Open finance is foreign to many New Zealanders. Many are not aware of its benefits, let alone of its existence. However, a study on financial technology (FinTech) revealed that open finance is destined to become the norm for financial well-being and consumer empowerment.
FinTechNZ, the government-backed non-profit industry group, affirms these developments. Its chief executive, Jason Roberts, says the huge opportunities for Kiwi businesses and consumers simply cannot be ignored; with open funding intended to increase competition and innovation in many sectors.
We are in an ideal position, with open finance in its infancy, to leverage this technology to help reduce financial exclusion and lay the foundations for a strong digital economy.
– Jason Roberts, Executive Director, FinTechNZ
The benefits are huge. Open finance, if done well, offers a huge opportunity to address inequality, both now and in the foreseeable future, helping Kiwis better manage their finances, Roberts asserted.
Moreover, he explained that the emergence of FinTechs like open finance is redefining the way we borrow, lend, save, spend, store and transfer money. Disruptive technologies are revolutionizing traditional financial services, creating new services for consumers and opportunities for start-up entrepreneurs and innovative companies, he added.
FinTechNZ, part of the NZ Tech Alliance, is at the forefront of all of this. The non-profit group brings together New Zealand financial services providers, technology innovators, investor groups, government regulators and financial educators.
Simply put, open finance is a FinTech that gives people and businesses more power when it comes to managing their finances. This means that they will be able to access and use any financial data provided by them or created on their behalf by their provider, be it a bank, insurance company, utility or of any company that holds their financial transaction data.
With open funding, account holders will have:
- Better access to cheaper and more holistic debt advice
- Better access to product recommendations
- increased commitment to their financial situation.
These are just three ways personal finance management (PFM) platforms could evolve into open finance. To date, countries like the United States and Brazil have consistently applied open banking concepts.
Wellington is well aware of these developments. Already, the Open Finance Research Report will be launched by David Clark, Digital Economy Minister David Clark. However, the technology is not as popular as major movers hope. There is a low level of awareness and understanding in New Zealand about open finance and the benefits it offers. Research shows that this needs to be improved.
The good news is that the private sector is leading the way. A handful of Aotearoa’s most successful international FinTech companies are already leading the way, the research report details. As with any emerging ICT, open finance can only thrive when regulations allow it. It is therefore extremely important that the New Zealand FinTech ecosystem has a foundation of trust, clear rules regarding liability, terms of access and privacy, technical standards and working with government.
New Zealand’s digital transformation is moving at seemingly breakneck speed. That Wellington has invested in a global marketing campaign to highlight its technology sector is proof of this. He knows full well how his economy can be displaced with the adoption of digital.
Yet he must move with great caution. While the benefits of open banking can be manifold, the technology could be a target for unscrupulous entities eager to take advantage of new technologies. The recent case of cyberattacks in the health sector during the pandemic is a reminder of this, as reported by OpenGov Asia.