New Zealand's changing financial services landscape: what it means for mid-market providers
New Zealand's changing financial services landscape: what it means for mid-market providers
New Zealand’s financial sector is operating in a period of sustained change. Regulatory expectations are increasing, technology is reshaping how services are delivered, and climate and ESG considerations are becoming embedded in financial decision making. At the same time, regulators are placing greater emphasis on how financial institutions behave in practice, not just what they commit to on paper.
While many of these changes are directed at the five major banks and Australasian insurers, the impacts extend well beyond the regulated entities themselves to those smaller, but economically significant providers - often termed the ‘mid-market’. The shifts are influencing access to funding, customer expectations, reporting requirements, and the way trust is built and maintained across the financial ecosystem.
The financial services sector is a major pillar of New Zealand’s economy. Having grown steadily over the last five years, it is now the seventh largest industry by GDP. While the biggest banks and insurers understandably have the largest slice of the pie, mid-market financial services providers are keeping pace with the growth, while also facing a range of issues and opportunities.
In shedding light on these key issues and opportunities for NZ’s mid-market financial services providers in 2026 and beyond, we sat down with Matt McQueen who highlights the major themes and opportunities for these key players to learn from the ‘big bank’ experiences.
Having now been in effect for 12 months, CoFI requires registered banks, licensed insurers and licensed non-bank deposit takers to be licensed by the Financial Markets Authority (FMA) and to follow a core ‘fair conduct’ principle. In practice, that means treating customers fairly across the full lifecycle of products and services - from design and pricing, through advice and sales, to servicing and complaints.
The FMA is also taking a more proactive approach, including thematic reviews and more frequent engagement. The direction of travel is clear: less emphasis on one-off compliance exercises, and more focus on whether firms are delivering good customer outcomes in practice.
For mid-market providers, this lifts customer trust from a reputational issue to an operating requirement. Products, communications and servicing need to stand up to scrutiny - not just on paper, but in how they work for customers day to day.
That has practical implications. Many mid-market firms will need to invest earlier in governance, documentation, controls and assurance; especially when launching new products or implementing new systems. Building conduct expectations in from the start is typically far easier (and cheaper) than retrofitting them across legacy products and platforms.
Matt adds: “We have seen a similar ‘lifting of the bar’ overseas, for example, the UK’s Financial Conduct Authority Consumer Duty has introduced higher, enforceable standards that put customer outcomes front and centre.”
Matt explains that for the mid-market providers, this agility can be a clear advantage. Simpler systems, better-connected data and closer proximity between owners, operations and customers allow smaller providers to innovate, iterate and tailor offerings more effectively than larger, more complex institutions.
Technology has become both an opportunity and a pressure point as it shapes how smaller financial services firms differentiate, grow and compete in an increasingly digital market.
Matt notes that while New Zealand has taken a “relative pause” when compared to Australia, and most mid-market financial services providers are not directly captured by mandatory reporting requirements, expectations are increasingly flowing through the financial system as climate reporting entities integrate climate risk into strategy, risk management and capital allocation.
As a result, mid-market firms may be asked to provide environmental data, explain how climate risk is considered in decision-making, or align with ESG expectations set by customers, lenders or other counterparties. Matt is seeing that firms that are prepared to respond credibly and proportionately are likely to be better positioned as climate considerations continue to influence financial markets.
Talk to our Financial Services team today to discuss what these changes mean for your business and what to do next.
While many of these changes are directed at the five major banks and Australasian insurers, the impacts extend well beyond the regulated entities themselves to those smaller, but economically significant providers - often termed the ‘mid-market’. The shifts are influencing access to funding, customer expectations, reporting requirements, and the way trust is built and maintained across the financial ecosystem.
“These changes are reshaping how entities manage risk, compete, and build trust with customers. We have an opportunity to adapt learnings from the major players, to help mid-market financial services providers drive success.” – Matt McQueen, Audit & Assurance Partner, Financial Services
The financial services sector is a major pillar of New Zealand’s economy. Having grown steadily over the last five years, it is now the seventh largest industry by GDP. While the biggest banks and insurers understandably have the largest slice of the pie, mid-market financial services providers are keeping pace with the growth, while also facing a range of issues and opportunities.
