10 big FinTech trends in New Zealand

I present a lot around the world, and I am always delighted and honoured when a conference asks me back for a second visit. It reaffirms that you were ok the first time around and so a second bite is delightful. One such moment occurred last week at The Point, the conference for PaymentsNZ, the governance organisation at the heart of New Zealand’s payments system. I couldn’t stay long and did the keynote the first day, before flying out to Hong Kong, but here’s a summary the guys at PaymentsNZ sent after the event. Very useful.

The conference Twitter hashtag #ThePoint2018 trended at number one in NZ across the two days, and there was a lot of fantastic media coverage from national business media (check out links to the stories at the end of this blog).

Here are the top 10 insights, in no particular order:

1) Open banking is still the topic du jour – but independent commentator Dave Birch warns that open banking, the way it is done in the UK, can have unexpected consequences. Instead of open banking, Dave says we should be thinking and talking about open data that goes two ways, otherwise there will be a “crippling asymmetry” between the big tech companies and banks and financial institutions. We also learned that we should now drop the GAFA (Google, Amazon, Facebook and Apple) acronym when talking about the big tech giants and start using FATBAG (Facebook, Amazon, Tencent, Baidu, Ant and Google).

2) 'Fin’ is the parent, ‘tech’ is the kid – we live in an era of unprecedented technological disruption, with international keynote speaker Chris Skinner noting that the most valuable companies today are digital companies. Stripe, started by a teenager, provides 22x more value per employee than JP Morgan. There is currently a re-bundling of fintech, moving away from traditional business models where you control every part of the process, to the ‘parents’ being co-creators and partners with the tech whiz kids. Chris warns that if decision makers don’t understand how the tech works then that's going to be a problem for them, as the kids know how to code...do you?

3) The grasshopper or the ant – open APIs is the way of the future. We’re moving on from the “set menu” style and to a more “buffet style” when it comes to financial services thanks to open banking technology, says Ismail Chaib from TESOBE/ the Open Bank Project. Regulators want open APIs but this is also an opportunity for banks to form new partnerships, innovate, and stay relevant. You’re either the grasshopper who waits for regulation and does the minimum, or you’re the ant who plans ahead and prepares for the future.4. Identity is in every challenge and every opportunity – identity is an intersection of the way we’re governed and our culture, says Joni Brennan from the Digital ID & Authentication Council of Canada. The role of industry and regulators is to enable individuals to have access to manage their data and empower them to do so. We can’t remove complexity from systems, but we can move them away from the end users.

4) Identity is in every challenge and every opportunity – identity is an intersection of the way we’re governed and our culture, says Joni Brennan from the Digital ID & Authentication Council of Canada. The role of industry and regulators is to enable individuals to have access to manage their data and empower them to do so. We can’t remove complexity from systems, but we can move them away from the end users.

5) We need to stay nimble to prevent fraud – identity theft is not new, it has always historically existed but the platforms through which criminals operate has changed along with technology. Dr Leila Fourie cites IBM research that says 95% of fraud cases are caused by people who make personal mistakes. We can’t introduce technology to consumers in a fragmented way, as that will create more opportunities for fraud.

6) Collaboration “with a big, big C” – collaboration is very much the theme when it comes to creating and maintaining effective governance frameworks, particularly when tackling fraud, building new payments systems, moving into open environments and managing the likes of digital authentication. Many speakers challenged both industry and regulators to understand that it’s a learning journey and be ready and willing to adjust their positioning as they move along and learn from each other. Katrina Stuart from the New Payments Platform cites the NPP as an example of success, saying early indicators are encouraging, with great broad participation by Australian financial institutions, and positive customer reach and adoption.

7) Digital wallets need to resemble physical wallets – contactless cards are so popular in Australia and New Zealand that they have proven to be a barrier to mobile wallet adoption. Kate Wilson from RFi Group suggests that for digital wallets to take off for Kiwis, the mobile wallets will have to resemble physical wallets; containing not just debit and credit card information but also things like your driver’s licence, and loyalty and store cards.

8) We have never been more connected – human connectivity is accelerating and the epicentre of digital connectivity is in the Asia Pacific region, says Glenn Maguire from VISA. He states that 70% of the total growth in global internet users is in the Asia Pacific region. Eighty-one percent of adult Kiwis use a smartphone, and the app economy is growing at a 40% year on year rate. Kaila Colbin of Missing Link Consultants says our technologies are accelerating, but also starting to converge, and what this means is we can turbocharge what we’re doing. New technologies like blockchain can be used in innovative ways, so we need to keep an open mind at all times.

9) Augmentation is our future – the future is augmented, so let’s embrace it, says Dr Roy Davies of Kiwi mixed reality company Imersia. Dr Davies talks about the growth of experience economies, where people pay for things that are not “real” and is within virtual spaces. We are currently in the midst of a paradigm shift, moving on from the information age to the intelligence age, which means we have powerful tools at our fingertips to increase our mental capabilities.

10) At the end of the day it is still all about the customer – if innovators want to succeed they need to turn traditional business models upside down and build apps and technology with the customer foremost in their mind, instead of building something and hoping they will come. Tech companies are great at this, because they come in with a completely new, fresh outlook. The old product-first models no longer work. The industry should be asking how they can get a startup mentality throughout the organisation, says Chris Skinner.

The Point 2018 in the media

• Commerce Minister Kris Faafoi warns Visa and Mastercard not to raise fees – stuff.co.nz
• Commerce Minister Faafoi ready to regulate credit, debit card interchange fees – Newsroom
• Datacom challenges Visa, Mastercard and POLi with new online debit payment tool; Westpac gets on board; ASB and BNZ to follow – Interest.co.nz
• Govt issues warning to Visa, MasterCard – NewstalkZB
• Commerce & Consumer Affairs Minister Kris Faafoi leaving door open for interchange fees to be regulated, wants to see tangible examples of open banking working within a year – Interest.co.nz
• Accelerate banking innovation, but not with digital currency – Computerworld
• Sector urged to speed progress on open banking, payment systems – Voxy
• Reserve Bank looks to a digital currency future – NZ Herald
• Reserve Bank rules out issuing digital currency…for now – Stuff.co.nz
• Cash will be extinct within 10 years, Kiwis predict – Voxy