Dec 7, 2017 - New Zealand's burgeoning fintech sector is coming of age with the likes of the Reserve Bank thinking more deeply about the impact changing technology will have on the broader financial system. The central bank identified the new wave of fintech as having "the potential to significantly change the structure of the financial sector" in its six-monthly financial stability report last week, singling out blockchain, crypto-currencies, application programming interfaces (APIs), big data and artificial intelligence, and digital platforms for peer-to-peer services among the most important.
Head of financial stability Bernard Hodgetts said in an interview last week that the central bank is thinking deeply about various scenarios arising from the new technology, and has identified open banking - which decentralises banking through third-party APIs - and crypto-currencies as areas where it can beef up its research.
"We've put quite a bit of thought into what sort of scenarios might lead to the core banking system suddenly facing more competition than it previously did," Hodgetts told BusinessDesk. "The core level of profitability of the system could potentially be competed away if you had some form of new entrant into the market that could take business away from the banking sector and I think the banks would be very mindful of that risk."
The Reserve Bank's decision to highlight fintech in the report follows earlier efforts by the likes of the Ministry of Business, Innovation and Employment and the Financial Markets Authority to support innovation in financial services, and the bank wants to work with other authorities to make sure it doesn't stifle digital innovation.
DEc 5, 2017 - Inflation in New Zealand and world-wide has been persistently low since the 2008 global financial crisis, partly because of factors such as globalisation, the growth of China, the rise of the digital economy, and low inflation expectations. In a speech today to the Institute of Directors, in Auckland, Reserve Bank Governor Grant Spencer said that persistently low inflation has prompted the Reserve Bank to think about whether it needs to tweak it’s approach to monetary policy. Mr Spencer explained a number of significant changes over the past decade have affected the outlook for inflation: · Globalisation over the past 10 years has led to outsourcing of labour-intensive production to cheaper locations, which has lowered the price consumers pay for a wide range of goods and also placed downward pressure on wages for lower-skilled jobs in advanced economies. · The scale and growth of China’s economy has also had a profound effect. China has become the largest exporting nation in the world and its expansion of capacity has restrained the prices of industrial materials and a wide range of manufactured goods. · New digital distribution channels and falling prices for ICT equipment have lowered import prices and reduced barriers to entry across a range of markets. Online competition in retailing, financial services, travel services, education and health has significantly altered the competitive landscape and put downward pressure on prices. · The domestic economy has become more integrated with global markets, resulting in greater competition in traditionally sheltered sectors. Increased international labour mobility has been an important driver. · Low inflation expectations have influenced the way businesses set prices and wages, adding further momentum to low inflation. These global trends appear to be changing the nature of the price formation process in New Zealand. “These factors may be reducing the leverage monetary policy has over inflation, although their persistence and impact on inflation in New Zealand remain uncertain,” Mr Spencer said. Monetary policy has less than fully offset the weakness in imported inflation which was not expected to be so persistent and has been overlaid with uncertain commodity price movements. The on-going shock has resulted in CPI inflation running below the 2% target mid-point. The policy response has been consistent with our flexible inflation targeting framework. More recently we have been assuming greater persistence in low global inflation and this is contributing to our current flat track for future OCR levels. “The changes in domestic pricing behaviour are causing our flexible inflation targeting approach to become more flexible. In pursuing our long term price stability objective, relatively more weight is being attached to output, employment and financial stability. However, this can only be sustained if monetary policy’s long term price stability credentials are maintained” Mr Spencer said. Read the speech: Low inflation and its implications for monetary policy
Dec 1, 2017 - The failure of the ANZ to consummate its sale of UDC Finance to China’s HNA Group is further evidence to the effect that it is one thing to sell an asset into this region. It is another thing to actually get paid for it. There are now strong indications that the UDC sale is now back at the point of its departure, the signing ceremony.
