digital sales and self-service capability. For both Home Loan and Credit Cards applications, we have recently designed and developed processes that utilise both Akuhu and Credit Sense to make it easier for consumers. A key part of a loan application process is assessing the applicant’s financial situation. Both Akahu and Credit Sense remove the need for a customer to upload bank statements and supporting documentation.

Power and Telecommunications are next

Looking further ahead, David Clark’s announcement mentioned that banking is the first industry to make data sharing easier, with Energy and Telco likely to follow.

I recently investigated the feasibility of installing solar panels on my family home. Having the ability to share my electricity smart meter data would have automated what was a 45 minute conversation with a sales person from the solar panel company. 

Unfortunately, all our kids are at school and we don’t have anyone at home during the day, so the economics of solar don't stack up for our situation.

However, there will be thousands of homes where solar does stack up, and sharing of smart meter data matched with the solar estimate you can find on to understand the solar potential of your roof, would help Aotearoa to accelerate the rate of decarbonisation and save many Kiwis money on their power bill.

We feel open banking developments will support regular Kiwis and businesses to improve transparency and lower cost. Lowering the cost of lending and supporting people with their finances has never been more important than in the current financial climate. We’re proud of the work we have done in this space.