Latest / Making Cents / AI Is Making Mortgage Fraud Easier. Here's What Changes

Transcript

AI Is Making Mortgage Fraud Easier. Here's What Changes · Making Cents

• 0:00
  It seems everyone is using AI to make their job quicker and easier these days.
• 0:05
  Apparently even fraudsters, mortgage fraud, even insurance fraud is on the rise.
• 0:11
  And it's serious enough that the Financial Markets Authority, our money police, has been writing to banks and advisors warning them on what they need to watch out for and running active investigations into it.
• 0:23
  Doctored bank statements, inflated income, things that used to be really quite hard to fake convincingly.
• 0:30
  Well now it can all be done in minutes with AI, which is also a bit of a problem for you and me because then the honest borrowers end up competing against the fraudulent ones.
• 0:42
  Josh Daniel is the co founder of Akahu, which runs open banking infrastructure used by our main banks and he is on the front lines of how the financial industry is fighting back.
• 0:53
  Historically it's been pretty hard to generate a fake file, but with AI you can get a professional looking file without having the technical skills to make everything else appear as an original document does.
• 1:07
  But it's interesting because AI is always a double edged sword.
• 1:11
  There are good things and bad things.
• 1:14
  And he's the first to admit AI is also changing the game to make the money world easier.
• 1:19
  For you and me, AI is inevitable.
• 1:21
  It will remake this world around us.
• 1:23
  AI has this huge potential to optimize people's financial lives without requiring a whole lot of effort.
• 1:30
  So where's the line?
• 1:31
  Can we stop the crooks?
• 1:32
  And should we make ChatGPT our new financial advisor?
• 1:36
  There will be this battleground over who has the interface combining of financial data and AI functionality.
• 1:44
  No one's won the interface yet.
• 1:46
  Well, welcome to Making Sense.
• 1:48
  It's the podcast people who want financial freedom without giving up their coffee.
• 1:52
  I'm Francis Cook, a financial journalist and fellow financial freedom seeker who makes money simple for you today.
• 1:59
  The good and the bad as the digital world and AI makes a grab for your wallet.
• 2:04
  This episode of Making Sense is supported by Odoo, the affordable way to get your business working smarter.
• 2:11
  Go to odoo.com that's o-o.com for more.
• 2:15
  I want to help as many people as possible build a better life for themselves by understanding and taking control of their money.
• 2:22
  You can be part of how that happens.
• 2:24
  First, make sure you're subscribed wherever you like to listen, whether it's YouTube, Apple Podcasts or Spotify.
• 2:31
  And then send your favorite episode to a mate.
• 2:34
  Then we can all level up with money together.
• 2:35
  The show grows and I can keep bringing you the money info that actually moves the dial.
• 2:40
  Welcome in Josh.
• 2:41
  Thank you so much for coming in.
• 2:43
  Look AI is one of those things.
• 2:45
  I think it creates a lot of intense feelings, people, both good and bad.
• 2:49
  Some people love it, some people hate it.
• 2:51
  Not much in between.
• 2:52
  And yet it is becoming more and more enmeshed in the financial world, for better or worse.
• 2:59
  What are your thoughts on that?
• 3:01
  You feeling better or worse about it?
• 3:03
  Well, I agree it's becoming more and more enmeshed and feels inevitable that it's going to remake the world around us.
• 3:10
  And that question reminds me of in my first job, it was at a law firm and there was a policy that everyone had to have a computer in their office.
• 3:20
  And there was a senior partner that was nearly due to retire who had one in his office but facing the wall.
• 3:26
  And it was sort of an act of defiance, I think.
• 3:29
  But it read to me like you're not trying to stay up with what's changing anymore.
• 3:35
  And I think, you know, AI is inevitable.
• 3:38
  It will remake this world around us.
• 3:40
  I personally feel generally optimistic about it.
• 3:43
  There are obviously new challenges and concerns that come with new technology.
• 3:48
  But one of my bugbears in the world of personal finance has always been people that don't happen to be on the best rate for their deposits or their loans.
• 3:56
  And I just think AI has this huge potential to optimize people's financial lives without requiring a whole lot of effort from the user.
• 4:04
  Yeah, I think I land on a similar place in terms of it doesn't necessarily matter how I feel about it, AI is coming.
• 4:10
  And I'm sort of of the opinion if it's coming, I need to know about it and figure out what's going on.
• 4:15
  And I see it very much as a sword that cuts both ways.
• 4:18
  Can be really helpful, can have some things that don't go as well.
• 4:21
  And what you actually drew my attention to, thank you very much, is it actually caused a bit of a spike in fraud, hasn't it?
• 4:28
  Tell me about that.
• 4:29
  It has.
