Speech to SavvyKiwi Finnotech Conference

Thursday, November 10, 2016 - 09:40
Commerce and Consumer Affairs

Good morning

First, can I say how pleased I am to be here.

One of the great things about a country with the size and innovative culture of New Zealand is that when technology shakes up a sector we can get the key people together in one room to share intelligence, identify opportunities and build relationships.

I’d also like to acknowledge the work of Binu Paul and his team in making this day happen.

I’m almost certain there will be at least one fintech business of the future that will begin its life as a discussion at the morning tea break of this conference.

I’d like to start by acknowledging the impressive performance of our fintech sector.

The opportunities for New Zealand companies – and consumers – are exciting.

The 2016 TIN 100 report came out last month, which shows that fintech remains New Zealand’s fastest-growing technology sector, with an annual growth rate of 31 per cent. 

To put that in perspective, that’s almost double the growth rate for the overall ICT sector, three times higher than agritech and four times higher than the biotech sector.

Xero has shown now just New Zealand but the world just how far you can go, but it is by no means the only exciting kiwi fintech business.

From our smart-payments start-ups, to our crowdfunders, to our peer-to-peer lending platforms, to some of the work our big banks are doing, we already have a varied fintech ecosystem.

It’s encouraging that fintech is once again flourishing in New Zealand – a country that in the early 1980s embraced eftpos while the rest of the world remained wedded to cash, and we still have the lowest proportion of cash to GDP in circulation in the world.

It’s good to see New Zealand businesses recapturing the pioneering spirit of those times. 

We provide a good test-bed for fintech products, as our population is digitally literate with an appetite for new technology.

As an example, Kiwis have embraced crowdfunding and peer-to-peer lending.

We have the highest alternative finance volume on a per capita basis outside of China, about $60 per capita.

That’s four times higher than the volume in Australia, eight times higher than in Singapore, and more than twenty times higher than in Japan and Hong Kong.

We also have a proven history of nimbleness when it comes to regulation and licensing that enables innovation.

This is what allowed us to be ahead of the curve with innovations such as equity crowd-funding and peer-to-peer lending.

But I don’t need to remind you of the power and strength of international competition in this area.

No one knows where this “story” ends.

I’d like to tell you a bit about how government currently supports fintech.

We have some fintech-focused initiatives, which I’ll get to in a moment, but I want to start with the broader picture.

This government is working hard to create an environment where all businesses can flourish.  Primarily it’s about doing the basics well – providing stable, predictable and fiscally sustainable government for an extended period. 

That boosts confidence, which in turn encourages investment.  And we know that it’s only investment – people taking the risk of hiring someone, starting a business, buying expensive new gear – that leads to jobs and growth.

Our government has been able to deliver that strong and stable leadership for 8 years and I hope we will be able for a long time to come.

Meantime, we carry on with systematic micro-economic reform and investment to build a more productive and competitive economy.

The massive investment by this government in infrastructure, for example, whether in transport so your partners and employees can get to work in our fast growing cities, and ultra fast broadband, so that you can connect to the world, has and will continue to make a difference. 

There is significant work going in my portfolio of Commerce and Consumer Affairs to achieve a more productive and competitive economy.

This includes:

  • A revamp of the regulation that governs financial advisors.
  • A study of New Zealand’s creative sector to understand how intellectual property can support innovation in the context of a rapidly changing technological environment.
  • Work to eliminate regulatory barriers to competition in a range of industries, and to ensure that New Zealand’s competition law – the Commerce Act – remains fit for purpose.
  • Upcoming changes to the insolvency practitioners regime, to ensure everyone’s interests are properly looked after when things go wrong.

Government is also working across portfolios to make sure we have the right environment for innovative businesses, such as fintech businesses, to thrive. This includes:

  • providing support for R&D, and fostering a culture of entrepreneurship,
  • helping firms access capital and export,
  • ensuring we produce and attract highly skilled people,
  • and, of course, making sure our regulation is flexible and fit for purpose

We also have some initiatives relevant to Fintech.

I know many of you attended the launch of the new Kiwibank Fintech Accelerator last week. I hear it was a great, and well attended event.

This accelerator is one of three new accelerators supported with money the Government allocated in this year’s budget.

It will be run through Wellington’s Creative HQ and will help ten fintech teams develop their products and pitch to investors.

The teams will work directly with Kiwibank, Xero and other financial industry partners.

It’s great that government and industry have come together to make this happen, and I’m really looking forward to seeing what the teams come up with.

Government also placed a particular focus on innovation when we re-tendered our banking contracts last year, and this has resulted in a number of initiatives that target innovation, including a commitment from one provider to a ten million dollar innovation fund.

While these are exciting initiatives, we also know that the best thing Government can do sometimes is get out of the way.

That’s what we are proposing with the new regulatory regime for financial advice, which will allow for the provision of robo-advice to New Zealand consumers.  Currently, the presents obstacles for robo-advice.

That’s why we are being cautious with the issue of retail payments systems, but willing to investigate the situation seriously.  The Retail Payments Systems study, which considers the implications of emerging non-card-based payment methods, as well as traditional card-based payment methods.

You will all be aware of the regulatory questions still to be resolved in the peer to peer lending space. 

I am always considering how the regulatory settings best apply to enable innovation in the financial markets area. I want to avoid unnecessary barriers and to ensure that providers can continue to innovate – while also ensuring consumers are protected.

So, every day we try to find the magic path that lies between enough regulation to maintain confidence in our financial markets and enough flexibility to give firms breathing room to innovate.

Enough flexibility to flourish, if they get it right, and fail if they don’t.

There‘s no single path to success in business. 

I’m sure there will be New Zealanders who succeed in fintech without ever talking to the government, they might not even know who is in government, or talking to anyone else.  They’ll just do their own thing.  I wish them all the best.

I’m sure there’ll be others who see the benefit of linking up with other Kiwis battling in this space and in entering into dialogue with regulators and policy makers. 

The government is happy to engage.

There is a real opportunity here for New Zealanders.  We can be agile, we can be open, we can try new things.

I wish you all the best for your conference.