Source: New Zealand Government
Tēnā koutou katoa.
Good morning and thank you to FintechNZ for having me here today.
Thank you especially to executive director Jason Roberts, and for putting together such fabulous event.
It is wonderful to be speaking to such a large audience. I am told there are nearly 400 attendees today, which speaks to the exciting growth that the fintech sector has undergone in New Zealand over recent years.
I understand that this event outgrew last year’s venue. That is excellent news for you – but it’s also excellent news for New Zealand as fintechs have so much to offer our country and our economy.
As a small, sparsely populated country at the bottom of the world, high-value, weightless exports like fintech products have significant economic potential.
I am delighted to be speaking to you as the new Commerce and Consumer Affairs Minister.
Commerce and Consumer Affairs is a significant – although little understood – portfolio.
In simple terms – and as the name suggests – there are two key strands to the portfolio:
First, a responsibility to ensure that the laws and regulations that govern our commercial environment are fit for purpose and enable businesses to safely and easily transact. That includes responsibility for legislation like the Companies Act and Commerce Act – two laws which are currently undergoing long overdue reviews.
Second, is a responsibility to safeguard the interests of consumers and ensure that their rights are fairly upheld. That’s the consumer affairs side and includes responsibility for legislation like the Fair Trading Act, which I am planning to launch a review of later this year.
Balancing these two halves requires careful consideration and we don’t always get it right. It’s possible to end up with policies that favour commercial entities over consumers or consumers over commercial entities.
And both of these scenarios are equally bad. Without adequate consumer protections, businesses lose their social license and infringe on consumers’ rights and freedoms. And without sufficiently open and well-functioning markets, businesses fail and people lose their job and income, and are faced with fewer choices.
However, when policy works well, it can – and should – benefit both commercial entities and consumers.
That’s the sweet spot that a good Commerce and Consumer Affairs Minister should be aiming for.
The fantastic thing about the fintech sector is that it speaks equally convincingly to both sides of the equation.
From a commerce perspective, fintechs offer opportunities for improving productivity, generating revenue and creating jobs and exports.
Equally fantastic are the opportunities offered to consumers through innovative products and enhanced competition, leading to greater choice and freedom.
So, safe to say I am excited to be here and excited to be beginning what I intend to be an open and collaborative relationship with the fintech sector.
Background
I know that my predecessor, Andrew Bayly, was very engaged with the sector and that he was in active discussion with many of you about how the Government can support you to grow and innovate.
I share Andrew’s enthusiasm and I am looking forward to continuing at pace the work he started with you.
I want to be clear that from a policy perspective it is full steam ahead and there is no intention to slow down or change direction.
Work underway
In the Commerce and Consumer Affairs space, many of our regulations and legislation have languished and there was a fairly urgent need to reform some of the foundational pieces of architecture.
I mentioned earlier that we are reviewing the Companies Act and reforming our corporate governance laws – this hasn’t happened in nearly 30 years.
Likewise, our competition settings have become increasingly out of step with our trading partners. I doubt any of you in the room are unaware that New Zealand suffers from a crucial lack of competition in key sectors – including, importantly, banking.
We have also placed ourselves at a competitive disadvantage by not keeping pace with transformative technologies, including crypto, blockchain and ‘open banking’ – to name a few.
I am aware of concerns from the fintech sector that our regulatory and legal environment have not sufficiently adapted to allow for these technologies and that there has been a lack of leadership and strategic direction.
Some of you have been participating on government led roundtables and with officials at MBIE and FMA. I hope that through that engagement you are sensing a change in tone and are experiencing a new willingness to respond to issues.
FMA’s regulatory sandbox
For example, I am optimistic about the FMA’s “regulatory sandbox” and keen to hear your feedback as the process continues.
I understand that the FMA received 24 applications and will, by the end of March, be notifying successful applicants.
Please keep in touch with me and my officials about your experience.
It is my hope that the sandbox will enable fintechs to save time, reduce costs and bring innovative products to market sooner.