• 4:30
  And yeah, this partially was in the news because the FMA has called this out as one of their focus areas for this financial year, and they called out specifically mortgage fraud, insurance fraud and fraud in relation to pulling
• 4:43
  out Kiwisaver for First Home purposes.
• 4:46
  So, yeah, with mortgage fraud, this is becoming a problem all around the world.
• 4:50
  Actually, in Australia, cba, the largest bank there, has spoken about a billion dollars worth of mortgage fraud, the biggest fraud in bank history in Australia, if those allegations are correct.
• 5:03
  Yeah, it is a rising problem because AI makes it easier in a lot of cases to carry out a fraud.
• 5:09
  How do they do it?
• 5:10
  Well, if we look at mortgage fraud.
• 5:12
  The idea here is that any lender in New Zealand is required to understand whether the consumer can afford the loan.
• 5:20
  So in order to meet their obligations there, they have to check that you've got an income that is going to support the loan that you're asking for.
• 5:29
  And they may also need to check your expenses because they need to look at your committed expenses like your rent and your food and any other loan commitments to see if there's headroom there between what you earn and
• 5:40
  what you're gonna have to pay on the new loan.
• 5:42
  Every applicant is having to submit evidence to support that assessment.
• 5:47
  And a common piece of evidence that lenders are relying on that is bank statements.
• 5:52
  And so if anyone's applied for a loan, they're probably familiar with this process where you might email your bank statements or you might upload files to some sort of online form.
• 6:02
  And so that leaves the opportunity for tempered files.
• 6:07
  So historically it's been pretty hard to generate a fake file where you've, you know, taken the statement from your bank and changed the income number to inflate that.
• 6:17
  But with AI, you can get a professional looking file without having the technical skills to make everything else appear as an original document does.
• 6:27
  So that is really what's happening here in terms of AI and its role within mortgage fraud.
• 6:32
  That's wild to me.
• 6:35
  How do you catch them?
• 6:36
  Are they catching them at some point?
• 6:38
  Surely that's a lie that would run out.
• 6:41
  It totally is.
• 6:42
  And obviously that leads to some bad situations.
• 6:45
  Acknowledge that for the lender as well, they are writing a loan based on fraudulent documents and then they are carrying credit risk there.
• 6:53
  But also for the applicant, they are now indebted in a way that they potentially cannot afford and that leads to a bad financial outcome for that applicant.
• 7:02
  So what the FMA is talking about is expectations around what you can do to try and prevent this type of fraud.
• 7:08
  There are things you can do to try and check whether the documents that are being shared, the evidence that's being shared, is genuine or not.
• 7:16
  But it's pretty hard to catch all the cases.
• 7:19
  So the better approach, and this is where open banking comes in, is that the applicant agrees to share data from their bank, and then the lender fetches that data that's been consented to from the source.
• 7:32
  So there's no chance for uploaded files that may be tampered with.
• 7:37
  Instead, it's consented to access, say 90 days of transaction history, and then the lender gets that from the source and they can be sure about the provenance of that data and they know it came straight from that bank
• 7:48
  that was holding the data.
• 7:50
  Yeah, and it's so interesting because of course open banking, the area that you are working in, so interesting.
• 7:57
  And I've mostly looked at things from the consumer point of view.
• 7:59
  I think it's got amazing possibilities.
• 8:01
  We only brought it in in New Zealand end of last year, which blows my mind.
• 8:06
  Everywhere else has had it for years.
• 8:08
  But fine, at least we're here now.
• 8:09
  And the fact that these changes are coming through.
• 8:12
  There's so many interesting applications in terms of helping people make smart decisions with their money, have things happening more automatically and similar to the things we just talked about with AI before.
• 8:23
  But what I hadn't really considered was also the business applications of it.
• 8:28
  And this is really interesting.
• 8:29
  And look, I'll be honest, when we talk about like mortgage fraud and bank fraud Board, there is the devil on my shoulder that's like haha, those big banks getting have really, you know, getting put to the test and
• 8:42
  then people are getting approved for things and oh well, those banks should work harder.
• 8:45
  But actually the serious side of it is that it's very important that people don't get approved for loans that they can't afford.
• 8:53
  That's what we saw with the 2008 global financial crisis that was based on bad mortgages.
• 8:59
  It has very serious ramifications for us all if this gets too big.
• 9:03
  So it's really interesting that you can pull that data across.
• 9:08
  Is that something that has been a change that's already happening?
• 9:11
  I know open banking is quite fresh, quite new in New Zealand.
• 9:14
  Is this happening at a large scale or is it something that's increasingly happening now?
• 9:21
  Like where are we at in this process?
• 9:22
  Open banking means different things to different people.
