What was the pilot?

The industry worked to develop two common payment-related API standards during a pilot: Account Information and Payment Initiation. The pilot provided an opportunity to build these standards as an industry group.

Pilot activity began in March 2018 and wrapped up on 28 February 2019 with the release of version 1.0.0 of these standards. We then released them in advance of the launch of the standards service so organisations could view them and start thinking about how they might use them as part of their customer solutions. These standards are now available to use through our new API Centre.

The industry chose the two standards for the pilot as they could ease the process of digital transactions for the benefit of consumers, businesses and service providers.

  • The pilot Account Information API will enable registered third party standards users, with customer consent, to access specific financial information relating to an account.
  • The pilot Payment Initiation API will enable registered third party standards users, with customer consent, to set up and make an electronic credit payment by connecting directly and safely with banks.

A small group of development partners worked together to develop the two API standards and to build and test the Payment Initiation API in production as a closed user group. The development partners also fed valuable and practical insights back into the refinement of the API standards and design of the framework.

The pilot took a minimum viable product (MVP) approach, where the aim was to get well-functioning common API standards and a framework to market as quickly as possible.

Alongside the initial two standards, the working group identified a possible enhancement and began investigating the development of an additional consent management API. This API will manage enduring consent for Payment Initiation. Enduring consent will allow customers to provide consent which remains valid for more than one transaction and simplify payment flow. This work will continue beyond the pilot and the delivery timeline is yet to be confirmed. The industry is also currently working on a development pipeline of new API functions and standards, which will be rolled out through the standards service once it’s up and running.

What were the key insights we learned from the pilot?

The pilot has given us a number of useful insights on how best to configure the API service and has encouraged organisations involved in the API working groups to invest in API technologies and capabilities to provide future scalability. Importantly, the pilot has delivered:

  • Market-designed common API standards for wider use.
  • Industry momentum towards common API adoption. 
  • Practical insights into the complexities involved in supporting API enabled innovation at both an industry and individual organisation level. 
  • A strong feedback loop from the market in terms of what is required to support innovation; enabling and promoting future investment in API capabilities. 
  • Hands-on experience in the development of common API standards that are right-sized for NZ conditions, are market supported and meet both business needs and deliver improved customer outcomes. 
  • A clear understanding third parties need to be highly involved from the outset in the development of new common API standards, ensuring those standards meet their needs and serve strong use cases.

In addition, we learned:

  • Enabling a collaborative API ecosystem is crucial. It means supporting documentation should be clear and unambiguous. There should also be open dialogue between API Providers and Third Parties to highlight areas of deviation.
  • Market demand should inform development efforts. We know that market demand can lead to innovation that will benefit the end customer. The API development pipeline should be attuned to the market.
  • Industry led approach works. The industry can come together and deliver core standards which provide a platform for innovation.
  • Timeframes for partnering should remain flexible. A high level of flexibility and agility is required to navigate both business and technical elements of bilateral partnering. The sweet spot for an industry led API ecosystem is to enable but not dictate partnering.
  • Implementation preparation takes time. A first time API standard user will require a high level of time and effort to implement. However, as the new API ecosystem matures and standards stabilise, the level of effort required will be reduced.

Who was involved?

Six development partners, who were a sub-set of the API industry working group, participated in the pilot. There were three banks - ASB, BNZ and Westpac - who built and provided the pilot APIs, and three third party providers - Datacom, Paymark and Trade Me - who used the APIs. Alongside the development partners we had the continued engagement and support of our API working group organisations who were ANZ, Kiwibank and Merco Limited, distributor of POLi. Many more organisations across the industry also contributed to the overall success of the API initiative.

What were some of its achievements?

The pilot provided a focal point for stakeholder engagement in the areas of payments and broader financial services innovation. Our development partners and working group organisations put in many thousands of hours of effort into this work.

It has allowed the industry to realise several achievements, including:

  • Agreeing a process and criteria to assess a range of international and local APIs that could be leveraged as base common standards.
  • Establishing a shortlist of potential APIs to be used as base standards and assessing those shortlisted APIs against that assessment criteria.
  • Agreeing to use the UK’s API standards as the base for our standards.
  • Provisioning the platforms (Confluence and GitHub) to be used to host and develop the common standards.
  • Agreeing the MVP API scope, functions and requirements to be supported during the pilot.
  • Having development partners successfully enter into any arrangements required to bilaterally connect.
  • Completing testing and technical on-boarding processes.
  • Successfully managing and resolving issues that emerged from time to time.
  • Having development partners craft the user experience they provide to their respective customers. 
  • Allowing industry to test and to validate levels of market demand and stakeholder interest in common standards for payment related APIs.

Are you doing open banking?

We are often asked whether the work we’re doing through the API workstream is considered open banking. The short answer is not exactly. The longer answer is that common payment-related APIs and a supporting management framework can be used to deliver many of the same outcomes as open banking in terms of paving the way for more financial services innovation.

Part of why we don’t call what we do open banking is because term open banking means different things in different jurisdictions.

Internationally, open banking has become a blanket term for a series of initiatives which can be regulatory-led, co-led or market-led to allow customers greater access to and use of their own banking data. What we’re doing is not open banking as conceived in the UK or Australia, but we’re working towards similar outcomes as these jurisdictions, namely having the ability to interface third party and bank services at the request of a customer. 

We talk about “open standards” rather than open banking because the industry’s focus is currently on standardising payment-related APIs. This is the engine room that can drive more openness in banking. But bear in mind that the API workstream is just one aspect of what we’re working on with the industry.

More broadly, we’re working on several initiatives beyond the API standards, through the Payments Direction programme, that taken together will deliver the desired payments ecosystem of the future for Kiwis. One that is fast, innovative, simple and efficient.