Nov 29, 2017 - New Zealand’s financial system remains sound and risks to the system have reduced over the past six months, Reserve Bank Governor Grant Spencer said today when releasing the Bank’s November Financial Stability Report. “Momentum in the global economy has continued to build over the past six months, reducing near-term risks to financial stability. However, the New Zealand financial system remains exposed to international risks related to elevated asset prices and high levels of debt in a number of countries. “Domestically, LVR policies have been in place since 2013 to address financial stability risks arising from rapid house price inflation and increasing household debt. These policies have helped improve banking system resilience by substantially reducing the share of high-LVR loans. Over the past six months, pressures in the housing market have continued to moderate due to the tightening of LVR restrictions in October 2016, a more general firming of bank lending standards and an increase in mortgage interest rates in early 2017. “Housing market policies announced by the Government are also expected to have a dampening effect on the housing market. “In light of these developments, the Reserve Bank is undertaking a modest easing of the LVR restrictions. From 1 January 2018, the LVR restrictions will require that:· No more than 15 percent (currently 10 percent) of each bank’s new mortgage lending to owner occupiers can be at LVRs of more than 80 percent.· No more than 5 percent of each bank’s new mortgage lending to residential property investors can be at LVRs of more than 65 percent (currently 60 percent). “The Bank will monitor the impact of these changes and will only make further LVR adjustments if financial stability risks remain contained. A cautious approach will reduce the risk of resurgence in the housing market or deterioration in lending standards. Deputy Governor Geoff Bascand said “Looking at the financial system more broadly, the banking system maintains adequate buffers over minimum capital requirements and appears to be performing its financial intermediation role efficiently. The recovery in dairy commodity prices since mid-2016 has supported farm profitability and has helped to reduce bank non-performing loans in the sector. Recent stress tests suggest that banks are well positioned to withstand a severe economic downturn and operational risk events. “The Bank has released two consultation papers on the review of bank capital requirements and a third paper on the measurement and aggregation of bank risk will be released shortly. The aim of the capital review is to ensure a very high level of confidence in the solvency of the banking system while minimising complexity and compliance costs. “The Bank has also completed a review of the bank directors’ attestation regime and is making good progress in implementing a new dashboard approach to quarterly bank disclosures. This is expected to go live next May,” Mr Bascand said. More information· Financial Stability Report
Nov 28, 2017 - New Zealand FinTech startups need to be braver and take advantage of rapid innovation and change happening in Asia, says a Kiwi-Asian business and technology trade expert working to attract Asian FinTech startups to take part in version 2.0 of Kiwibank’s FinTech Accelerator, run in partnership by Kiwibank and Creative HQ. Darshan Shetty, of Auckland and Beijing-based Xing Cheng Xing (Rising Star), says Kiwi startups can learn much from what’s happening in FinTech markets in China, India and Vietnam.
Many Kiwi ventures are too focused on breaking into the United States and European markets, Shetty says.
“Of course, we need to focus on the US and Europe markets, but innovation and change is happening a lot more – and lot faster – in Asia than the US and Europe.
“China is way ahead of the game, especially with WeChat and Alipay leading the charge. India and Vietnam are not far behind but are catching up fast.”
The onus was on Kiwi FinTech startups to be much more agile in putting ideas into practical application – and to take a few risks.
“Compared with Asian startups, Kiwi startups tend to move much slower. Having a clear idea of things is crucial, but there can be a tendency to overthink things, rather than taking action.
“We need to start taking a few more risks as a startup ecosystem and be braver in working closely with Asian markets.”
New Zealand’s reputation in Asia was as a primary producer. That reputation needed to be diversified into FinTech and innovation.
“On the whole, no one knows much about New Zealand when it comes to tech innovation,” Shetty says. “We’ve always positioned ourselves as a country that makes meat, milk and manuka honey and, of course, the Lord of the Rings movies. These are maybe the only topics we ever talk about (in Asia). But New Zealand is much, much more, it just seems we’ve forgotten and ignore the innovation success of Kiwis.”
Shetty says blockchain, cryptocurrency and app-based FinTech innovation was exploding in Asia and were areas Kiwi startups would be well advised to focus on.
