A Kiwi technology start-up is aiming to compete with the banks to provide an alternative secure payment and finance system for businesses and organisations.
PowerFinance was set up about two years ago when chief executive Dave Corbett left his job as finance services partner at PwC, where he had been heading up the arm which dealt with banking for nearly 10 years.
Corbett says his speciality is financial engineering and he saw changes coming in the technology world which made him think something could be done to change the future of finance.
"What we noticed was businesses tend not to embed finance into their user experience. They tend not to get to how am I going to pay for this thing I am buying or this experience and leave that to the customer.
"And then it becomes personal admin - and in totality that is not a great experience."
He said there was an opportunity for businesses to provide that extra service as well as providing a positive experience for customers.
Corbett said at the moment it was mainly large businesses that offered finance as part of their service, such as motor trader Toyota which offered Toyota Finance.
"When you are that size you spring up finance arms. But for the vast majority of Kiwi businesses, those building homes or installing heat pumps, you tend not to have finance embedded in the offer."
He said that was because, typically, it was really expensive to build a "mini-bank" inside a business.
"Technology of banking is really expensive upfront and the regulatory compliance is nothing to be underestimated."
Corbett said that was evidenced by the last few banking licenses applied for in New Zealand, where the applicants had to have $50 million in capital.
Instead, PowerFinance had built technology that allowed businesses and communities to embed a finance offering into their websites.
It will be a pay-as-you-go model for those who use it rather than a big upfront cost and it included financial compliance as well.
The service will use PowerDollar, with one dollar equivalent to one New Zealand dollar.
Corbett said with digital currencies people often had questions about where their money was and how safe it was.
He said they wanted to ensure the money was held in the safest place possible in New Zealand, which was with the government.
This meant payments went from the bank of the end-customer into a government bank account and then out into the bank account of the business or organisation.
"The PowerDollar will be a world-first public-private sovereign backed digital currency."
He said it used the advantage of the government balance sheet with private resources providing the technology platform.
It began talks with the Reserve Bank in 2019 after finding a way to work within the law by using tax pooling rules to pre-pay tax to the government and then get a tax refund.
PowerFinance partnered with Tax Management New Zealand, whose associated company the Aotearoa Foundation has since become a shareholder in the technology business.
"They talked to the Inland Revenue on our behalf and Inland Revenue sent them a letter saying yes we acknowledge you are using the existing laws in a way that is appropriate. That letter was shared with Reserve Bank - Reserve Bank talked to Inland Revenue and off we go."
Corbett said the system meant PowerFinance did not touch the money at all. Along the way it used technology to create a digital profile of a customer that met anti-money laundering laws through identifying the person and their location.
"We want to make sure we are doing things safely and appropriately." That meant the money could only come from and go to those with established and verified digital identities, he said.
Corbett said the PowerDollar was a bit like announcing a light-bulb when there were gas street-lamps up and down the road.
It was now working with six foundation partners who wanted to use the service which it would announce over the next six months whose transactions would add up to significant volumes.
There were three main customers it was targeting - commercial businesses such as real estate agents and car dealers.
"The other really exciting category is what we call community customers." They were either faith-based or ethnicity-based like iwi or people with a certain set of beliefs.
"They look at a mainstream banking and it's an averaged experience." While he believed they could offer something that was tailored.
It was working with a Māori fin-tech called Ahau - using the concepts of whānau, hapū, iwi and whakapapa to set up digital identities that go beyond individuals having loans and deposits to those groups having the same access.
"Which we see as part of the puzzle to solve issues around Māori land lending in New Zealand."
And the third group was fin-techs like Ahau and Carbon Click. "That means people who want to have a green bank can have carbon off-setting built into their lending and deposit products."
Rather than cutting out the banks, Corbett said it was trying to look beyond them to improve customers' experience.
"They are enormous entities so I'm not sure they will be worried any time soon." It had initially looked to work with the banks but the banks had their own paths they were following, he said.
The company was also planning to seek a banking license next year. "We think a business like ours it is socially responsible to be regulated. So that is what we are seeking to do."
Corbett said it was playing into two major trends - the rise in embedded finance such as Apple's payment system - and central bank digital currencies.
"What we are doing is not a central bank digital currency it is a sovereign-backed digital currency." He said the difference was the central bank was not involved in providing the technology.
In three years' time, Corbett said he expected most major economies would have their central bank digital currencies sorted.
"At that point, we will expand our future of finance layer."
"In the meantime, we have plenty to do in New Zealand."
And Covid-19 has not put off its expansion plans.
During the first lockdown, PowerFinance managed to raise $6 million from new investors.
Up until that point, its backers were mainly in the technology space but that capital raise opened it up to its customers.
"It was tricky to close during the first lockdown but we did." It is now about to close another fundraising round of $9m, also from customers.
Corbett said its service could be used by businesses to better look after their existing customer base and grow revenue from that.
"It's way easier to sell to an already existing customer something else - fries with a burger - than to find someone else that wants a burger."
He said he believed it was also healthy for New Zealand to have competition which could bring bank returns on equity down to a more normal level.
"I think it is good for New Zealand Inc to have efficient financial services structures."