In shedding light on these key issues and opportunities for NZ’s mid-market financial services providers in 2026 and beyond, we sat down with Matt McQueen who highlights the major themes and opportunities for these key players to learn from the ‘big bank’ experiences.
Regulation and conduct: higher expectations, more scrutiny
One of the most significant regulatory shifts in New Zealand’s financial sector is the roll-out of the Conduct of Financial Institutions (CoFI) regime.Having now been in effect for 12 months, CoFI requires registered banks, licensed insurers and licensed non-bank deposit takers to be licensed by the Financial Markets Authority (FMA) and to follow a core ‘fair conduct’ principle. In practice, that means treating customers fairly across the full lifecycle of products and services - from design and pricing, through advice and sales, to servicing and complaints.
“CoFI is not just another compliance obligation. It fundamentally changes how financial services providers are expected to think about conduct. Embedding fairness, governance and accountability into everyday decision making, rather than treating them as periodic compliance exercises.”
The FMA is also taking a more proactive approach, including thematic reviews and more frequent engagement. The direction of travel is clear: less emphasis on one-off compliance exercises, and more focus on whether firms are delivering good customer outcomes in practice.
For mid-market providers, this lifts customer trust from a reputational issue to an operating requirement. Products, communications and servicing need to stand up to scrutiny - not just on paper, but in how they work for customers day to day.
That has practical implications. Many mid-market firms will need to invest earlier in governance, documentation, controls and assurance; especially when launching new products or implementing new systems. Building conduct expectations in from the start is typically far easier (and cheaper) than retrofitting them across legacy products and platforms.
Matt adds: “We have seen a similar ‘lifting of the bar’ overseas, for example, the UK’s Financial Conduct Authority Consumer Duty has introduced higher, enforceable standards that put customer outcomes front and centre.”
Technology and FinTech: agility reshaping competition
Technology and the growth of FinTech is reshaping competition across the financial services sector. Fast, digitally native firms, often unencumbered by legacy systems, have been able to enter the market quickly, launch new products faster and respond more directly to evolving customer needs.Matt explains that for the mid-market providers, this agility can be a clear advantage. Simpler systems, better-connected data and closer proximity between owners, operations and customers allow smaller providers to innovate, iterate and tailor offerings more effectively than larger, more complex institutions.
“Being closer to customers enables a deeper understanding of needs, pain points and gaps in the market, supporting product innovation and differentiated service. However, this agility must be sustained. As customer expectations rise, mid-market providers still need to invest in scalable technology, data capability and digital resilience to remain competitive.“
Technology has become both an opportunity and a pressure point as it shapes how smaller financial services firms differentiate, grow and compete in an increasingly digital market.
Climate and ESG expectations: pressure and opportunity
Climate considerations are now firmly embedded in New Zealand’s regulatory framework. Mandatory climate-related disclosures require large financial institutions to assess and publicly report on how climate risks and opportunities affect their business, in line with standards issued by the External Reporting Board (XRB).Matt notes that while New Zealand has taken a “relative pause” when compared to Australia, and most mid-market financial services providers are not directly captured by mandatory reporting requirements, expectations are increasingly flowing through the financial system as climate reporting entities integrate climate risk into strategy, risk management and capital allocation.
As a result, mid-market firms may be asked to provide environmental data, explain how climate risk is considered in decision-making, or align with ESG expectations set by customers, lenders or other counterparties. Matt is seeing that firms that are prepared to respond credibly and proportionately are likely to be better positioned as climate considerations continue to influence financial markets.
“There’s no question the financial services sector is changing at pace. But for mid-market providers, this period of change also presents an opportunity to strengthen foundations, sharpen focus and build trust. With the right advice and support, businesses can navigate complexity with confidence and position themselves for long-term resilience.”
How BDO can help
BDO works with small and mid-market financial services providers across New Zealand to navigate regulatory change, strengthen resilience and remain competitive. With deep sector expertise and a national footprint, BDO helps businesses manage risk, adapt with confidence and position for sustainable growth.Talk to our Financial Services team today to discuss what these changes mean for your business and what to do next.