Financial technology partnership opportunities

Banks are taking their cue from the tech sector. Strategic FinTech partnerships are on the rise for the 26 registered banks in NZ, alongside a number of other financial institutions.

Globally almost 80 percent of financial institutions have entered into FinTech partnerships, according to McKinsey. An increasing number of incumbents and FinTechs are realising the benefits of combining strengths in partnership models. FinTechs bring to the table their higher speed and risk tolerance, and flexibility in reacting to market changes. Incumbent financial institutions are cautious, but bring large customer data sets amassed over long periods of time, combined with compliance and regulatory competencies. Opportunities in this space include:

• FinTechs as startups looking to enter financial services using new technologies. These firms seek to build economic models similar to those of banks, often targeting a niche or particular product.
• FinTechs as incumbent financial institutions that are investing significantly in technology to improve performance, respond to competitive threats, and capture investment and partnership opportunities.
• FinTechs as ecosystems orchestrated by large technology companies which offer financial services both to enhance existing platforms, and to monetise user data or relationships.
• FinTechs as infrastructure providers selling services to financial institutions to help improve risk management, digitise tech stacks, and improve the customer experience.

FinTech disruption opportunities

Forbes list of the 50 most innovative FinTech companies in 2019 can be segmented into the following areas of disruption: personal finance, real estate, payments, lending, ‘Wall St’ (or NZX) type products or services, crypto and blockchain, and investing. FinTech is a force for democratising financial services, with the shift to open banking creating more business opportunities. Western banks need to take into consideration the influence of China's adoption of mobile payments - Alipay and WeChat pay together have over a billion regular users of mobile payments.

Mobile-only 'neobanks' that do not bear the cost of branches are nibbling at customer bases and the pace of change is accelerating, according to The Economist. "Tech firms that people trust, such as Apple and Amazon, are natural candidates to grow big financial arms. The biggest four American banks are spending a total of over $25b a year on perfecting better customer applications and learning to mine data more cleverly. Venture-capital firms invested $37bn in upstart financial firms last year."

NZ's FinTech ecosystem

NZ should change its financial tech systems to drive the Kiwi economy or the country may miss out on sweeping changes, FintechNZ GM James Brown says. “As a small agile country, we could easily scale this, we just need to join the dots and follow similar models to some of the Nordic and Scandinavian countries of similar size who see FinTech as the easiest way to scale an economy. We were famous once for eftpos and there is no reason we couldn’t do something bigger around open data. I have spoken with a number of the large incumbents who are keen to work together for the greater good so that innovation in financial technology will create inclusion for all New Zealanders.” Brown says FintechNZ is leading the way, but it needs industry and government to make this work and everyone in New Zealand will ultimately benefit.

Why join an Accelerator programme?

It’s an exciting time to be in the FinTech sector, and the upcoming Kiwi FinTech Accelerator (KFA) is a 3 month, mentor-driven programme focusing on accelerating young ventures, and growing the innovation economy in NZ. KFA receives applications from across the country and internationally, and chooses a cohort of teams to participate in the programme. Each of the selected teams have access to NZ's largest and strongest network of startup mentors, expert advisors and startup coaches. In the programme, teams practice market validation and product development approaches used by companies like Google, IDEO, and Tesla. The teams are also eligible to receive $20k NZD seed funding, and through Lightning Lab become part of the invite-only Global Accelerator Network (GAN) community. There is also an opportunity for an organisation to put in a project team to solve a particular organisational challenge, for example along the lines of DIA's Digital Identity project (note: this comes with a cost to the organisation of $50k).

The KFA programme is now in its third year and has notable alumni - Sharesies from the 2017 accelerator cohort is now valued at $24.4m after Trade Me’s $4m investment, and recently featured in Idealog as the 2018 winner of their ‘Most Innovative Companies in Finance/Money.’ The 2018 accelerator cohort included Hnry (the trusted financial sidekick for contractors and freelancers), JRNY (improving the customer experience in the insurance industry - they have closed off a round of seed investment, received a Callaghan Innovation R&D grant, partnered with IBM and FaceMe and developed emotional intelligence capabilities into the solution offering), Choice (payments with impact - they successfully secured $1m in non-equity funding from the NEM community fund) and Invsta (digital wealth and asset investment management solutions for a new investment age). The upcoming NZ Hi-Tech Awards features finalists Sharesies in the 'Hi-Tech Start-up Company of the Year' category, and Hnry in the 'Most Innovative Hi-Tech Service' category.

So, what are you waiting for? Find out more information here.