Two advisers give their input on how innovative NZ banks are – and how regulation may be stifling progress
While New Zealand's banking sector is taking strides towards being tech-savvy, those working on the front lines of finance say the gap between promise and practice remains frustratingly wide.
The industry reached significant milestones in 2024, with New Zealand's biggest banks required to implement Payments NZ open banking API standards by 30 May 2024. ANZ, ASB, BNZ and Westpac NZ all made the API Centre's Payment Initiation standard available. This regulatory push was a crucial step toward open banking, designed to enable seamless data sharing and payment processing between banks and third-party providers.
However, the reality on the ground tells a different story. Frank Cui, managing director at EverBright Finance, said that while fintech adoption is moving forward, the execution still falls short of expectations.
"Fintech is a global trend, and we're probably slightly behind the others here in New Zealand,” Cui said. “The FMA requires CRMs from all aggregation groups, banks and providers for advisers to use, so it is actually a regulatory requirement. The question is how much does that change our efficiency at work? I wouldn't say it does so dramatically.”
The core issue lies in incomplete integration. Despite regulatory requirements for customer relationship management (CRM) systems, the promised “seamless connectivity” is still elusive.
"The five banks need to connect their API to the CRMs that we have, because not all of them are connected,” Cui said. “What happens is you put your application and basic customer information through – that doesn't spit out one set of data into the bank, because their API isn't necessarily connected. It generates into a PDF that you still need to deal with via email.”
This creates a frustrating paradox where technology designed to eliminate manual processes still requires a good amount of human intervention. Cui said that ideally, providers should find ways to cut out double handling – but so far, this hasn't happened.
"In an ideal world, the CRMs should connect to all bank, non-bank and insurer suppliers,” he said. “The information can be plugged in, you hit the button, and the provider can receive and process it straight away without double-handling. Unfortunately at the moment, we still have to go through the 'second round' of the process with emails and phone calls.”
Innovation stifled by regulation?
The broader fintech landscape shows promise, with New Zealand's fintech sector having global revenues of nearly $2 billion and a compound annual growth rate of 32%. However, implementation challenges persist across the sector, and not just in mortgage processing.
Jeff Royle, financial paramedic at iLender, said that progress varies significantly between different lenders.
"Some lenders are better than others on this, and the banks have some way to go to bring technology up to speed,” Royle said. “I know they're working on it, and AI is going to play a large role. I don't often protect the banks, but sometimes it's not their fault."
Royle said that regulatory constraints have occasionally been a barrier to innovation, even when providers try to implement something new. He noted one of Westpac’s products as a relatively recent example, which was quickly pulled when the Reserve Bank felt it didn’t meet its criteria.
"A few years ago, Westpac came out with a really neat refinance product that was a short-form,” Royle said. “It was dollar for dollar, so it was outside a lot of RBNZ's criteria. So long as Westpac could see that you paid the loan regularly, you didn't need payslips or bank statements. It was a really sensible product, but it got squashed by the Reserve Bank."
This tension between innovation and regulation reflects broader challenges facing New Zealand's financial sector. The Commerce Commission has granted Payments NZ Limited conditional authorisation to work with current and future API providers and third parties to develop and apply a partnering framework relating to the provision of API services, intended to make it easier for third parties to work with API providers and accelerate the delivery of open banking.
While regulatory frameworks are evolving, the implementation timeline continues to stretch ahead. The next major API deadline is in November, when the four main banks must have the technology in place to allow customers to securely share their banking data with third-party providers of their choice, going beyond payments to allow the sharing of account information and transaction history.
The disconnect between regulatory requirements, technological capabilities, and practical implementation suggests New Zealand's banking transformation will be measured in years rather than months.
”Ultimately, the CRM is good at storing information and providing easy summaries, but that middle process is still manual," Cui said.
