What’s Needed to Become a Fintech Powerhouse in New Zealand in 2023?

by Rosemarie Hardison
whats needed to become a fintech powerhouse in new zealand in 2023

New Zealand’s unique geographical location means that many a tech powerhouse has either started up or received extensive testing in the country. It is the ideal pilot location for tech products to be extensively tested before being rolled out on the global market. Microsoft, Yahoo, and Facebook have tested new features here recently. The country is sufficiently remote that any bugs are unlikely to come to the attention of the mainstream international press. Glitches can be smoothed out and systems perfected.

New Zealand is a great place to launch or refine a fintech business because over 90% of the population is connected to the internet. This has resulted in New Zealanders being tech-savvy and early adopters of a good deal of new tech ideas. In fact, Wellington is known as ‘Silicon Welly’.

The future is digital

In keeping with the whole Asia-Pacific region, digital payments in New Zealand are more common than not. The most commonly used payment method for both online and in-person payments is digital wallets. According to Statistica, by 2025 three quarters of e-commerce transactions will be made through fintech solutions. However, it is not only online where fintech is popular; over half of POS payments are expected to be made this way over the next few years.

The popularity of digital payments means that shoppers have a wide choice of fintech products. For example, Boku is specific to digital services like film streaming, music platforms, online gaming, and gambling. Buy Now Pay Later fintech is designed for physical products.

PayPal, the granddaddy of payment fintech, can be used for both services and products. Those looking to use these digital payment platforms for something, such as PayPal Casino NZ, should be sure to do some research so they can make sure they have assessed their options properly. PayPal is accepted almost everywhere and is often seen as a trust mark when people shop at new sites.

Why New Zealand is an attractive location

With forecasts indicating that fintech use will be increasingly adopted, plenty of entrepreneurial companies are launching products and services in this area. Graeme Muller, CEO of NZ Tech, said that New Zealand’s ICT contributions to GDP growth were higher than for any other OECD country. He said that one of the reasons for this is that the country has a simple regulatory system with only a single tie of regulators. As a result, The World Bank ranks the country at number one in the world for ease of starting up and running a business. In addition, it is ranked as one of the least corrupt countries in the world.

New Zealand has a dedicated sovereign investment fund focused on early-stage investing called NZVIF. Established over twenty years ago, the fund works closely with private equity, venture capital, and angel investor networks and provides capital to new companies. We’ve seen this work hugely in New Zealand’s favor, as it has allowed many startups to reap the benefits of working with trusted investment companies.

There is a specific fintech group, FinTechNZ, to help companies collaborate and expand in New Zealand. There are sub-branches for different areas. These include InsurTech NZ and Wealth TechNZ for the insurance and wealth tech sectors. Fintech is not all about payments. Tapping into these networks will help anyone looking to get an innovative idea off the ground.

Another source of funding could be accessing New Zealand’s regulated crowdfunding market. A lack of capital gains tax makes the country an attractive location for start-ups to start up. Former Prime Minister Jacinda Adern said that the country’s doors were open to people with great ideas who wanted to turn them into reality. Fintech investment quadrupled to $4.3bn NZD, and the sector is the second largest for growth in the region.

How Xero did it

If you want to see what it takes to become a powerhouse in the country, it is worth taking a look at one of the earliest fintech companies to emerge from the country. Xero was started by Rod Drury in 2006. The Wellington-based software company revolutionized the accounting industry. It saw traditional desktop accounting software replaced with cloud-based products.

Drury stated that starting the company in New Zealand allowed him to attract the best talent at lower wages than he would have had to pay in Silicon Valley. In 2007 Xero went public and raised $15 million in share capital. Because New Zealand is a relatively small market, the product was always built for a global market.

However, the concept was tested and perfected in relative obscurity before being taken to international markets. Xero ceased trading on the New Zealand Stock Exchange in 2018. It now trades on the Australian one and has a value of more than 7.5 billion Australian Dollars. This model is worth following if you want to be a fintech powerhouse.

Emerging fintech payment platforms

An emerging payment fintech to keep an eye out for in Choice. They are a payments company using blockchain technology to reduce merchant fees. They also aim to direct 50% of the electronic card transaction fees to New Zealand-based charities. While they will be competing with other giants in the sector, they launched their pilot scheme from Wellington. They are in direct competition with another NZ fintech, Vend, which started up in 2010. Vend has raised NZD 63 million in funding and is partnered with Xero, PayPal, and Apple.

In conclusion

New Zealand’s isolation is not a deterrent at all; in fact, it has created the ideal tech incubator environment. The Government’s investment infrastructure has allowed fintech to flourish. Xero might be center stage now, but there are plenty of other companies waiting in the wings.

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