“Another area would be to simplify ways to get smaller investments into the New Zealand marketplace from investors who actually want to invest here, rather than just coming here as immigrants. Stock market apps are another growth opportunity in Asia in the automation of market prediction and advice.”
The inaugural Kiwibank FinTech Accelerator resulted in the successful launch of startups including Sharesies, Accounting Pod and Tapi with support, funding and expertise to build, develop and expand their products in New Zealand and world markets.
That success had encouraged Kiwibank and accelerator partners Creative HQ and Callaghan Innovation to launch version 2.0 of the programme, which will be run by Creative HQ’s Lightning Lab accelerator.
Kiwibank’s Peter Fletcher-Dobson says focus of the new accelerator is on helping Kiwi FinTech startups develop a “global first” approach.
“FinTech’s a $1 trillion global industry, with investment increasing every year. As a country with talented people and a good regulatory environment, we can be at the heart of development.
“By having overseas ventures involved, we can expose Kiwi startups to the thinking and technology being applied internationally. The global networking potential alone will be invaluable.”
James Hartley, Manager of Financial Markets Policy at the Ministry of Business, Innovation and Employment, agreed that New Zealand was well-placed to be a leader in FinTech innovation.
“We’ve got some of the most modern and supportive financial markets legislation in the world. On top of that, the World Bank ranks New Zealand as the easiest country in the world in which to both do business and start a business. We’re also the least corrupt country in the world and sit high in financial literacy and innovation rankings.
“Because we’re a small country, we can co-ordinate and act quickly when responding to change. Our policymakers and our Financial Markets Authority are engaging with the FinTech sector and taking an agile approach to innovation. We know larger countries struggle to provide the level of access and openness we have here.”
Nov 27, 2017 - New Zealanders increasingly think we're moving to a cashless society. So why has the amount of cash held in New Zealand more than trebled in the last 20 years? Lynn Grieveson looks at whether criminals, tradies or abusers of migrant workers are responsible. Half of New Zealanders think that we won't be using cash in ten years' time, and over two-thirds rarely carry cash now, yet new research shows that the amount of cash in circulation has grown over the past decade, outpacing the growth in GDP.
The Federal Research Bank of San Francisco released research last week into cash use around the world.
After looking at the amount of cash in circulation in 42 economies including New Zealand, the Bank found that in nearly every country the amount of cash being held grew as fast or faster than GDP over the past ten years.
In New Zealand, the amount of cash in circulation rose by 76 percent over the past decade, while GDP only rose by 54 percent - a 21.5 percentage point difference. Over the same period, the average household wage grew only 42 percent.
This increase in cash in circulation gave us a ranking of 27th in the list of 42 countries, which was topped by troubled economies such as Argentina (where the rise in cash in circulation was 769 percent more than the rise in GDP), the Sudan (454.5 percent) the Ukraine (368.2 percent) and Afghanistan (206 percent).
The two outliers in the survey were Norway and Sweden, where cash use is declining.
Why so much cash?
The Bank had some theories for the results, which it conceded "may come as a surprise" given technological innovations in the payments sector and a widely-held view that cash is nearly dead.
In countries in economic and political turmoil it clearly makes sense to have a store of cash. But the Bank suggested that the low interest rates in many countries since the global financial crisis may also be factor, as people worry less about the interest they are losing out on by keeping a stash of cash that could otherwise be in a savings account or investment.
New currency designs, as we have had in New Zealand, can also bump up the amount of cash in circulation.
But it seems unlikely to be a major factor, and the statistics show fewer people carrying cash and ATM use falling. ATM use fell 22 percent in Australia over the past five years, even as the amount of cash in circulation there rose 17.7 percent faster than the rate of GDP growth.
Nov 21, 2017 - The FMA has today published KiwiSaver data in an interactive format to prompt discussion, engagement and debate on the relationship between investment risk, returns and fees. The FMA KiwiSaver Tracker uses the information KiwiSaver providers give investors through their quarterly fund updates and via the Companies Office’s Disclose Register. These updates are a legal requirement and the Tracker will automatically incorporate the new information every three months.
