Six financial technology (fintech) companies have been picked by the Financial Markets Authority (FMA) to test their products, services and business models in the FMA’s new regulatory sandbox to be piloted this year.
The FMA said it had received 24 applications to be part of the sandbox.
The six successful fintechs are Tandym Limited, Invest in Farming Co-op, IndigiShare, Homeshare, Emerge and ECDD Holdings Limited which is part of the exchange service Easy Crypto.
Daniel Trinder, the FMA’s Executive Director of Strategy and Design said the regulatory watchdog had gone through a thorough review process to determine which of the 24 firms that applied would be picked to be part of the pilot.
The criteria the FMA used to determine the final six companies ranged from benefit to customers, the product or service not posing high risk of causing consumer harm and showed genuine innovation.
The FMA also looked for firms that were “ready” and had a product to test and a demonstrated need to be included in the sandbox pilot.
The team management behind the successful sandbox applications also had to have appropriate experience and skills to execute the sandbox testing plan.
“During the pilot they can test new products and services in a controlled environment, helping them to obtain a deeper understanding of supervisory expectations,” Trinder said.
“The opportunity to adjust a product or service before full commercial launch may also help reduce costs for firms.”
Trinder added that there were “clear benefits” for the FMA as well from the pilot.
“By working closely with the firms during their time in the sandbox, we expect to gain greater insights into the benefits and risks of financial innovation and new technologies,” he said.
“Experiences gained through such a testing phase should allow us to react faster and more effectively to any potential regulatory and supervisory problems. It should also highlight gaps around investor and customer protection, allowing development of more appropriate and timely solutions.”
The FMA has provided the following detail on the intentions of the six fintechs selected for the sandbox pilot:
ECDD Holdings Limited: ECDD Holdings Limited (part of the exchange service Easy Crypto) intends to launch a yield bearing NZD-backed stablecoin and to generate revenue from interest earned on money held on trust in interest-bearing accounts.
Emerge Group Limited: A digital banking alternative offering products like debit cards, current accounts, and in-app expense tracking. Customer funds are currently held in trust with a partner bank but Emerge aims to transition to higher yielding options such as government bonds.
Homeshare: Offers investors the opportunity to own a fractional share of real estate, with each property divided into 1,000 equal shares. These shares are tokenised and can be bought and sold via an online platform.
IndigiShare: Aims to improve access to capital for Māori entrepreneurs and small businesses. It seeks to offer Te Whare Manaaki (a koha loan platform), as a way to lower barriers to entry for indigenous businesses and enable community entrepreneurship.
Invest in Farming Co-op: IIF (Invest in Farming) is an Australian-based cooperative that connects investors to farming by digitising ownership of livestock, aquaculture, horticulture, and agriculture. It allows investors to own a share of agricultural assets, where investment returns are unlocked on the sale of the stock or crop.
Tandym Limited: A group investment platform enabling people to form groups and build wealth together in a social and engaging way - while removing administrative burden.from ECDD or Easy Crypto planning to release a yield bearing NZD-backed stablecoin and to generate revenue from interest earned on money held on trust in interest-bearing accounts.
The FMA announced last December it was launching the pilot regulatory sandbox and looking for applications.
The FMA described the concept of a regulatory sandbox at the time as a way to help “spur innovation by allowing both startups and established licensed financial institutions to test new products and services in a controlled environment”.
Applications for the pilot were open to all parts of the financial sector that came under the FMA remit, including new entrants as well as firms already with a market presence.
“The pilot is also open to more than just regulated financial services, and can include products or services that, for example, simplify compliance solutions, or use blockchain or regulatory technologies,” the FMA said last year.
Commerce and Consumer Affairs Minister Scott Simpson said the FMA’s pilot programme would help “shake up” competition in New Zealand's financial and banking sectors.
“The financial and banking sectors are among the most crucial to our everyday lives and our economic growth – however, they are often criticised as being among the most regulated and, some say, least competitive,” he said.
“The benefits of this programme reach all corners of our economy. For consumers, it opens the door wide for new and innovative solutions that will challenge traditional banks and boost competition, providing more choices about how people manage their money, investments, and day-to-day transactions.”
Simpson said while fintechs were the kind of “high-value companies” the Government wanted to see thrive in NZ, regulatory barriers have prevented fintechs from “competing on a level playing field.”
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