Financial Technology (FinTech)
Financial Technology (‘FinTech’) refers to technological innovations which may have a material impact on the business models, processes, or products in financial services. As in many industries, technological innovations are one of the key drivers of change across financial services and present many opportunities for firms, regulators and consumers alike.
However, with opportunity comes risk. We recognise the need for regulation which supports dynamic products and services and welcomes new technologies but which also manages and minimises the risks and impacts on consumers, businesses, and financial stability.
Why are we interested in FinTech?
FinTech has the potential to improve efficiency across financial services and fundamentally change the way businesses provide, consumers use, and regulators oversee, financial services.
We want to understand the risks and opportunities for consumers and businesses, and the effect of FinTech on the safety and soundness of firms. We are mindful of new risks to financial stability and concerned that FinTech initiatives do not inadvertently exclude some of those who need access to financial products and services.
We are also keen to explore how FinTech developments could support the Bank in achieving its mandate - promoting a sound, efficient and dynamic monetary and financial system, and enabling the economic wellbeing of all New Zealanders.
We can see FinTech opportunities in the following areas:
- Increasing financial inclusion and financial literacy in New Zealand
- Providing financial services to consumers and small businesses at lower cost
- Driving competition and enhancing existing offerings
- Making the financial system more efficient, effective and resilient
- Enabling the Bank to perform our operational and regulatory roles more efficiently and effectively
- Exploring new perspectives on existing challenges as we seek to manage a modern and evolving financial system.
FinTech and the Reserve Bank of New Zealand
We want our regulatory settings to support innovation and industry-based solutions in financial services. We are keen to ensure that we and the regulatory frameworks we operate do not block digital innovations in financial services from flourishing in New Zealand. Over time, such developments may require changes in our supervisory approach and a change in the types of entities or activities that are captured within the perimeter of prudential regulation.
Our current focus
FinTech affects a number of work streams across the Bank. The major projects which are currently exploring FinTech opportunities are:
- Future of Cash - Te Moni Anamata – Cash allows access to the financial system for those who are digitally excluded or face other barriers to making electronic payments. Cash also provides a back-up means of payment in cases of personal emergency or system outages. We are particularly interested in hearing from those with innovations which can enable financial inclusion or who are thinking about innovative solutions for personal finance. Find out more about the Future of Cash - Te Moni Anamata.
- Remittances – We work closely with our Pacific neighbours and recognise the reliance of many Pacific nations’ economics on remittance – however the costs of sending remittances to these countries are amongst the highest in the world.
The Reserve Bank, in partnership with other domestic and international agencies, is looking at what practical steps could be taken to alleviate some of the constraints. This includes exploring what FinTech options may be available (e.g. a ‘Know your Customer’ facility that could support reporting entities in meeting their anti-money laundering and countering financing of terrorism obligations to collect and verify customer identity information) and how they can be adapted to meet the unique needs of the South Pacific. We are also interested in supporting longer term sustainable improvements for the payments infrastructure in the region. Read more on Pacific remittances.
- Engaging with stakeholders – We work with other agencies in the Council of Financial Regulators (CoFR) to ensure a ‘one voice’ approach and create a clear and consistent regulatory pathway so firms can navigate New Zealand’s regulatory landscape with confidence. We believe the current regulatory system is sufficiently flexible to allow innovative approaches to flourish, however we will continue to work closely with our stakeholders to identify and remove any unnecessary barriers to new firms entering the system or obstructing incumbent firms developing FinTech solutions.
The Reserve Bank has a broad research agenda and we are committed to learning about and exploring opportunities which may enable us to achieve our mandate more efficiently or effectively. Currently, there are three topics at the top of our agenda:
- RegTech & SupTech – We are keen to learn about technology which can increase our ability to perform our operational and regulatory roles, and reduce the cost and complexity for financial services firms of complying with and implementing the regulations. This includes technology which enables better understanding of the environment and managing a wider and more complex range of risk, and data visualisation tools which enables us to present supervisory data in a user friendly manner.
- Analytics – We are interested in understanding the range of analytical tools which will enable us to undertake efficient, timely and insightful analysis of regulatory returns and data. This includes understanding the large volumes of unstructured data we receive which is difficult to access and analyse.
- Digital currencies – We continue to be interested in developments on central bank digital currencies and keeping abreast of research and current projects by our international peers.
Research and speeches
- The Future of Cash Use – Te Whakamahinga Moni Anamata
- FinTech developments and implications for RBNZ regulatory responsibilities (Financial Stability Report, November 2017)
- An open mind on open banking (Financial Stability Report, May 2018)
- Decrypting the role of distributed ledger technology in payments processes (RBNZ Bulletin, May 2018)
- The pros and cons of issuing a central bank digital currency (RBNZ Bulletin, June 2018)
- FinTech developments in banking, insurance and FMIs (RBNZ Bulletin, November 2018)
- The FinTech Opportunity in Personal Finance - speech by Simone Robbers, Assistant Governor and General Manager Governance, Strategy and Corporate Relations (Singapore, November 2019)
Getting in touch
If you want to find out more or get in touch please contact us at [email protected].
If you are a business, please provide basic information about your product or service, and about your business in New Zealand. We aim to help businesses understand our regulatory regime and the challenges they may face when developing an innovative product or business model.