The Tracker is part of the FMA’s ongoing focus on using disclosure to drive good conduct by providers and informed investor decision-making. The tracker complements other existing independent sources of KiwiSaver analysis, like Sorted’s Fundfinder.
The Tracker allows people to arrange and sort the data. It shows:
The risk profile, returns and fees for each fund.
A percentage figure for how much of the return is paid to the fund manager in fees (excluding fixed management fees) and how much is paid to investors.
Data that currently covers the past year and average five-year returns.
Funds that have been invested for less than a year and restricted schemes are excluded.
Paul Gregory, FMA Director of External Communications and Investor Capability said, “We regularly encourage investors to look carefully at who is managing their money and what the results and costs are.
As KiwiSaver matures, balances are increasing and more people are looking at what’s inside their KiwiSaver. This will increase demands for transparency. The market is also changing, with new lower-cost entrants, the potential impact of robo-advice and policy changes requiring fees to be disclosed in dollar amounts.
The information in the KiwiSaver tracker about fees and return is an important factor in considering your investment, but it is not sufficient information to make an investment decision. This is why we link to providers and the Fund Finder tool to discover further information.” Mr Gregory added.
Investors involved in early tests of the tracker showed particular interest in the scatter plot of KiwiSaver fund fees and returns.
Mr Gregory said, “People like to see where their fund and other similar funds sit in a plot. Over 5 years, there certainly seems to be a link between higher risk investments and higher returns. However, the link between higher fees and higher returns is, apart from in the case of a couple of standout funds, far less obvious.”
Investors are encouraged to talk to their provider if they have questions about KiwiSaver in general, or their specific fund. The contact details for each fund are provided in the Tracker.
The Tracker has been designed to enable users to embed it within their own website. The FMA also welcomes feedback, suggestions and comments on the Tracker.
Nov 21, 2017 _ On October 20, 2017, Mastercard announced that developers would be able to access its blockchain technology platform via its Mastercard blockchain API published on Mastercard Developers writes Giulio Prisco on nasdaq.com.
The new service was launched during the Money20/20 Hackathon in Las Vegas after testing and validation had been completed. According to the company, Mastercard's blockchain solution "provides a new way for consumers, businesses and banks to transact and is key to the company's strategy to provide payment solutions that meet every need of financial institutions and their end-customers."
Mastercard wants to provide an easy-to-use, permissioned platform to its network of developers and partners, designed for privacy, flexibility and scalability. According to the company, Mastercard's blockchain technology platform provides privacy by ensuring that transaction details are shared only amongst the participants of a transaction while maintaining a fully auditable and valid ledger of transactions; flexibility by providing the blockchain APIs and a wider suite of Mastercard APIs, with software development kits available in six different languages; and scalability to commercial processing speed. Mastercard emphasizes that its blockchain technology is integrated into the company's widely popular payment network.
At this moment, the Mastercard blockchain website for developers states that, due to an overwhelming amount of interest in Mastercard's blockchain, "We are limiting access to our API documentation to a select audience at this time."
Besides specific use cases such as Proof-of-Provenance and vehicle service history, Mastercard notes that the global market opportunity for peer-to-peer (P2P) bank transfers is $16 trillion. Mastercard intends to take advantage of blockchain technology and the Mastercard Settlement Network to transfer funds between bank accounts.
"The Mastercard Settlement Network reads the blockchain and will transfer the funds between two banks," stated Mastercard. "It then writes a confirmation of transfer to the Mastercard blockchain."
According to Mastercard, the company operates the world's fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. Besides developing its own blockchain platform, Mastercard had previously filed for over 35 patents related to blockchain technology, invested in Digital Currency Group and joined the Enterprise Ethereum Alliance to explore the possibilities of Ethereum technology across a wide range of potential use cases.
"This move comes as a bit of a surprise, as Mastercard previously issued a blanket rejection of Bitcoin," reads a commentary published in Futurism . "Still, Mastercard's blockchain service heralds what Ethereum co-founder Vitalik Buterin described to be blockchain's potential to replace credit cards."
