Often regarded as one of the most stable economies in the world, the conditions in New Zealand appear ripe for fintech to step up its role and enhance the region’s economic development. But can the island overcome its challenges?
Historically, the Pacific Island nation of New Zealand has often been regarded as a safe, easy place to do business that offers a high quality of life and living standards. Whilst faring better than much of the world during the pandemic, it also boasted a strong recovery afterwards.
According to the Organisation for Economic Cooperation and Development (OECD), the intergovernmental organisation with 38 member countries (of which New Zealand is one), despite its ongoing challenges with a slower economy with inflation such as in housing causing concerns, the country is still faring well.
New Zealand also has a strong and well-established financial services sector. Twenty-seven banks currently operate in the region, regulated by the Reserve Bank of New Zealand (RBNZ). However, only five of these are locally owned.
The region’s banking sector is dominated by four banks – Australia and New Zealand Banking Group, ASB (owned by Commonwealth Bank of Australia), Bank of New Zealand (owned by National Australia Bank and Westpac. To note, all four are Australian-owned, a reflection of the strong economic ties shared by Australia and New Zealand.
In 2024, the New Zealand government is aiming to reform aspects of the financial service legislation by streamlining the regulatory landscape, protecting vulnerable consumers and removing unnecessary compliance costs.
From 2001 to 2013, the contributions of the ICT sector to New Zealand’s gross domestic product (GDP) growth have been higher than any other OECD country. New Zealand has even created a sovereign wealth fund focused on early-stage startups, the New Zealand Venture Investment Fund.
Fintech in New Zealand
New Zealand’s fintech sector has global revenues of nearly $2billion and a compound annual growth rate of 32 per cent, creating a 14 per cent annual growth in high-value jobs, according to the 2022 New Zealand Fintech Insights Report by Technology Investment Network.
The same report also highlights that the country is one of the Asia Pacific (APAC) region’s fastest emerging fintech hubs. In addition, the 2023 edition of the report showcased that the fintech sector in New Zealand is now driving $2.76billion in export revenue.
In New Zealand, the Financial Markets Conduct Act aims to promote innovation and flexibility in the financial markets, with the Financial Markets Authority (FMA) as the principal regulator. The Council of Financial Regulators (CoFR) provides a key single point of regulatory support and other information for the fintech sector. CoFR is made up of the RBNZ, Commerce Commission New Zealand, Ministry of Business, Innovation and Employment (MBIE), the Treasury New Zealand, and the FMA, which acts as the lead agency, working with the Department of Internal Affairs.
Other key ecosystem players include FintechNZ, a purpose-driven industry working group and inclusive community comprising different voices across the fintech industry such as fintechs, investors and other fintech advocates.
New Zealand also houses a diverse range of fintech successes, including Xero, the cloud-based accounting software, as well as Dosh, the country’s first digital wallet.
Taking the right steps
In 2021, the New Zealand government announced its decision to roll out a consumer data right (CDR) in New Zealand sector-by-sector, beginning with the banking sector before extending to other industries.
The consumer data right in New Zealand gives individuals and businesses greater choice and control over their data. This is being done through the Customer and Product Data Bill, which is now before Parliament, according to MBIE.
BNZ also recently implemented the Payments NZ Account Information API v2.1 standards. When open banking is fully operational, these standards will enable New Zealanders to safely and securely share their financial information with approved providers.
Major banks in New Zealand will have to implement these standards by November this year, following a May 2024 requirement for major banks to support payments via APIs, enabling direct account payments through third-party apps.
Despite these positive steps and a strong economy, New Zealand is still encountering challenges with financial inclusion, particularly with much of the Maori community, the elderly and rural communities. Fintech could potentially support closing these gaps.
New Zealand’s strong developed economy can see it further grow and develop further with fintech as a main part of its future.
