Digital Banking

What The World Can Learn From New Zealand FinTech

Why The New Zealand FinTech Scene Offers Global Lessons

New Zealand is a country that can be easy to overlook when it comes to FinTech. But the story of how payments are evolving there can offer lessons for the rest of the globe, along with glimpses of how the relevant technology might play out in the 2020s.

And that’s why PYMNTS recently caught up with Steve Wiggins, the chief executive of payment governance organization Payments NZ, and Serge van Dam, a venture capitalist focused on FinTech in that country, to get a better idea of what’s going on there – and why it matters to the rest of the FinTech world.

Open Banking

These are indeed exciting times for FinTech, payments and financial services in New Zealand. Open Banking stands as one recent example. Earlier this year, for instance, Payments NZ launched the first application programming interface (API) standards tied to account data and payment initiations. The move comes after a pilot launched last year involving several stakeholders in the industry, spanning DatacomBNZWestpac and others. The overarching approach has been to bring API standards to bear so that financial firms can speed the time it takes to bring new products and services to market.

“Open Banking will create the infrastructure for innovation,” van Dam said.

Thanks to such fuel, the FinTech sector in New Zealand has grown some 33 percent year over year, Wiggins told PYMNTS, with more growth certain to come. After all, as van Dam noted, even though New Zealand may be small – about 5 million people live there – the country has a developed consumer market made up of relatively highly educated people who speak English. All of those factors combine to make FinTech a robust proposition in that country.

“The smaller the network, the faster you can actually get to mass market – and to success, really,” said van Dam.

Challenges abound, of course, just as they do in any market. For New Zealand FinTech, the problem is how to scale. In that case, size does tend to inhibit growth. “The inability to scale is one of the key competitive disadvantages,” Wiggins told PYMNTS.

Vital Collaboration

Other differences also stand out for the country’s FinTech scene – differences that seem likely to, at the least, produce case studies in the near future about the relationships being created in the FinTech and financial services world to create more innovation around products and services.

“We have incumbent banks that provide very good service, and are very profitable,” noted van Dam. And that translates into those legacy financial institutions (FIs) being able to launch a good deal of digital services. That also impacts partnerships between FinTech and those traditional FIs. As Van Dam explained it, there is more force in favor of FinTechs working closely with those established banks rather than against them – which is not always the case in other parts of the world.

“Instead of bringing disruption to the banks, (FinTechs) will disrupt with the banks,” he said. “That’s not true in other areas. Competing against the incumbents is much more of a factor in the U.S.”

Wiggins agreed with that general view. “It’s a very collaborative industry,” he said of the FinTech and payments innovation space in New Zealand.

For the foreseeable future, collaboration and Open Banking will be among the main factors that Payments NZ and other payments-oriented businesses and professionals will be working on in New Zealand, hoping that at least some of their innovations will find an audience outside the country. Other areas of focus include real-time transactions and seven-days-a-week settlement, Wiggins said, along with building a self-governing payments sector.

To get there, one issue that will have to be dealt with is crafting and maintaining consumer trust – in that respect, New Zealand is just like any other place where Open Banking, mobile payments and the like are taking on more steam. When asked to look ahead a year or so, van Dam struck a note of realism in describing what he thought might be some of the main developments at the start of the new decade. The push for Open Banking and data is very likely to lead to breaches “that could set the whole industry back [in terms of] consumer trust,” he said. “Probably the U.K. or the European market is the first place that will happen.”

That might sound akin to a call of pessimism. But it’s also a reminder that in this new age of payments and Open Banking, companies must do even better to gain the trust of consumers. That’s a lesson payment experts are increasingly hammering home – even if those experts are located in a relatively small country in a relatively remote part of the world.

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