It appears that the payment processing giant, realizing that blockchain technology is here to stay and disrupt the credit card industry, is accelerating its blockchain-related plans. Last week, Mastercard filed a new patent for a " Method and System For Instantaneous Payment Using Recorded Guarantees ."
While it may seem that Mastercard is trying to patent blockchain technology itself, the filing is more specific and targets fast, verifiable and guaranteed payments on a blockchain network.
Mastercard noted that, while fiat currency enables merchants to receive instant payments, it may take several days for a merchant to receive electronic payments due to processing, clearing and settlement times. On the other hand, credit cards are more convenient for consumers. Therefore, according to the filing, there is a need for a technical solution that allows merchants to receive instantaneous, guaranteed electronic payments while maintaining a high level of consumer convenience.
| A Nasdaq release || November 20, 2017 |||
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
17 Nov 2017 - The Reserve Bank today published a consultation paper proposing an enhanced mortgage bond standard aimed at supporting confidence and liquidity in the financial system. This follows a review of domestic and international mortgage bond collateral standards. When the Reserve Bank lends to banks and other counterparties it does so against ‘eligible collateral’ (usually lower risk financial assets). Mortgage Bonds are a key form of eligible collateral in many countries with the Reserve Bank first accepting them in response to the global financial crisis when its lending to the banking system increased significantly. In New Zealand mortgage bonds are not generally traded. The Bank believes that a more standardised and transparent framework for mortgage bonds would improve their quality and make them more marketable. The Bank has developed a proposed new format for mortgage bonds, called Residential Mortgage Obligations (RMO). The Bank believes the proposed new collateral standard would: · improve the risk position of the Reserve Bank by promoting the use of higher quality and potentially more liquid, mortgage bonds as collateral in the Bank’s lending operations; · support New Zealand market lenders by creating an additional funding instrument for residential mortgages; and · promote a deeper capital market through the availability of simple, comparable and transparent mortgage bond instruments. The proposed standard is consistent with international policy guidelines aimed at promoting simpler and safer secured bonds. The Reserve Bank is seeking feedback on the terms under which it should accept mortgage bonds as collateral and the proposed new RMO standard. The consultation closes at 5.00 pm on 16 February 2018. More information:Review of mortgage bond collateral standards
17 Nov 2017 - American Express business customers will be able to then to make “instant, trackable, cross-border payments” to Santander UK accounts. American financial services giant American Express has announced that it has teamed with Ripple and Santander UK to develop a blockchain-based solution for instant business-to-business cross-border payments between the US and the UK.
In a statement published today, the US revealed that Ripple’s blockchain technology had been integrated into its FX International Payments (FXIP) platform, meaning that payments made by business customers of the service will now be routed through Ripple’s enterprise blockchain network, known as RippleNet. The project will initially connect American Express’ customers to Santander UK, allowing them to make “instant, trackable, cross-border payments” to accounts in the British bank. However, both companies hinted that the project could be substantially expanded in the future.
This is major development for blockchain technology and particularly Ripple, which has been working with a number of leading banks and financial institutions, including MUFJ, UBS, UniCredit, Bank of America and Standard Chartered.
“We’re taking a huge step forward with American Express and Santander in solving the problems corporate customers experience with global payments,” Ripple’s chief executive officer Brad Garlinghouse said in the statement. “Transfers that used to take days will be completed in real-time, allowing money to move as fast as business today. It is just the beginning, and we look forward to growing this partnership to help other American Express FXIP customers.”
Meanwhile, American Express’ executive vice president and chief information officer Marc Gordon, commented: “This collaboration with Ripple and Santander represents the next step forward on our blockchain journey, evolving the way we move money around the world.”
The Ripple price (XRP/USD) has surged in today’s trading. As of 14:53 GMT, Ripple was trading at $0.249, having gained nearly 20% since the start of the session.
For further information on how to buy and trade Ripple, see our comprehensive Ripple guide.