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The speed of innovation in the financial technology sector over the last two years has sparked major advancements in the traditional forms of banking. As the sector continues to expand, financial investors look for the most rewarding location for their fintech investment.
It is undoubted that in almost every region, fintech is undergoing some sort of expansion. However, not everywhere can boast such a transparent and stable business environment as New Zealand nor can they claim the same surging levels of return on tech investments.
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New Zealand’s business environment is a well-kept secret. It rates as number one in the world for ease of doing business, rates number one for least corruption and on top of that, offers some of the lowest business development and startup launching fees in the world. As a result of these advantages, New Zealand’s technology exports increased by NZ$1 billion in 2018. The same 12 months also saw fintech grow to New Zealand’s fastest-growing technology sector, increasing 42%.
Fintech in New Zealand – What is financial technology?
Financial technology is a broad term – it encompasses anything that combines technology and money. Examples include mobile banking apps, online loan distributors, radio frequency identification (RFID) chips, cryptocurrencies, and blockchain. There has been a steady increase in fintech ever since the launch of Paypal in 1998. However, the last 2-3 years have seen an explosion, mostly down to new online currencies, data sharing, and online banking security.
New Zealand’s exciting banking reforms
To develop New Zealand’s already attractive business environment, the government is currently undergoing two exciting banking reforms which could drastically alter the sector, making their fintech and financial services industry even more appetizing.
Firstly, the New Zealand government has initiated a digital identity project to be led by the Department of Internal Affairs and consulted on by the private financial sector. The move will likely make the activities of the fintech industry more visible – ensuring fintech companies reach higher privacy and anti-money laundering standards. By enforcing greater ‘know your customer’ requirements, fintech businesses will operate with more transparency and attract more users and investment through increased confidence in the industry.
Secondly, 2019 saw New Zealand take a step closer to ‘open banking’. This system would put everyone’s banking information in one place, helping to enable data sharing between banks and fintech firms. Already this has been introduced in the UK and has had positive effects both allowing customers simpler banking solutions and giving fintech companies greater information on customer banking habits.
Get help from the New Zealand government’s startup initiative
To a certain extent, starting a business is a matter of capital. Failing to get off the ground is often for lack of funding. However, New Zealand has managed to navigate this problem with a number of government funds to support startup firms, especially those in technology.
The New Zealand 2018 budget included a NZ$1 billion fund for research and development projects as well as a tax incentive for research and development (R&D) companies. Fintech businesses looking to obtain some of this funding must be spending a minimum of NZ$50,000 on R&D every year.
If seeking a larger investment, New Zealand has a number of private venture capital funds with a technology orientation to really encourage the startup environment.
The most well-known is Callaghan Innovation. Callahan Innovation is a private fund that provides tech startup ventures with initial capital injections for research and development. They not only function as financial partners but also as business partners.
The New Zealand Venture Investment Fund is a similar tech and innovation-oriented fund. They aim to spend NZ$50 million every year in order to support young technology companies.
The Icehouse is another privately-owned funding corporation that specializes in investing in early-stage businesses. Their portfolio heavily features technology and innovation companies.
New Zealand fintech regulation to be aware of
Generally, fintech has fit in well with the financial regulatory system in New Zealand. No fintech activities have been banned and no specialist legislation has needed to be brought in. Of course, some firms have needed to be put in line with banking regulation but on the whole, fintech has suited New Zealand’s flexible and relatively small banking system.
Dependent on the activities of the fintech business, they may need to comply with licensing and registration requirements and/or anti-money laundering and conduct regulations.
The regulators and policy-makers of the New Zealand financial system have been receptive and encouraging of the fintech industry. The Financial Markets Authority (FMA) and The Ministry of Business, Innovation, and Employment (MBIE) have been extremely positive about the growth of fintech. These agencies are proactive in promoting its growth in New Zealand by creating reports on its business opportunities and helping to solve digital identity issues in New Zealand banking.
The Reserve Bank of New Zealand (RBNZ) has approached fintech with a little more caution and tentativeness. They have announced they would not like to inhibit the growth of the expanding industry which has the potential to improve banking in New Zealand. They are however careful to monitor and maintain the utmost integrity and security for their fintech users.
Partner with Biz Latin Hub to incorporate your fintech
Fintech is the fastest-growing technology industry and export in New Zealand. 2019 is projected to spell further growth to the industry thanks to the increasing customer interaction, support from major financial institutions and new favorable legislation.
Entering into a rapidly-evolving and crowded market can be complex. Biz Latin Hub provides legal and accounting services to foreign businesses entering a new market. We make sure you stay compliant with local regulations every step of the way in your expansion process.
With our team of experts, we also specialize in professional employment, helping you find the right team in New Zealand. Contact us now to help your fintech business navigate New Zealand.
Learn more about our team and expert authors.
The information provided here within should not be construed as formal guidance or advice. Please consult a professional for your specific situation. Information provided is for informative purposes only and may not capture all pertinent laws, standards, and best practices. The regulatory landscape is continually evolving; information mentioned may be outdated and/or could undergo changes. The interpretations presented are not official. Some sections are based on the interpretations or views of relevant authorities, but we cannot ensure that these perspectives will be supported in all professional settings.
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