📬Kiwibank and Open Banking: A New Era for Kiwi Consumers

The final report of the Commerce Commission into competition in New Zealand's personal banking sector has highlighted that a stronger Kiwibank and the concept of open banking could be game-changers for Kiwi consumers by increasing competition and offering more choice.

The Revelations:

• The Commission recommends a raft of regulatory and structural changes to drive more competition for the benefit of Kiwi consumers following a 14-month market study. Researchers from this study found a very stable, very profitable, two-tier oligopoly without a disruptive maverick and with a lack of obvious or aggressive price competition.

• Competition isn't working as well as it should in personal banking, says Commission Chair John Small. "With almost every New Zealand household having a bank account and debit card, and with a substantial $340 billion residential mortgage market, we need to be taking an integrated approach to make improvements in this market," says Small.

• It is supportive to new entrants and is reducing regulatory barriers, empowering consumers with better prices and services. Open banking has the potential to transform consumer choice by giving financial services access to underserved Kiwis. Dr. Small does, however, support progressive regulation focused on competition as a way to balance the need for financial stability against the need for competitiveness in reducing the entry barriers to the personal banking sector and obstacles to its expansion.

• It has brought forward four recommendations to underpin the systemic issues in banking, such as access to basic bank accounts and surmounting the lending barriers to housing on Māori freehold land. These include capitalization of Kiwibank; acceleration of progress on open banking; assurance of a better regulatory setting for competition; and the empowerment of consumers. More specifically, the government should be an early adopter and have an All-of-Government approach to the adoption of open banking functionality.

Why it matters:

Open banking will increase the competitiveness and innovation in the banking sector, hence reduce costs and improve services offered to clients. A more dynamic and customer-oriented financial sector can also be achieved by ensuring that all providers of services work on equal competitive ground.

Bottom line :

The government should foster a more competitive and innovative banking system, where fair competition and innovation are really encouraged, so that everybody gets better access to financial products at lower costs and with improved services.