2020 was a chaotic year for economies all over the world. The Coronavirus outbreak has caused the international market to crash, with some countries — including New Zealand — declaring a recession.
This year, the financial sector is expected to bounce back. Although the progress is slow, global markets are doing their best to adjust amidst the pandemic. With the development of COVID-19 vaccine and continuous efforts by the government, the NZ economy will likely recover to numbers relatively similar to pre-pandemic levels.
Given this setting, here are five financial trends that are expected this 2021.
Technology has been one of the key drivers in the global financial markets even before the pandemic. Due to limited travel and face-to-face interactions, tech is expected to be more ingrained in the finance industry this 2021. Its effects won’t only be seen through virtual communication, but also on a more tangible level.
With most of the financial sector still working from home, this is crucial to ensure the systems maintain the highest level of security. Aside from more efficient processes and lower service costs, secured tech also gives assurance to New Zealanders in making their transactions online.
With this, more automation, AI, and machine learning will be utilised to reduce the human error associated with every transaction.
It’s no news that house prices in New Zealand are astronomical. This trend will likely continue this 2021, with recent statistics showing almost 20% growth rate from October 2019-2020. The median price of property also jumped from $605,000 in 2019 to $725,000 last year. This has led to a 25% increase in sales of properties across the country.
One key part in influencing this price increase is the low-interest rates, aiming to fasten the recovery of the economy. As leading banks in New Zealand compete for lower fixed home loan rates, this financial trend isn’t going anywhere soon.
The economists at Westpac predict that housing inflation will reach 16% this 2021, and will decrease slightly to 12.2% by December.
Neobanks are financial institutions that operate entirely online. Just like traditional banks, they offer checking and savings accounts with fewer fees and higher interest rates. The low rate market, along with Kiwis’ growing distrust for major banks, set for Neobanks’ competitive entrance in New Zealand.
The caveat for neobanks is, there are usually limits to their services. They often don’t offer credit, investments, and insurance. With global digital banking more competitive than ever, they’re expected to diversify their offerings this year.
UK-based Neobank Revolut as well as Australian Volt are setting its sights on launching their services in New Zealand. Although, it may take a while before they finally surge in popularity, as most Kiwis still prefer to do their financial transactions physically.
“Buy now, pay later” (BNPL) is a popular purchase option for many Kiwis. Compared to credit cards, your purchases don’t incur interest as long as you pay the instalment on time. It’s an appealing choice for New Zealanders who may be budget constrained.
With the economic challenges of the pandemic, it was no surprise that BNPL has surged in popularity. This is backed by a study of New Zealand Post that shows 11% of online shopping revenue from 2019-2020 was generated through BNPL.
With the economy still recovering from the series of lockdowns and border restrictions, this will likely stay in trend this 2021.
Many Kiwis lost their job due to the pandemic. Businesses have no choice but to layoff workers, and worse, shut down completely. Thanks to the efforts of the New Zealand government, the labour market is on better terms when it comes to opportunities that match their qualifications.
A survey by the Commission for Financial Capability released in October, shows that household income is going back to normal. In over 4,000 respondents, almost two-thirds of households have the same or even higher income than before the COVID-19 hit. Best of all, the unemployment rate reached 5.3% in Q3 2020, which is way lower than the dreaded 10%.
No local transmissions have been recorded in the country, gaining the labour market a higher recovery potential this 2021.
If there’s one thing that 2020 has taught us about our finances, it’s to always prepare for emergencies.
Most importantly, make sure your financial tools are fit for your needs. Be it a mortgage rate, insurance premium, credit card limit, or a KiwiSaver scheme, always compare to find the deal and terms that's right for you. Start with glimp!
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