By Binu Paul
Say what you will of 2020, but from the lens of New Zealand’s innovation and technology ecosystem, it’s been a year of silver linings, especially within the context of financial services.
Even before the pandemic hit, New Zealand had a number of things that were going in our favour – access to technology and infrastructure, sources of funding, a flexible approach to regulation, access to a nation of ready and willing early adopters of new technology, and a certain doggedness when it comes to problem solving.
Yes, we could have done better at holding onto our home grown talent, rather than see them relocate overseas. And it’s true that our scale of only about five million meant commercialising ideas created additional challenges.
But these challenges were not, and are not unsurmountable. Indeed, a number of Kiwi success stories feature innovators who were able to quietly develop and refine their products here in New Zealand before scaling them into global markets.
Now, with the pandemic taking hold worldwide rather than going away, a number of interesting trends are emerging here - mostly positive.
Not only are we holding on to a bigger base of high-quality talent, but we are also attracting returnees, some of whom come with deep and valuable experiences from around the globe. That, along with high quality inward migration, bolsters our intellectual capital.
The pandemic has also helped nudge Kiwis into digital solutions to everyday needs such as online shopping, investing, making payments and staying in touch with work, family and friends. In some ways, ‘social distancing’ is tailor made for going digital – socially connected, but physically distanced!
Alongside the above trends, the financial services sector in particular has seen a number of stars aligning to its benefit, providing some very exciting opportunities for innovators.
Open banking, which allows innovators access to users’ banking transaction data, when implemented creates a ripple effect onto other enabling technologies such as Artificial Intelligence. Combined, the potential to create cheaper, faster or better solutions for consumers is significant.
The principles behind AI help to analyse a large amount of data (such as banking transaction history) and gain insights into the individual’s particular situation, helping create customised solutions. Examples already exist across the whole spectrum of financial services, from on-demand insurance to investment robo-advice to bank lending rates based on individual spending and savings habits.
We are also making progress on a national digital identity solution, something that will enhance the consumer’s experience with tech-enabled financial service products. A comprehensive and inclusive digital identity solution lets innovators remove paperwork and do away with the hassle of physical verifications as part of on-boarding consumers.
Fair, transparent and efficient markets are an essential part of enabling innovators to create such solutions for consumers. A flexible approach to regulation is an essential element too.
I digress, but I’m reminded of a recent conversation with a start-up founder who I have known for some years. We were reminiscing about our own start-up journeys but the conversation soon drifted on to a philosophical one about innovation and regulation. The best way to sum up his view was that innovation is like an unstoppable force, and regulation an immovable object in innovation’s path.
However, in counter to that stance, my view is that if the ultimate objective with innovation is to generate better consumer outcomes, then any effort to provide an environment that builds trust and instils confidence can only add further value. As a result, the innovation community benefits, not only from a consumer base that is willing to engage, but also from being able to operate in a level playing field. Regulation then plays an innovation facilitator role.
The Financial Markets Authority takes a flexible approach when considering innovative solutions. Recognising the evolution and pace of innovation in the financial services sector, the FMA has recently beefed up its capability to address emerging trends in financial services innovation.
Establishing a specialist lead role for fintech signals the FMA’s desire to help innovators navigate the regulatory world, help facilitate the contacts necessary to meet regulatory obligations, and enable a thriving innovation ecosystem in our financial services sector.
Now, it is a matter of bringing it all altogether. And if our collective resourcefulness as a progressive nation is anything to go by, the future looks bright for a tech-enabled financial services sector in New Zealand.
Binu Paul is the FMA’s new Specialist Lead, FinTech. He has deep industry experience across financial services, technology innovation and commercialisation over the past 20 years in New Zealand and overseas.