• 9:25
  I would say that open banking is when a consumer is able to digitally share access to their bank account with another party.
• 9:32
  And so with that definition you could say Xero has been doing that for 20 years in New Zealand.
• 9:37
  And so there's these use cases that been around for a long time, have shown the demand.
• 9:41
  What the regulated system does, the new open banking system that came live in December last year is that it requires the five largest banks to provide these open banking services.
• 9:52
  So even if the bank doesn't like you sharing your data with another lender to compare loans and are required to, so it's trying to put the consumer in control of their data and make it easy to bring about
• 10:02
  those competition and innovation benefits.
• 10:05
  So we've had 20 years of unregulated forms of open banking that has proven the demand.
• 10:10
  And there's more than a million Kiwis that have used those unregulated forms of open banking every year.
• 10:15
  So that has been a sizable part of the market.
• 10:19
  But everything is now transitioning to the regulated system.
• 10:22
  And that's a great thing.
• 10:23
  The main reason is a great thing for consumers is that when you use the regulated system and you're granting consent, you redirect to your bank to log in and authorize the access that's being requested.
• 10:35
  So instead of entering your login credentials into a third party, you are logging in directly with your bank and authorizing the access there.
• 10:43
  And then you can always go back to your bank if you want to revoke that access.
• 10:46
  So you're in control of the permissions that you're granting at all times.
• 10:50
  From what we see just through Akahu, the uptake is really strong.
• 10:54
  It's already better on a per capita basis than what we've seen in the UK and Australia and other countries that have gone before us.
• 11:00
  We're providing open banking services in the regulated system to over 150 products.
• 11:05
  So there's already a lot of organizations that have made that switch to the regulated system.
• 11:09
  I love that.
• 11:10
  I do think I have quite a lot of faith in my fellow New Zealanders.
• 11:15
  There's pros and cons everywhere, don't get me wrong.
• 11:17
  But I do think New Zealanders are willing to give things a crack.
• 11:20
  That's quite cool that you've seen that strong uptake.
• 11:22
  I love that because I think, like I say, there's huge potential here, people's financial lives to get easier.
• 11:28
  And we all want our financial lives to be easier.
• 11:30
  We've got other things to be thinking about, frankly.
• 11:33
  One thing that I've seen criticism on both open banking and AI is like privacy concern issues and how that would work.
• 11:46
  So let's focus on the open banking side of that, seeing as you're working in that area.
• 11:50
  And what do you think in terms of when we're pulling data straight from the source and we're using it in these types of way?
• 11:57
  They're verifying you, they're checking you, they're vetting you.
• 11:59
  Are there privacy concerns when we're opening this up?
• 12:02
  Yeah, I think that's right to treat open banking and AI separately on the topic of privacy.
• 12:08
  So I guess one thing to be clear on in case people are new to open banking is that open banking doesn't happen without your consent.
• 12:14
  So there's no ability for a lender to Say I want Francis's data.
• 12:18
  Can you share it with me?
• 12:19
  And you're not in the picture.
• 12:20
  You have to explicitly consent to it.
• 12:22
  So you have to consider that there is enough value in doing that.
• 12:26
  So you've got to want to complete the loan application or use the budgeting tool or use the accounting software.
• 12:32
  Whatever it is that you're looking to share data for, there has to be enough value for you to want to do it.
• 12:37
  Otherwise you just say no.
• 12:38
  Then it comes to, okay, is that better or worse from a privacy perspective?
• 12:43
  And my view is that open banking is almost always an upgrade when it comes to privacy because you have better audit trail of the consents that you've granted, better ability to revoke them if you're no longer getting value
• 12:56
  from that.
• 12:57
  Data being shared is just a more visible system for you and I as consumers.
• 13:02
  And to go back to the loan application example, if the method that you've used historically was to download bank statements onto your laptop, upload them onto some lender's website or some broker's website, or attach them to an email
• 13:16
  and send them elsewhere, you're creating more surface area from a security perspective there.
• 13:22
  And it is the same data that you're sharing through open banking.
• 13:25
  So my view is that open banking is a security upgrade and there's no privacy, there's no additional exposure.
• 13:32
  From a privacy perspective, it is the same data that you have to decide you're willing to share with that third party.
• 13:37
  Yeah, no, exactly.
• 13:39
  I think that the key there is, at least in the way it has been written and the way it's rolled out so far, is it's putting the customer, the consumer, in the driver's seat.
• 13:48
  And I think that's a really important part of this, that always having to have that opt in.
• 13:53
  And as long as that's the case, I'm so all for it.
• 13:57
  Especially, you know, when we saw this, you know, the mortgage fraud increase, also insurance.
• 14:02
  Right.
• 14:03
  Which is kind of wild.