But the sandbox is also an opportunity for the FMA to identify unnecessary red tape that poses an industry-wide barrier.
I am aware that there are regulatory barriers that prevent fintechs from competing on a level playing field, and I am determined to work with Government and industry to remove these barriers.
Consumer data right
I am delighted that we are finally establishing a ‘consumer data right’ and advancing plans to roll out ‘open banking’.
Commerce Ministers have been talking about ‘open banking’ for nearly 10 years.
In August 2017, the then Minister Jacqui Dean wrote to Payments NZ encouraging them to advance payments technology.
Safe to say the time for writing letters of encouragement has been and gone.
As many of you know, the Customer and Product Data Bill, which is currently before Parliament, establishes a framework to enable access to, and sharing of, customer data.
This is a transformative piece of legislation that has the potential to reshape our economy.
The legislation lays the foundation for ‘open banking’ and eventually ‘open electricity’, ‘open insurance’, ‘open telecommunications’ and more. The possibilities are immense.
The Bill passed second reading in Parliament last week and is scheduled for further consideration this week.
We are moving as fast as we can, and have committed to passing it through all stages by the end of Q1 this year.
Soon after the Bill passes, we will be applying it on a sector-by-sector basis through regulations.
Banking will be the first cab off the rank, and my team are working with industry to develop the banking regulations.
Our goal is to have open banking fully operational by the end of the year.
Again, please keep in touch with me throughout this process.
I am conscious that open banking has the potential to over promise and under deliver and I know that uptake in other jurisdictions has been underwhelming.
The single greatest benefit of being slow is that we can learn from others’ mistakes and there are some important differences in our approach compared to Australia, for example.
But this doesn’t mean we have all the answers. For open banking to deliver on the promise of increased competition and greater consumer choice, we need your buy in.
My officials and I are acutely aware of the need to balance safety and security with openness and accessibility. We also know that we need to agree a pricing model that allows enough income generation to support innovation but is affordable.
Please make sure you are actively participating in these discussions. Let’s do it once and do it right.
Banking competition
Continuing with the theme of competition, in August last year, the Commerce Commission released its final report into personal banking services.
The report found that banks do not face strong competition, and made 14 recommendations, which we have committed to implementing.
As well as open banking, this includes increasing the emphasis on competition in the Reserve Bank’s prudential regulation and payment systems, capitalising Kiwibank, and addressing issues in the anti-money laundering regime.
Many of these recommendations fall within the Finance Miniter’s portfolio, however please know that I will be advocating internally on your behalf.
Driving better competition across the economy, but in particular in banking, is a key concern for the Finance Miniter, and I will be working closely with her to achieve this.
Financial services reform
Finally, before I close off, I want to touch on an important piece of work underway to reform how financial services are regulated in New Zealand.
Changes to the Credit Contracts and Consumer Finance Act in 2019 saw a big increase in the time it took to process consumer loans. Applicants who would have previously qualified for a mortgage were suddenly being turned down.
The Conduct of Institutions (or CoFI) regime was another change in the system, requiring large product providers like banks and insurers to implement fair conduct programmes.
Last year, Cabinet agreed to changes to reduce the complexity and conservatism baked into the CCCFA, streamline requirements in the incoming CoFI legislation, and improve the transparency and effectiveness of the dispute resolution system.
Legislation to make these changes will be introduced shortly, subject to Cabinet agreement.
These changes will simplify the financial services regulatory environment.
I realise this may not sound like super exciting work, but enabling consumers and businesses to safely and efficiently access credit when they need it, is vital for our economy.
When the money stops, everything stops.
Closing remarks
In closing, I would like to thank everyone here for the role you play in helping to shape a more productive and innovative economy.
I am keen to hear about other actions that the Government can take to make the fintech sector thrive and am looking forward to engaging with you throughout the year.
Thank you again for having me here today.
Enjoy your day and stay in touch.
