What the heck is fintech?
This Friday, applications for the third annual Kiwi Fintech Accelerator close with scores of hopefuls hoping to make the cut. Reporter Vanita Prasad went along to a warm up event to find out more about what fintech is and why Kiwi investors should be paying attention.
On a blissfully sunny Saturday afternoon I walked in on a room of strangers trying to make it rain.
First, there was the hand rubbing. Then came the chorus of finger clicking and before long came the clapping and the stomping.
A shamanic ritual to the money gods, this was not. I was at Xero’s Start-Up Weekend and these strangers were working up the mojo to present viable fintech business propositions.
Well, that was the idea anyway - it’s harder than you think to create a disruptive cash-cow of a business idea with people you’ve just met in less than 48 hours.
The two dozen participants, some ex-bankers others technology whizzes, had given up their weekends to try out the two-day taster of what it’s like to do the Kiwi Fintech Accelerator programme.
It was also a chance for the early stage entrepreneurs to attract partners - think speed dating for business.
Fittingly, the event was held within the bowels of Xero’s Auckland headquarters - Xero is after all, New Zealand’s celebrated fintech unicorn.
For the uninitiated, fintech is the label for technology used to enable banking and financial services and ‘unicorns’ are tech-speak for start-up companies that reach a $1 billion dollar market value.
Think of the frustrations you have with dealing with your bank, deciding what to invest in, managing your taxes - these frustrations are what fintech entrepreneurs are racing to solve.
For Leeanna Kohn Hardy, whose team won the event, it was the difficulty she experienced getting transparency about where her Kiwisaver funds were being invested that inspired her business idea.
Were her funds being invested in oil and gas, arms trading, big tobacco? The ex-banking marketer found it exceedingly difficult to know as she jumped through several hoops to find that information.
Kohn Hardy has been chipping away at her ethical investment app - the latest iteration called Finappster - for the last two years and now she’s keen to take it to the Kiwi Fintech Accelerator.
This Friday, applications close for the three-month intensive business growth programme, and Kohn Hardy is on the hunt for developers so she can apply.
A teammate is pre-requisite for the intensive course with selected teams put through the ringer as they stress-test their business ideas with New Zealand’s top financial experts, regulators, corporates and innovators.
Formally known as the Kiwibank Fintech Accelerator, the programme is sought after by financial entrepreneurs keen to fast-track their business validation. This year it’s expected that 15 teams will be accepted for programmes run in Wellington and Auckland.
Sixteen start-ups have gone through it in the past two years and amongst its successful alumni (which includes Sharesies, Tapi, Choice, Jrny) is Hnry.
Hnry is online service that handles financial admin for the self-employed. It simplifies the business of tax calculations, ACC payments and other admin so that contractors, freelancers and sole traders can focus on their core business.
Hnry co-founder James Fuller and his co-founders Richard Freestone and Claire Fuller had been working on their enterprise (which already had customers and revenue) for more than a year and before taking it to accelerator in 2018.
Fuller says the business was born from frustration that the group of freelancers had with financial admin.
“We thought we might have been just lazy. But we were always constantly asking ourselves - is this a thing?”
Fuller says the accelerator confirmed Hnry was indeed ‘a thing’ and was a gamechanger for progressing the business from a side project to a fully-fledged operation which now employs eight people full-time.
“Where we are now is, ‘This thing is huge - how much more of this thing can we deliver to the world?’.”
Since the Kiwi Fintech Accelerator, Fuller says Hnry has raised almost $1 million through angel investors, and grown more than 20 times as a business and signed a deal with ASB in March.
Altogether the combined value of KFA companies now exceeds $30m.
Sidling up to start-ups
One thing that struck me about the ideas pitched at the Xero Start-Up Weekend event was how much fintech entrepreneurs want to unravel banks as we know them.
Why on Earth would Kiwibank or any big player in the finance sector want to fund and support these classically bullish start-up types?
Kiwi Fintech Accelerator business support lead Anand Ranchord says it serves both banks and start-ups to partner up together.
Banks have expertise on regulatory framework, working at scale and have large departments to deal with everything from risk management to HR. Crucially for start-ups, they also have trust and an ability to access customers.
“For start-ups it’s really hard to get above the noise. A lot of people are fairly apathetic to financial services in general. To be able to catch someone’s attention and say I’ve got this really new way of doing this thing - whether that’s making payments or investing - and getting them to sign up and engage with it. And how do you do that at scale?”
Conversely, fintech start-ups are nimble, more able to take risk and freer to create the ideas of tomorrow.
Ranchord quite rightly points out it’s almost never the incumbent that is able to create disruption of the status quo.
Ranchord is also a member of the executive council of FinTechNZ, an umbrella group launched in 2016 as a place for the New Zealand fintech community to collaborate. Today it has 185 member organisations, 13 local partners and seven international partners.
He says the sector is flourishing due to strong collaboration and he’s encouraging New Zealand investors to give due consideration to the fintech start-ups being produced here.
“The combined value of KFA companies exceeds $30m, demonstrating the growth track that the accelerator has been able to assist these fintechs to establish.”
To game-ready entrepreneurs ready for the next step, his message is simple:
“If you’re a fintech, the Kiwi Fintech Accelerator is your passport for growth.”
Kiwibank is a foundation partner of Newsroom.co.nz