Kiwis leading the global rise of fintech

The tyranny of distance in this digital era no longer applies. Aotearoa is proving itself a hub for low-cost, hi-tech companies that are breaking open traditional business models, helping consumers secure better deals and providing better value and faster more streamlined processes and tools.

A better user experience, lower fees, ease of access, a diversity of products and the ability to self manage on simple technology platforms makes for quick converts these days, especially in the finance sector where consumers have traditionally been dealt a bad deal.

Unsurprisingly, companies with a strong social enterprise focus are holding centrestage. Jaundiced consumers fed up with questionable service, bloated profits and high priced services have put them there.

The common thread for fintech pioneers Simplicity, Squirrel and Lifetime Income, the trio behind this month’s Wealth Innovation Tour,  a 17-city traditional roadshow, was a desire to give New Zealanders a better deal, according to Squirrel’s John Bolton. 

“For us, it’s about helping making NZ Inc more competitive, and improving standards of living by being more productive. The banking industry makes over $5 billion of profits a year off roughly $10 billion of revenue. If we can get more of that into consumer’s back pockets, then we’re on the right track,” he says.

Simplicity KiwiSavers founder Sam Stubbs concurs.

“The financial services sector is notoriously greedy in its treatment of consumers who either don’t know or fail to understand the true cost of the products and services they’ve been sold.”

“People are no longer willing to put up with mediocre service for high prices if they don’t need to.”

Simplicity, which launched mid year in 2016, is a nonprofit, online KiwiSaver provider that only charges members what it cost to invest. That cost is half the industry average, which explains why only six months later, the startup has more than 4,000 members and $100 million under management.

Stubbs says Simplicity’s low cost, no fuss simple model made dinosaurs of its competitors very quickly.  Already, it’s saved members close to $1 million in fees combined  and donated $45,000 to charity.

Buoyed by its early success, Simplicity this month will also begin to offer investment funds outside of the KiwiSaver structure, using the same set up, fees and technology.

With more than $40 billion invested in managed funds in New Zealand, and Simplicity offering funds for fees that are half the industry average, the scrappy start-up is likely to cause another major disruption in the market.

Squirrel’s Bolton says we’re in the early phases of a digital revolution in New Zealand. 

“We’re going to see technology play a massive role in financial services. There will be a massive reduction in costs and an increase in accessibility. It is an industry that will be truly disrupted and over a relatively short period of time.”

Bolton is one of the early tech adopters going against the grain of traditional.

His company Squirrel Mortgages, established in 2008, has helped save Kiwis millions by showing homeowners how to get a better negotiated rate and how to pay down their mortgages faster. It’s not something most banks are eager to teach borrowers.

It writes about $1.1 billion in mortgages annually.

Recognising the opportunity outside of housing, Squirrel in 2015 introduced a peer to peer lending side to its business called Squirrel Money. Last year, it wrote $6 million in loans.

“Squirrel Money leaves more money in Kiwis’ pockets. Money that would otherwise end up in bank profits. Borrowers with good credit get lower borrowing costs and investors (or lenders as we refer to them) get a higher return on their investment.”

Lifetime Income was also a first for New Zealand, combining insurance and investment to make for a regular income in retirement. The insurance works to smooth out the income you want in retirement.

CEO Ralph Stewart says there is no reason why an investor can’t know exactly what an investment costs each year, what the risks are and what the returns will be.

“In retirement the stakes are even higher. How do you transition from saving for retirement to spending in retirement? How do you manage fixed expenses with fluctuating investment returns and even worse, how is it possible to allocate savings when we don’t know how long we will live?”

Stewart says technology, greater transparency and a genuine caring approach for consumers has demystified these questions to a large extent.

“Enabling technology, combined with genuine and real client advocacy is the future of financial services. Complexity and the unintelligible language of money holds no place in the financial future of New Zealanders.”

Bolton says innovation, on top of a curbed expectation of profit, and a genuine desire to help people rather than raid their pockets will continue to kick down old doors in finance. He says innovators like Squirrel, Simplicity and Lifetime Income can offer better value by keeping their own costs down.

“The only reason we can deliver this much value is by keeping our costs low. We have been very careful to build a scalable digital platform. We cannot afford to spend money on advertising, so growth will come from word-of-mouth as consumers start to understand and talk about the value we are creating for them.” 

Stubbs says costly conventional advertising has been no match for word-of-mouth.

Simplicity has also eschewed traditional methods of marketing, preferring to rely on member advocacy, social media and its vast constituency of volunteers and influencers.

As part of his daily routine, Stubbs takes an hour to phone new members to welcome them to Simplicity, a simple but powerful gesture that has fanned the Simplicity story.  

“People are always so shocked to hear from a CEO. To be honest, it’s the best part of my day,” says Stubbs. 

Bolton says acts of service like this build trust, which is where the future of fintech companies really lies.

“Trust is going to become the most valuable part of any financial services business.”

It’s a message that will undoubtedly resonate with attendants who show up to hear them speak on their two week roadshow between April 18 to May 3.

In this era of digital communications, face to face still leaves the strongest impression.

Within days of announcing the event, the major city venues booked out.

Bolton says the seminars are an opportunity for investors to get a better understanding of what the three companies are all about, to dispel and misconceptions, and to ‘eyeball us and see the cut of our cloth.’

If you're keen to hear from JB, Sam and Ralph in person, get yourself along to one of our free sessions. You'll learn about the latest, most innovative investment products which can help you make your money work harder.