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Dermot Butterfield is the CEO of New Zealand open data company Wych, which has successfully launched in Australia in the past few years.
He shares his insights on what New Zealand can expect in the coming years as Open Banking grows and matures.
Open banking, which allows third-party developers to build applications and services that connect to financial institutions, has the potential to revolutionise the way New Zealanders interact with their finances.
"Open banking is about making data flow seamlessly between banks and service providers, much like how pipes carry water from a reservoir to your tap," Dermot says.
In the analogy above, Dermot’s company Wych is the pipes - an intermediary role that ensures smooth and secure data transfer.
One of the most immediate impacts of Open Banking will be on the lending process, Dermot says.
"The first thing we'll do is make some of our existing journeys work better. We'll reduce friction and make things faster."
Take a typical lending journey – dealing with a mortgage broker or getting a car loan. An Open Banking application could allow the lender to have a full seamless view of your accounts without having to supply each and every document.
"You can see the time to “yes” reducing from two or three days to five minutes," Dermot says.
This means that mortgage approvals and other lending decisions could be made almost instantaneously, greatly enhancing customer experience.
Beyond lending, Open Banking will also transform personal financial management (PFM).
"There's a lot of work in the space enabling organizations and individuals to connect to their data and bring that in so that they can get a learning."
This could lead to smarter budgeting tools and more insightful financial dashboards, empowering users to take control of their finances without compromising security.
"You no longer have to give away your bank credentials," Dermot says, highlighting the enhanced security measures that come with Open Banking.
Payment automation is another exciting development on the horizon. Dermot envisions a future where "people can move money in a better way, in a faster way, in a more informed way."
While New Zealand introduced Open Banking payments first, the Australian experience suggests that the data side of Open Banking is where we’ll see the biggest strides forward, Dermot says.
“The biggest one is probably WeMoney on the Australian side. That has a massive, massive following - really good personal financial management. “
WeMoney is an app that consolidates a user’s various accounts into one place, helping attack debt faster and finding savings.
“It’s helping people get control of their finances on a day-by-day basis. It's plugged in, consuming your data, telling you what's happening, where it's coming, where it's going. It's really, really strong.”
While the possibilities are endless, the journey towards a fully integrated open banking ecosystem in New Zealand is not without its challenges.
"The cost of innovation is high in New Zealand, the cost of participation is high," he says.
He predicts that while the initial phase will see a lot of innovation, the real value will emerge in the second wave, as the market matures and more customer-specific solutions are developed and existing applications from overseas enter the New Zealand market.
Dermot remains optimistic about the future of Open Banking in New Zealand.
"We are positive. We think that there's a real opportunity for great things to happen here," he says.
As the country navigates the complexities of implementing these new systems, the promise of a more efficient, secure, and user-friendly financial landscape is within reach.