Why a digital disruptor could offer you a better deal than your bank - Diana Clement

There's a growing number of digital accounts available from disruptors. Photo / 123RF

OPINION

The face of “banking” in New Zealand is changing, with a growing number of digital accounts available from disruptors. Most have a Mastercard or other debit card attached and some customers are using them for their day-to-day “banking”.

The offerings currently range from Revolut, which is said to have more than 30 million users worldwide, to local start-ups such as SquareOne, which offers an account designed to teach children financial literacy. Other names consumers will start to hear more about include Savvy, Dosh, and Making Debut Bank.

The selling point of these disruptors is that they make it super-easy to open an account, and provide what traditional banks don’t offer, do badly, or do rarely. That might include multiple sub-accounts, built-in budgeting, paying competitive interest on every dollar, or using AI and machine learning to make smart recommendations.

The two biggies from overseas that have launched here are Wise and Revolut. Both offer multi-currency accounts, with debit cards attached, better exchange rates than banks, and low-cost ATM withdrawals overseas for travellers. Neither Wise nor Revolut pay interest on balances nor offer overdrafts. Revolut, which launched here last year, can be used much like a bank account and has budgeting features, goal-setting and AI analytics built in and a few other clever features.

Home-grown KiwiSaver provider Booster offers Savvy, which is a transaction account and attached debit card. Savvy pays a return, which is currently set at 5 per cent. It allows users to split their incoming pay automatically between “stacks” (sub-accounts). The account has budgeting built in. Savvy can be set up to sweep leftover money at the end of the month into your stack of choice, and offers daily, weekly or monthly analysis of your spending. Chief customer officer Diana Papadopoulos says Savvy came about through conversations with its KiwiSaver members that highlighted a need for more flexible banking in a way that teaches good savings habits.

Dosh started life as an app to ensure friends and family pay each other back after a trip or big night out. The idea is that you all have Dosh accounts and square up in the morning. Some customers simply use Dosh as their current account with built-in sub-accounts called “strives”. It comes with a Visa debit card that pays 1 per cent cash back currently on spending.

When Jovan Pavlicevic’s 8-year-old daughter asked him, “What’s cash?”, he teamed up with friend and payments industry veteran Jamie Jermain and launched SquareOne. It’s an account with a debit card for children. Parents can set chores that need to be ticked off before pocket money is paid and there are a range of other features, such as matching or contributing to their savings goals. The children can’t use their debit cards in R18 stores for goods such as alcohol and vapes.

SquareOne has a very ambitious plan up its sleeve. It’s on the verge of launching Emerge.nz, a business “banking” offering that it hopes to follow up with the very first true full-service challenger bank in New Zealand. There are a lot of hurdles to get over before then.

Making Debut Bank, which isn’t actually a bank but has ambitions to become one, is nearing the launchpad in New Zealand, with a waiting list open. It plans to offer customers insights into their spending and top-notch budgeting.

Other digital apps offering savings-type products include Kernel Wealth’s Smart Saver, which is building up a wait list currently. Smart Saver offers a competitive interest rate. Another interesting banking-like product is Aera, which is designed for saving for a home loan.

Mastercard country manager Ruth Riviere says her company is in talks with a number of other international and local players which plan to offer services here in the near-future for consumers and businesses.

It is important to understand that currently, none of the disruptor offerings in New Zealand are registered banks. That means they’re not regulated by the Reserve Bank of New Zealand.

Most are overseen by the Department of Internal Affairs and are required to register with a dispute resolution service. But they don’t undergo the same level of scrutiny as a bank. Others such as Booster and Kernel come from a fund management background and are regulated by the Financial Markets Authority as a result.

Either way, most of the locally-based apps hold customers’ money with a registered bank, which does give some added protection. But never keep all your money in a single bank or other financial service provider.