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Financial services and payments regulation is expanding and its proponents are aiming to produce more inclusive and resilient systems, according to a report by Payments NZ, a quasi-official body whose stated mission is "making sure payments are simple and secure for Kiwis."
Payments NZ is a limited liability company whose shareholders include major banks and which develops and manages the rules and standards that govern four of New Zealand’s core payment clearing systems, namely the Bulk Electronic Clearing System (BECS), the Consumer Electronic Clearing System (CECS), the High-Value Clearing System (HVCS) and the Paper Clearing System (PCS).
The report highlights some interesting trends in payments-related regulation in New Zealand.
A new data right
On July 5, the New Zealand government announced that it wanted to enact a new act to introduce a "Consumer Data Right" that mirrors Australia’s regime closely.
It has said that this right will allow consumers to share data that is held about them with trusted third parties securely, using standardised data formats and interfaces.
The consumer data right is to be rolled out sector-by-sector, with its content potentially covering a different type of data and functions applicable to each market, industry or sector. For example, when it is the turn of the banking sector the law may mention bank accounts. More detailed obligations are to follow in rules and data standards.
To protect consumers' privacy, commercial confidentiality and the security of data transfers, the government intends to accredit "third-party data recipients." It does not say whether it believes the recipients to be third parties or whether it is using the well-known compliance phrase "third-party data," although the former seems the more likely in context.
According to David Clark, minister of commerce and consumer affairs, on July 6, the new data right is to work hand-in-hand with a "Digital Identity Trust Framework," announced earlier this year, which will set out rules to govern the performance of services related to digital identities.
Payments regulation
Regulation continues to be a pervasive force for change in the payments arena for an expanding array of reasons. Some of this regulation is oriented towards soundness, efficiency and competition, whereas other regulation is in direct response to the pandemic. A desire to have greater control over fintechs and global technology platforms has also increased regulator' remit, as has the desire to ensure that consumers benefit from greater competition and innovation in the marketplace.
Concerned about any harm that might occur to New Zealand's consumers from the rapid growth in "buy now, pay later" services, Clark has previously expressed a desire to consult financiers about the regulation of these services late in the year.
Meanwhile, New Zealand's government has instructed the Ministry of Business Innovation and Employment to develop a regulatory regime to reduce merchant service fees. That regime will (i) "introduce a transitional downward price path to require reductions in interchange fees as soon as possible"; (ii) allow the Commerce Commission to intervene directly, using a broad range of powers to regulate different participants, or classes of participants, in the retail payment system and (iii) oblige people to disclose and report various things so that the the Commerce Commission can monitor the retail payments system. The government will draft up a new Retail Payment Systems Bill to put all this into practice and will consult financiers about several secondary issues.
The report endorses an existing global governmental push to give consumers greater control over their data and a realisation that data is fundamental to the success of every country's digital economy. It also wants the governments to hold global technological platforms to account, in part because their activities span regulatory perimeters and national borders.
Cryptocurrencies and money laundering
The New Zealand Parliament’s Finance and Expenditure Committee has opened an inquiry into cryptocurrencies to understand the impact of mining, to spot risks to users/financial stability and to consider fresh regulations.
The Financial Action Taskforce’s (FATF) latest evaluation of New Zealand found that the country's anti-money laundering (AML) system was effective but contained room for improvement. Its findings will influence a review of the AML/CFT Act, which is expected to commence imminently.
Looking ahead
The report predicts that regulators will do more and more to shape the New Zealand payments ecosystem, assuming greater control over the systems that firms use to clear and settle payments. It also expects them to assume more control over the ways in which consumers make and receive payments and over cybersecurity and access to data. Decisions made in other jurisdictions concerning the regulation of big tech may also spill over into New Zealand.