• 14:04
  I do wonder if people think it will come to claim time and their claim will be checked and then, you know, these things can be caught.
• 14:11
  But, you know, whatever fraud is going to.
• 14:14
  Fraud, I guess.
• 14:15
  Are there other areas where you think this could impact, where we might see greater security, greater protections from these open banking changes in a similar way to what we're seeing, this crackdown on fraud?
• 14:29
  Well, the way that the New Zealand open banking system has been designed is that it is a method for sharing data and making payments, but it doesn't try to impose new regimes around security and privacy instead, it leaves
• 14:42
  that to the general law.
• 14:44
  So this was actually a key learning from the Australian regime, where they did have different data protection mechanisms around data collected through their open banking system.
• 14:53
  But it meant that anyone collecting data through that system had to silo that data and treat it differently than data they'd collected through other means.
• 15:00
  So it actually in practice was very difficult.
• 15:02
  Yeah, I really endorse the approach that New Zealand has taken, which is this is a regime that makes it easy for consumers to share data and make payments, but it doesn't try to do more than that.
• 15:14
  It does provide a secure way of sharing data and making payments.
• 15:19
  So it is often an upgrade from the previous ways of doing things, but it's not designed specifically for that.
• 15:27
  It's designed from the consumer's perspective to drive competition and innovation.
• 15:31
  And those security and privacy aspects are more of a secondary benefit that come out of the inherent way that open banking works.
• 15:38
  And of course the Financial Markets Authority, our lovely money police, have been keeping an eye on this AI frame fraud boom.
• 15:46
  It's kind of handy that open banking has become fully regulated, right.
• 15:50
  As we've seen this huge boom in AI, is there a little bit, not that anyone wants there to be fraud clearly, but is there a little part of you that's like, well, this is great business timing for us.
• 16:03
  I hadn't thought of it in that way, to be honest.
• 16:05
  It's definitely happy that the regulated system is here because it's the best.
• 16:09
  It's the long term environment for open bank is what we've always wanted to get to that particular driver around increase in forward driving demand for it.
• 16:18
  Yeah, like I definitely wouldn't be something on my wish list, but yes, it does help us in terms of our position in the market.
• 16:25
  Just like, you know, the increase in people wanting to make financial hardship applications to withdraw KiwiSave early is another area that we're involved in where people share data to support their application.
• 16:36
  But again, not something that's on my wish list to see a rise in that.
• 16:40
  But it happens to be that open banking works well in these scenarios, especially if, you know, we've talked about the fraud aspect, but you also want the lender or the KiwiSaver provider or the supervisor to make a fast
• 16:53
  and accurate decision about your application.
• 16:56
  If you're in serious financial hardship, your life is in disarray, you don't have hours to sit down and meticulously work through an application.
• 17:03
  You want to get it in quickly and accurately and have a decision fast.
• 17:07
  Fast and so open banking also helps whoever's assessing the data to get exactly what they need so that they can make a fast decision.
• 17:16
  Whereas the alternative is someone gets these PDF files and they're going through with highlighters trying to map things between these different accounts.
• 17:24
  And that takes a long time and slows the whole process.
• 17:26
  So you know there are consumer benefits for sharing data in a way that is easier to process at the other end.
• 17:33
  This episode of Making Sense is supported by Odoo because they're all about making business smarter, easier to manage and more affordable.
• 17:41
  Odoo is a software platform that gives you access to over 70 apps to help you manage your website, accounting, invoicing, sales, inventory and way more.
• 17:52
  But instead of death by a thousand cuts, where you pay for all of those apps individually, it's just one affordable subscription subscription which starts from $34.40 Aussie dollars per user per month.
• 18:04
  It's not just about the cost either.
• 18:07
  It's having all of those apps in one integrated dashboard to make your business or side hustle possible.
• 18:14
  Let your software work for you so you can handle the important stuff.
• 18:18
  Try Odoo for free for 15 days, no card details required.
• 18:23
  That's odd.
• 18:24
  Oh, for more if this episode is your kind of thing, you'll want to check out the Market Memo too.
• 18:30
  It's my weekly newsletter where I break down how to actually invest.
• 18:34
  All plain English chat about how the share market really works and how you can get it working for you.
• 18:40
  It's everything I wish I'd had when I was starting out.
• 18:43
  Head to Francisco Co NZ Invest.
• 18:48
  I'll also pop that link into the show Notes for you.
• 18:50
  Right back to it.
• 18:52
  We were talking before about the privacy concerns and something that people say to me a lot and I as someone who wants people to be able to make good financial decisions in the easiest way possible.
• 19:02
  This still concerns me when they talk about dumping their financial information just raw into something like ChatGPT, which I kind of look at and go, that gives me the heebie jeebs.
