New Zealand’s banking sector is set for a new phase of competition as a local fintech moves to become the first locally owned bank designed for an open banking environment and artificial intelligence (AI).

Financial services company Debut has begun discussions with the Reserve Bank of New Zealand and is preparing an application to become a registered bank.

The company aims to reduce barriers to financial services faced by consumer groups such as Māori, older Kiwis and those living in rural areas.

There are 27 banks registered in New Zealand, but only five are locally owned — with the last registered over a decade ago.

A recent Commerce Commission report into NZ’s banking industry highlighted significant concerns about the lack of competition. The report found the market is dominated by the four major Australian-owned banks, which are highly profitable but do not compete aggressively for customers — resulting in higher costs, fewer choices and poorer service for consumers compared with countries that have open banking.

Debut co-founder Sulabh Sharma says the introduction of open banking will be transformative for the industry and how Kiwis manage their finances.

Open banking is a system where banks allow third-party providers such as fintechs to access customers’ financial data with their approval. The model is designed to give consumers greater control over their financial information and provide them with more personalised products and services.

The Government has accepted the commission’s recommendation to allow the introduction of open banking and allow consumers greater access to next-generation banking services and more competition throughout the sector.

Though not a registered bank, Debut has launched an array of new financial services into the market through a mobile app.

The commission’s report also found consumers such as Māori were particularly vulnerable to financial exclusion under the banking system. Debut representatives say their technology is designed to reduce geographic and other barriers to access — with customers able to set up an account online without the need to enter a physical branch for key services like a digital Mastercard debit card, Apple Pay, and Google Pay within minutes.

These services also include allowing customers to set up multiple virtual debit cards on demand that control the type of transactions that can be made. The card can be deleted at any time, preventing hard-to-cancel subscriptions from recurring and providing more protection when shopping on unfamiliar websites.

Experts say open banking will also allow the entry of service providers with leaner operating models — reducing fees and improving returns for consumers.

In a first for the industry, a 5.1% per annum universal interest rate is applied to transaction and savings accounts offered by Debut. There are no penalties, lock-ups or minimum deposit requirements, ensuring all customers can benefit equally from this rate. Also, there are no foreign-exchange fees applied to purchases while travelling abroad or through international e-commerce sites.

Artificial intelligence and automation are also set to play a significant role in fraud detection and helping consumers manage their finances, with new AI-driven budgeting tools introduced by the company automatically categorising transactions with 91% accuracy.

Debut co-founder Sulabh Sharma says the introduction of open banking will be transformative for the industry and how New Zealanders manage their finances.

He says while New Zealand has been slower in adopting open banking compared with other countries, the introduction of the Consumer and Product Data Bill marks a significant step towards broader data sharing.

Account transactions on Debut, which is applying to become a bank.

“The bill will extend beyond the banking sector to include industries such as energy, telecommunications and insurance, creating a more integrated and comprehensive data-sharing ecosystem,” Sharma said.

“The primary goal of open banking should be about empowering customers with control over their data, driving innovation and fostering competition. The focus should be on delivering genuine value to customers, not just meeting regulatory obligations.

“We have modelled Debut’s offering on highly successful neobanking services that emerged in markets like the UK, Brazil and Australia, following changes to their regulatory environment.

“By building this technology from the ground up with this framework in mind, we can integrate a new suite of financial services and work towards our goal of putting $1 billion back in Kiwi pockets.

“Consumer interest in alternative banking services is strong and we had over 7000 Kiwis on the waiting list for early access to our app. Having now launched, our customer numbers are doubling each month.”

Sharma says the company has established partnerships with local banking partners and investment firms that ensure all customer funds are held in trust for their protection and offer low-risk investment add-ons that aim to mirror the Official Cash Rate — for customers who may not be confident in traditional investment products.

He says the company is also developing lending products tailored to individual needs, regardless of financial ambition or stage in life.