Ashley Lake-Johns, a co-founder of Fintech start-up, Qippay with Wayne Deas, has recently signed a bilateral agreement with BNZ, with more agreements with New Zealand banks on the horizon.
Lake-Johns has worked in technology and finance for many years, his first career role being in politics as a staffer in Australia, after which he founded his start-up.
Since moving back to New Zealand with his partner, Lake-Johns has worked for a technology company reselling software before moving on to a role within a finance company as a currency trader, hedging currency and mitigating business risks.
"My headspace has always been in that arena," said Lake-Johns, "what inspired me to get into financial technology and payments and subsequently open banking was financial inclusion."
Financial technology exists on the premise of elevating business and individuals, with a critical area of concern for Lake-Johns and co-founder Deas being the high rate of transaction fees that businesses, charities, and corporations large and small were facing, which has resulted in an equally painful payment experience for customers.
The high transaction rates for businesses were costs that were usually passed onto the consumer or resulted in the hefty transaction fee, which merchants with a smaller margin couldn't manage, creating cash flow delay and, as Lake-Johns puts it, plenty of other chaos.
Qippay's role is to resolve these issues for businesses, which is how the co-founder discovered opening banking and got involved with Payments New Zealand, the API (application programming interface) Centre, which has led the start-up to team up with banks.
The bilateral agreement with BNZ has been positive. Being API-ready Lake-Johns commented that these bilateral agreements allowed for collaboration and an environment for Qippay to build its product.
Wayne Deas, the co-founder of Qippay, has a wealth of experience with small business and charity, with an extensive background within the charity sector, allowing a complementary partnership between Deas and Lake-Johns with a shared passion of streamlining transaction processes to save costs for businesses, charities, and corporations large or small.
Open banking is a financial revolution of transparency of data. Traditional practices with businesses, such as banks, have kept their data, consumer and business-orientated, private. This makes it very difficult for customers and other businesses to access this data to share and compare with other financial service providers or third parties, such as Qippay.
Therefore, open banking gives accessibility to consumer banking data for a consumer to pass on to other financial service providers, another bank or third party, to compare the services of each and either negotiate or choose the options which benefit them best, for example, getting better interest rates on loan.
Secondly, consumers can aggregate all their accounts into one place and manage their subscriptions. In Qippay's case, the business offers account-to-account transactions, which provide an alternative solution for more affordable card payments.
Europe has had legislation enacted for open banking, which is where the concept was first introduced, which allowed regulators to go to banks and ensure that data was shared with consumers so that all could make more informed financial decisions and have access to financial services and products. After being introduced in Europe, the initiative was introduced to the United Kingdom, where it has gained significant momentum.
However, the challenge open banking faced in the United Kingdom was that the speed at which regulators came for data sharing came at a pace that the industry didn't have time to adapt to or build APIs to manage, which Lake-Johns stated was the glue for banks and third parties to talk to each other.
It took a while for us to get it as well. In New Zealand, the approach we have here is industry-led.
"It took a while for us to get it as well. In New Zealand, the approach we have here is industry-led."
Payments New Zealand, owned by the banks of New Zealand and set up through the Reserve Bank in New Zealand, has a subsidiary, the API Centre. The data centre standardises APIs and gets third parties, such as Qippay, into a room with banks where there is back-and-forth conversation about developing the products and APIs.
"We're waiting for regulation to mandate the banks to come to the table. But in the meantime, Payments New Zealand is pushing forward with this anyway, getting the APIs ready and allowing third parties like ourselves to work with the banks to get bilateral agreements."
Lake-Johns said regulation would take time, meaning businesses like Qippay go to banks individually to create bilateral agreements and build a payments network. There are several hoops to get a bilateral agreement with banks, including extensive security due diligence to ensure there's no risk for banks, businesses or charities that have access to work with Qippay.
Then there is the technical aspect of building a product with API.
However, Lake-Johns stated that BNZ had been great to work with and that New Zealand banks have become more open to bilateral agreements with FinTech start-ups such as Qippay.
Qippay's service streamlines the payment process of merchants, where traditionally, the merchant must wait approximately four days to receive payment for the goods consumers buy with an additional transaction fee for receiving the payment through their financial service provider, which can be up to three percent.
Qippay is designed to reduce this transaction fee significantly through its account-to-account services.
Furthermore, from the consumer perspective, Qippay removes the need to add card details per purchase. This can often lead to merchants losing impulse buyers, making payments quick and easy for consumers and merchants alike.
"So by using open banking, they essentially click on to their bank account, be it BNZ or Westpac, and that directs them to the banking app, and they consent to pay out of there. So that process is a lot easier for the customer."
To deliver that, Qippay has new QR codes, so you scan a QR code, pay, and purchase online.
As of Tuesday, the 30th of May, implementation dates were released, meaning banks need to provide APIs and access to the parties by May next year.
In the future, Lake-Johns hopes to expand Qippay's reach and accessibility to multiple industries in New Zealand to simplify and reduce transaction costs. Secondly, Lake-Johns hopes that New Zealand will become a leader in the financial technology industry and have the government be more conscious of the role and importance of industry in promoting financial inclusion and transparency for communities and businesses across New Zealand.
"I'd love to see New Zealand become a beacon of light for the tech industry."