• 19:13
  But what about you?
• 19:14
  When people are sort of getting financial advice from something like ChatGPT, the privacy concerns there, you know, do.
• 19:22
  Do you see people talking about that?
• 19:23
  And does that concern you too?
• 19:25
  It's such an interesting topic.
• 19:27
  And for you, are you mostly worried about the privacy aspect of what happens with the data or are you worried about the advice that people are getting out of the book?
• 19:35
  Right.
• 19:36
  Yeah.
• 19:36
  Cool.
• 19:36
  Okay.
• 19:37
  All of the above.
• 19:38
  Yeah, fair enough.
• 19:40
  So there are a lot of good reference points on people turning to AI chatbots for assistance with their finances.
• 19:46
  And, you know, you gave the example of people uploading statements or data to the chatbot.
• 19:51
  That's common in New Zealand.
• 19:53
  In some other countries, like the U.S.
• 19:55
  they have bank data feeds built into the chatbots.
• 19:59
  So if you use ChatGPT or Perplexity or some other AI chatbots, you can consent to ongoing data feeds from your financial accounts into the chatbot.
• 20:08
  So it knows what.
• 20:09
  What's happening in your accounts.
• 20:11
  Ooh.
• 20:11
  What are your thoughts on that?
• 20:13
  Well, Perplexity, one of these providers, at the time of announcing this, said that 75% of their paid users were asking personal finance questions every month.
• 20:22
  So they were trying to meet their users where they were.
• 20:25
  So regardless of what you think about it, it's almost like the inevitability of AI that we were talking about.
• 20:29
  People are going to chatbots to ask questions and, you know, they have some things going for them, like they are available 24, 7.
• 20:39
  They don't get annoyed at your incessant questions.
• 20:41
  I don't know.
• 20:42
  I was once pretty rude to Claude and it sassed me back.
• 20:45
  Oh, yeah?
• 20:45
  Yeah.
• 20:46
  I was pretty rude to Claude, though.
• 20:48
  You must have really slipped it off.
• 20:50
  I really did.
• 20:52
  They're very happy to work on questions that aren't product related.
• 20:56
  Whereas, you know, so much of financial advice is about insurance products or home loan products or, you know, investment products.
• 21:02
  Whereas this can be general things about how should I set this up with my spouse, who we share finances with?
• 21:08
  And it's not about any particular product.
• 21:11
  It's also just meeting people where they are.
• 21:13
  People are using these interfaces to ask questions and process information.
• 21:18
  And so it is a form factor or an interface that people are using.
• 21:22
  So it is becoming incredibly common, I think, to quickly cover off what happens with the data.
• 21:28
  This depends on who provides that AI chatbot.
• 21:32
  Generally, the rule is that if you're on a paid plan, you can opt out of your data being used for training purposes, other than there's usually a sort of exception there for safety purposes.
• 21:42
  But if you're on a free plan, usually the quid pro quo is that that data is available for training purposes.
• 21:47
  So it's something that if someone is thinking about this, they would want to check which product they're using and see their exact terms on what happens with the data.
• 21:56
  And then in relation to the advice, in a lot of ways, I think the advice is getting really good.
• 22:00
  And again, you're seeing these AI companies make moves to make financial advice better, or they probably wouldn't Want to call it financial advice, but it is.
• 22:10
  So as an example, OpenAI acquired a product called Hero that is an AI financial planner.
• 22:15
  And they haven't talked about what they plan to do with it, but everyone's expectation is that they will build up the capabilities around working on questions relating to personal finance.
• 22:27
  If I'm trying to avoid saying financial advice in a way that is more helpful for the user.
• 22:33
  So they are building up these capabilities because users are coming to these chatbots for this.
• 22:38
  In a lot of ways, I think the quality of advice is good, but we do have to worry about.
• 22:44
  The AI is famously sycophantic.
• 22:47
  It tries to please you.
• 22:48
  And so if you go in saying, I watched a couple of YouTube videos on Options trading, I think I've got the gold touch.
• 22:54
  Just wanna check a couple of things with you on these things that I'm thinking about doing.
• 22:58
  It'll probably try to help you down that path, whereas a human financial advisor is probably gonna wanna step back and make sure that that is the right path for you to go down and maybe put some other ideas
• 23:11
  in front of you.
• 23:12
  So, yeah, there are ways that it can go wrong, but I think on net there is a lot of value that people are getting from using AI and everything is going to have to remake itself around this.
• 23:24
  It's interesting, that point that you make about the sycophant sort of problem because.
• 23:29
  Yeah, exactly.
• 23:30
  And I've seen so much discussion about is AI going to make financial advice obsolete?
