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New Zealand Promotes Innovation in Payments Industry

Stakeholders in the payments industry were challenged to step up their technological advancement. The appeal was issued as a government effort to ensure that the country stays current in advancing the money and payments landscape.

“My overarching message is that we all work and live in a period of substantive change. (The change) offers enormous opportunity if embraced, but potentially greater risk if not,” Karen Silk, Assistant Governor of the Reserve Bank of New Zealand – Te Ptea Matua, said at a conference in Auckland.

Silk emphasised the technological improvement needed because New Zealand does not yet have scalable electronic, instant, peer-to-peer payments and lacks real-time retail payment systems. She also encouraged speeding up the fintech developments in the country. She noted that the country could become more digitally competitive by nurturing home-grown fintech enterprises.

The government has recognised the importance of increasing domestic competition and efficiency savings in the payment space and the broader financial system. However, lingering reliance on legacy systems, failure to understand regulatory impetus and focus, and limitations in cohesion and provision of regulatory support for innovation are impeding real progress.

Nevertheless, Silk praised recent legislative changes. Financial regulators provide a one-stop shop for fintech firms and system-level work to improve cross-border payments. The positive movement makes domestic interbank payments available seven days a week.

Silk stated that challenges could arise from new players who “inadvertently” introduce design or technology risks. She called it a risk as the nature of the business avoiding New Zealand regulation or undermining the role of central bank money, whether cash or a possible Central Bank Digital Currency (CBDC). Even though the Reserve Bank is still researching the CBDC.

The Reserve Bank of New Zealand published a paper recently describing the current state of the country’s payments system. It will issue another next month, consulting on the potential need to regulate private crypto assets until March 2023.

The Reserve Bank remains committed to improving the cash system’s efficiency and resilience to ensure that it continued providing payment options for everyone and financial and social inclusion for those who rely on it, Silk said. Next year, the Bank has planned small live experiments to investigate various ways to expand merchants’ roles in the cash system.

This could include assisting merchants in recycling cash at the point of sale; compensating them for cash-out services; facilitating frequent, affordable cash delivery and collection for merchants; and consolidating the cash system through the creation of utility entities, Silk explained.

Payments represent the flow of money. Sooner or later, the global payment evolution will also impact New Zealand. Hence, the country demands better, smarter, and faster payment. As a result, the study of payments has come under scrutiny.

Only some understand the intricacies of New Zealand payments, and because they are complex and interconnected, creating a single view of the payments landscape takes time and effort. Furthermore, payment systems and services differ from country to country.

The Reserve Bank plays a multifaceted role in the payment landscape. The bank runs, participates in, regulates, and monitors core payment systems. It has also recently taken on the part of money steward in New Zealand. In addition, it is interested in supporting and ensuring that money and payment systems are efficient and reliable and supporting innovation and inclusion.

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