The short-term future of banking doesn't just promise a blurring of lines between the abilities of New Zealand's FinTechs and national finance institutions, but rather a removal of the line totally.
Chris Russell, HSBC New Zealand chief executive, backed this by claiming ''FinTechs give us a great opportunity – we aren't concerned with disrupters, we are embracing it.''
The finance sector cannot resist the tide of technological expertise to come – so are FinTechs the future or the demise of New Zealand's banks?
The FinTech sector in New Zealand is now worth $10 billion and was the fastest growing technology sector in 2017.
What is a FinTech?
FinTechs are business start-ups that use digital technology and IT-oriented solutions and service providers to compete with traditional institutions in delivering financial services.
This feeds into the rapidly growing national technology sector, which broke the $10 billion value last year – partially thanks to FinTechs' place as the largest contributing sector, with 48 per cent growth in 2017.1
How do New Zealand FinTechs rival national banks?
FinTechs offer the same services as traditional financial institutions like banks and credit unions – but focus on digital technology and IT-based solutions. By providing more digitally savvy services, these businesses can focus on delivering more effective banking for customers. They are also able to tailor customer-led experiences, which some believe will render the services offered by banks redundant.
However, statistics demonstrate FinTechs have a very different focus . Just over 13 per cent of these businesses launched between 2011-2016 were focused on B2B technology solutions.2 This shows the relationship between New Zealand FinTechs isn't a case of one making the other redundant – rather one of potential mutual benefit for both parties.
What are the benefits of a future with joint banks and FinTechs?
Over 85 per cent of financial institutions in New Zealand have already worked with FinTechs to develop their digital capabilities.3 This union can deliver a number of benefits to banks:
- They can lower their costs on outsourcing digital services to other IT providers.
- Banks can increase their online revenue streams and better control the increasing trend towards online banking on-the-go.
- Finally, they can improve the customer experience and deliver services that recognise and reward the value of long-term loyalty.
The future of finance seems geared towards a connected future, with banks working alongside FinTechs to improve digital services to meet the needs of their online customers.
FinTechs ultimately look set to partner with banks to improve their digital offering and IT-expertise, not replace them.
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1– FinTech NZ
2– McKinsey report
3– PwC survey