• 23:35
  And if I'm really honest about it, maybe it'll make someone like me obsolete.
• 23:39
  Someone who explains the general rules of the game to you, who talks about how this works in general terms.
• 23:46
  It's really good at that middle of the road.
• 23:48
  Here's the things that work for most situations, but like you say, it tends to agree with you.
• 23:54
  It tends to tell you, you're so smart.
• 23:56
  That's the best idea ever.
• 23:57
  Yes.
• 23:58
  And then you're like, but what about this?
• 23:59
  It's like, good point.
• 24:01
  Like, I can't be right on both.
• 24:03
  Like, pick a side.
• 24:05
  And it's.
• 24:06
  That thing of the human judgment is becoming more and more valuable in the age of AI.
• 24:12
  And to have, you know, whether it's a financial advisor or all the way up to, you know, properly what you'd term more like a wealth advisor, someone who is really helping you be strategic and look at things carefully.
• 24:23
  Their value is surely then at that point being able to pull you back from the cliff and saying, you're panicking.
• 24:29
  We've seen a Crash like this five times before and we're just going to, you know, sit still and, you know, play possum and it's going to be fine.
• 24:37
  That sort of human judgment thing becomes more and more important.
• 24:41
  But I do love the idea that you can use AI to be like, hey, generally speaking, what does this mean?
• 24:47
  What does that mean?
• 24:48
  How does this work?
• 24:49
  If I'm looking at this, is that even a possibility?
• 24:52
  Then go and check it with a person.
• 24:53
  But by then you're speaking the same language.
• 24:55
  I think it takes that ground level out of things.
• 24:59
  Do you think?
• 25:00
  I think there's a lot to that.
• 25:01
  And yeah, I think that human led financial advice still has a lot going for it, even in this world of digitization.
• 25:08
  And then you add on a AI and open banking and other things.
• 25:11
  Human advisors bring accountability.
• 25:13
  I think that for a lot of people, just getting advice through a digital platform won't result in someone creating behavioral change.
• 25:22
  Whereas if there's someone helping support the decision to act and stay the course, like your example about not panicking when the markets drop, I think that human in the loop can be really important for it.
• 25:36
  There are many ways in which I think human led advice will have a place, continue to have a place.
• 25:42
  And you do see a whole lot of these technologies being built specifically to make human led advice more efficient or more effective.
• 25:52
  And you also see these AI native platforms that are looking to disrupt that space.
• 25:56
  But I think we will get both and there will still be this place for human LED advice.
• 26:01
  Yeah, yeah.
• 26:02
  One of the things that I find really exciting about where we're at in terms of open banking coming in properly.
• 26:08
  And as you said, we've got quite a good system from the start.
• 26:12
  I'm sure there'll be things that get worked out.
• 26:14
  Everything that starts off new gets a few little tweaks and changes.
• 26:16
  But we, we are starting off with quite a good system there.
• 26:20
  We've got AI just going strength to strength and becoming more powerful by the day.
• 26:25
  And I think the collision of this in terms of our financial will becoming more and more digital and having these, these sort of superpowers behind it.
• 26:34
  It's quite interesting and I'm quite excited to see what new tools pop up to help people make their money lives easier, to help themselves make smart decisions just in the background so we can go back to having a
• 26:46
  far more interesting fun life, not worrying about that, but also not being broke.
• 26:49
  Yay.
• 26:50
  I'll take both.
• 26:51
  Are there any areas where you see these lining up in interesting ways, where you think Something new is coming down the pipeline that we should be aware of and keeping an eye on.
• 27:00
  Oh yeah, there's lots happening here.
• 27:01
  So we talked before about what's happening in the AI chatbots themselves.
• 27:06
  They're becoming a common and popular interface for people to engage on their personal finances.
• 27:12
  But there will be a fight back from people that already have a customer relationship and they want things to happen in their interface.
• 27:20
  And so anyone with a large customer base has got to be considering how they weave AI into customer facing features.
• 27:28
  And we've seen some things in market already within financial services like Revolut in the UK has launched AI features as part of the app.
• 27:38
  NatWest, one of the UK banks, has got AI features in market already.
• 27:44
  I'm sure we will see that happen from larger financial service providers in New Zealand as well.
• 27:50
  So I think there will be this battleground over who has the interface where you have that combining of financial data and AI functionality because it's really powerful when it's paired up.
• 28:03
  But no one's won the interface yet.
• 28:06
  So there is still a battle to come, I think on that.
• 28:11
  But there are plenty of examples of where people can use AI enabled or open banking enabled products in New Zealand for particular purposes.
• 28:20
  So if you think about, you know, paying down expensive debt, you know, there are products around that I know you've had fejoa on the podcast and that's an example of making voluntary contributions to KiwiSaver and just sitting and
• 28:33
  forgetting that.
