How great would it be? – Issue 11
James A. Brown, Co-Founder of FinTechNZ tells Findexable about how fintech can put New Zealand on the international stage.
What are the gaps in fintech research?
The reality is that some countries are doing a really good job of uncovering the economic potential for fintech in their own jurisdiction. New Zealand is, unfortunately, a little bit behind other countries, even our partners across the pond in Australia.
The Government hadn’t truly identified fintech as a really strong economic driver for the country. What we’ve not seen yet is a piece of research similar to what has been done in the past for primary industries like, among others, agriculture, forestry and tourism. However, FinTechNZ has recently had a session with regulators and Minister Kris Fafooi to discuss the future of financial services in New Zealand. The result is a soon to be published briefing paper that will be distributed to the entire ecosystem, in which we’ve been able to make recommendations. One of these is to have a baseline for New Zealand in order to identify economic opportunities for fintech.
Over the last ten years – and this has been driven by individuals rather than collectively – we have seen companies like Xero, Pushpay, TSG and BZX build success both locally and globally. We are using this information to show the Government that there really is an opportunity in New Zealand. It has not been an easy journey for any of these companies because of the lack of information on the regulatory framework. Also, raising capital in New Zealand is very difficult: there is a big gap between the 2M$ and the 15M$ marks. The lack of talent in this country has forced businesses to go overseas.
Access to funds and percentage of the investment that normally goes overseas for a greater return, would make a huge difference to the ecosystem. Promoting this access overseas would attract more people into New Zealand, to a good regulatory framework, access to capital and a good work-life balance. And we could take this to the country, so that people and businesses do not necessarily gravitate towards the big cities. This is as a real opportunity to drive talent and capital investment towards the rural parts of New Zealand.
We have seen that individual companies have been successful and with the research we’ve conducted we are able to show Government that there is reason for them to invest resources and surplus in fintech. In fact, it has just announced a surplus of 7.5 billion dollars – to invest in the fastest growing sector in New Zealand.
What are the needs?
We have to uncover the barriers to creating real opportunities for small businesses.
In New Zealand we hear from the sector that we do not have a sandbox and that this is a barrier.
Only a few weeks ago, the Monetary Association from Singapore – here in New Zealand to discuss further supplementing the new agreement between our countries – explained that in Singapore too there was a similar ‘market anxiety’ and this was the reason why a sandbox was created. However, they could see, during the application period, that less than 1% of the applications only had to go through a slightly different regulatory environment; they could see that what they had in place was fit for purpose. This way they were able to ‘cure’ the market anxiety.
Here in New Zealand, the FME is very much open for business and have done some great work, but there is an element of ‘market anxiety’ that makes people believe that we need a sandbox – UK has one, Singapore has one and so have other countries that are doing great in the fintech space. It is not beyond reason that some assume that the sandbox is the reason for that level of success. However, what is really missing is access to capital, to funding, to talent and to a regulatory environment that creates collaboration between small and large entities. Our research will show that the regulatory environment is fit for purpose and this will go towards ‘curing market anxiety’, making the sector a far better place.
An additional aspect is the rules of engagement between small and large organisations. The Royal Bank of Scotland has recognised a similar issue in the UK environment: small businesses do not have the time and resources to wait for large and complex organisations to evaluate what they have to offer and whether there is a fit with the strategy or governance model. It can take a long time, which burns into the capital of smaller organisations and may lead to them ceasing to exist or having to change their business model. RBS has decided to engage the banking community and British Standards Institutions in producing a framework for small organisations to understand what to prepare and how to engage with larger organisations, and for the latter to fast track the process to provide answers on the rules of that engagement.
FinTechNZ has presented this project to local banks in New Zealand for them to trial: ANZ have started an internal revision process, which we hope will be adopted by other banks. We have shared this project with the Commerce Commission, which is responsible for competition here in New Zealand, to assess its adherence to the rules, and how we can work together to support the community.
Where do you see research and content development going?
We already produce a very large amount of content trying to keep fintech, insurtech and wealthtech at the forefront of everyone’s minds, to understand the benefits of adopting new technologies, and maintain the sector firmly in the radar of Government and agencies.
It is important to show who is doing what, who is leading the charge and what the banks are doing to support innovation. We are seeing more maturity and openness from the banks in working together with fintechs towards the common goal of delivering better customer services.
Once we have put our house in order, New Zealand will be very well placed: it may never be a fintech hub of the size of London or New York or Singapore. However, some of the things the Government has been doing – for instance extending the agreement with Singapore for entrepreneurial visas, or easing the data flow between the two countries for research purposes, or making it easy to set up businesses and access capital in either jurisdictions, or the discussion with the UK on free trade agreements post Brexit – represent great opportunities to drive strong economic growth in New Zealand. Creating partnerships with Singapore and other countries like Vietnam and Indonesia is an opportunity for New Zealand to further the discussion on free trade agreements with UK and other EU countries: it means that companies and investors in those countries can use New Zealand as a test-and-learn environment before entering new markets like, for instance, Indonesia and gain access that they would not necessarily have.
The Global Fintech Index by Findexable launches worldwide on 4 December 2019
Follow us on @findexable