• 28:34
  If you think about building up emergency funds, Sorted have just released an app called Buffer Builder that enables you to nominate a fund to build up emergency funds and then set and forget those contributions and just let it
• 28:48
  chip away over time.
• 28:49
  If you think about protecting your assets, you've got apps like Quashed where you can upload your policies and it will keep you updated on better options in the market or cheaper options.
• 28:59
  It'll tell you when those policies expire so that you have time to go and scan the market.
• 29:04
  So I think we're seeing particular products that are being built for a specific part of personal finance.
• 29:11
  But at some point I do expect there'll be some rebundling.
• 29:15
  So the big financial management apps will consider how to build this functionality into their interface because they want to keep that sticky relationship.
• 29:22
  I think as well, you know, the idea that people can get some, like you say, not financial advice, but financial information at a lower budget, free in some instances or very low cost in others.
• 29:35
  I love that because for a long time it really was the domain of Wealthy people.
• 29:40
  And certainly especially at the beginning of my career, I really conceptualized myself and my role as like, there's a lot of people who are already wealthy and there are people clamoring to help them because they all want to
• 29:55
  charge them a regular percentage fee for looking after that money.
• 29:59
  And then there's a whole bunch of people who could be wealthy and they don't know how to get from A to C.
• 30:04
  That B step is really confusing.
• 30:07
  And nobody's really clamoring to help them yet because they're not rich yet.
• 30:12
  And so I really sort of at the beginning of my career was like, right, that's me.
• 30:16
  I'm going to help people get from that A to C step.
• 30:18
  And now I'm sort of having to rethink things because I'm like, great.
• 30:21
  There's so much more information available at a much lower cost that people can go out and look at this stuff and figure it out, which is so good.
• 30:31
  I'll take being put out of a job any day.
• 30:35
  But it's also, I think there's good and bad sides of it because we do see sometimes not good information out there.
• 30:44
  Some of it can be straight up wrong, some of it can be made for other jurisdictions.
• 30:50
  So where do you see in the more digital financial landscape as there is so much information, when people are trying to get good information, what's the good and the bad sides of this and would there be sort of
• 31:05
  safeguards that you would recommend people employ?
• 31:07
  So within human led financial advice, one of the things that I hope will happen is that these enabling technologies reduce the cost to serve a client.
• 31:17
  And so as a result of that, you have a broadening of the market that is addressable through that kind of delivery method.
• 31:24
  And then in my mind the big question is these ways of getting self help through AI or other tools.
• 31:31
  I think there will be a lot of value from that.
• 31:34
  But we haven't had the reckoning yet on the fact that this is regulated financial advice that's being provided.
• 31:41
  You can't say it's not financial advice and disclose your way out of it.
• 31:44
  So these chatbots are trying to be helpful and they are reacting to your personalized situation and they are providing, I think on net a lot of value.
• 31:54
  So that's why I think we just have to remake regulation and the way that we respond as a country to this new technology which is here.
• 32:04
  I don't think it would be worth just saying you can't use that in New Zealand because people will find ways to proxy through another country's IP or they'll find ways to access these services.
• 32:15
  And I think we need to be more thoughtful in the way that we respond to it.
• 32:20
  But I think that's the reckoning that hasn't come yet.
• 32:22
  How do we provide guardrails, as you say, around these lower cost methods of getting support with our personal financial situations that are never going to be a great fit for human need advice because of the income or the
• 32:38
  assets that are available there.
• 32:39
  And how do we still make sure that those people are protected when they go into these other methods of getting support?
• 32:44
  What do you think is the solution though?
• 32:46
  Because as you say, there's so many workarounds.
• 32:48
  Well, I just think that if we come back to those fundamentals about personal finance like we're talking about expensive debt and emergency funds and being in the right kiwisaver and protecting your assets, all those kind of things.
• 33:02
  I do think that personal finance is black and white enough that you can actually design great self help products.
• 33:09
  And we talked before about some of the problems that are there when people go to chatbots.
• 33:14
  A good example of a problem is the user asking the right questions.
• 33:17
  If they start asking about leverage single stock ETFs, how do you bring them back into talking about, hey, can we zoom out a little bit and get a sense of where you're at?
• 33:26
  But I think that these self help products will get better at doing that and they'll sort of dead end the user on trying to suggest things on a dodgy path if they haven't covered off some of the fundamentals
• 33:39
  first.
• 33:39
  I think that is the direction of travel, you pair data feeds so that the AI has enough context and you peer AI and the right kind of guardrails around it and I think you can do really well with
• 33:52
  the product.
• 33:53
  So now that we do have open banking finally regulated here in New Zealand, what have you seen change already?
• 34:01
  And do you think there's any areas that we need to be looking at for, you know, further tweaks, further changes?
• 34:08
  The regime in New Zealand has been a great starting point.
• 34:12
  We've learned the lesson from other countries that have implemented open banking before us and our regime has been well designed.
• 34:18
  One thing that we've noticed because we've been providing open banking through unregulated methods for five years before the regulated system came in, is that there has been a big increase in demand, particularly from large organizations that have been
• 34:33
  sitting on the sidelines.
• 34:34
  They know they've got use cases that use open banking, but they've been Waiting until open banking had solid foundations.
• 34:41
  And that's what this regulated system does.
• 34:43
  It gives open banking solid foundations and the confidence for these organizations to invest in products or features that use open banking.
• 34:52
  So this last year we've seen a big increase in organizations coming off the sidelines and doing something with open banking.
• 34:59
  And that is what drives the customer activity.
• 35:01
  Because customers can't really use open banking directly.
• 35:04
  They need a product that uses open banking to do something meaningful for them.
• 35:08
  So it's really those organizations deciding to move that makes a difference in terms of what we'll see or what we should see over the next few years.
• 35:18
  I think we can look at offshore examples to get an indication of the kind of products people can build when there's a good open banking system available.
• 35:28
  One that I'm really keen to see is a product that helps people, tracks the, the financial products that you're using currently and just tells you if there's something better available.
• 35:40
  So across deposits, loans, insurance, any financial products, something that just helps you set and forget an optimization of those products.
• 35:50
  There's so much low hanging fruit there.
• 35:51
  There's billions of dollars every year that people are missing out of because they've got their deposits in an account that doesn't earn interest, for example.
• 35:59
  And the AI is very happy if it's an AI product to scan the market for you daily, to onboard you with a new provider, to go through all that drudgery to make it happen, and then you get the
• 36:12
  result, which is more dollars in your pocket.
• 36:14
  So there is plenty more that can be built with this combination of open banking and AI and other digital technologies.
• 36:23
  So yeah, there's I think, an exciting space to watch over the next few years.
• 36:27
  Oh, that's such an exciting one because I've been looking into some of the inflation cost of living concerns for another video that I'm working.
• 36:35
  And as I've been researching it, I'm like, you know, I'm such a believer in that there's always something you can do, right?
• 36:39
  You might be in a bad spot, there might be more or less you can do, but there's always something, even if it's small.
• 36:43
  And it's worth doing those things even when they're small.
• 36:45
  Even better if you can find something big.
• 36:47
  But take the wins where you can.
• 36:49
  And so much of the inflation cost of living solves in every area.
• 36:54
  You know, whether it's your groceries, whether it's your insurance, whether it's whatever else, it all seems to come back to shopping around.
• 37:01
  And the problem is people are so busy these days.
• 37:04
  And I get it, you don't want to be spending your evenings.
• 37:07
  You want to fall into a scroll hole or you want to.
• 37:10
  You want to be watching your TV show.
• 37:11
  Like you just need a moment to tune out from Life's admin.
• 37:15
  And if an AI could do that for you instead, use some open banking to back it up and just, just suss it out for you.
• 37:24
  Oh, man.
• 37:25
  Like, I personally would be stoked on that.
• 37:26
  I think a lot of people would be stoked on that.
• 37:29
  Totally.
• 37:29
  And that's where the competition will come when, as the product manufacturer, you know that AI is watching your rates or whatever the main features of the product are.
• 37:38
  So you feel this incentive or this pressure to be best in market.
• 37:44
  I think these technologies that we've been talking about in this discussion will bring that pressure on over the coming years.
• 37:49
  Fascinating.
• 37:50
  Okay, well, look ahead for me in the next 12 months for Akahu.
• 37:54
  Specifically, what are your biggest priorities?
• 37:58
  The things that you are excited for, the things that you're working on.
• 38:01
  If we sat down a year from now, what do you hope your big win is?
• 38:05
  There would be a million Kiwis that have used the new regulated open banking system.
• 38:10
  I think that's achievable based on, you know, what we've seen to date.
• 38:15
  It's a fascinating area.
• 38:16
  I can't wait to see.
• 38:17
  We'll definitely have to stay in touch.
• 38:19
  Thank you so much, Josh Daniel from Akahu.
• 38:21
  Now, if this episode was interesting to you, sparked a few ideas, drop it into the group chat, let's have a conversation with your mates about it and we'll all level up with our money together.
• 38:29
  Until next time, have a great day.
• 38:33
  This podcast can only give you general information about how things work in most situations.
• 38:38
  It's not individual financial advice.
• 38:40
  If you're after that, a financial advisor is always the best bet.