Kiwibank embraces RBNZ capital review amidst digital transformation and competitive pressures
David McLean (pictured left), chairman of Kiwi Group Capital, expressed support for the Reserve Bank’s upcoming review of bank capital requirements during his presentation to Parliament’s Finance and Expenditure Committee.
The review investigates if the capital requirements — 13.5% for large banks and 11.5% for smaller ones — match global standards and promote economic stability. It responds to concerns that these high requirements may escalate borrowing costs and constrain capital, impacting investment and economic growth.
McLean likened excessive capital in the banking system to “over-insuring your house,” pointing out the economic drawbacks of such a strategy.
This comes at a crucial time as Kiwibank, a subsidiary under Kiwi Group Holdings, addresses both digital innovation challenges and competitive pressures in the banking sector, interest.co.nz reported.
Kiwibank’s strategic capital and digital advances
During the session, the focus briefly shifted to Kiwibank’s efforts to secure a significant capital infusion, potentially $500 million, aimed at enhancing its competitiveness against major Australian banks.
This capital raise is part of a broader strategy to support Kiwibank’s ongoing digital transformation, which CEO Steve Jurkovich (pictured right) described not merely as a goal but as an ongoing process.
“I’m not trying to be tricky here, but I think of it much more as a verb than a destination,” Jurkovich said.
Challenges in digital payment systems
Jurkovich also discussed the challenges Kiwibank faced in integrating modern payment systems like Apple Pay and Google Pay due to outdated infrastructure, interest.co.nz reported.
Despite being the last major bank in New Zealand to offer Apple Pay, Kiwibank, the latest NZ bank to adjust its home loan rates, quickly saw a high adoption rate, with nearly 300,000 customers using Apple payments within a week of launch.
This rapid adoption underscores the bank’s digital strides and its commitment to catching up with industry standards.
Future outlook and open banking integration
Looking forward, Jurkovich highlighted the next 18 months to two years as pivotal for Kiwibank, as it prepares for potential public listing and further digital enhancements, including the integration of standardised Application Programming Interfaces (APIs) for open banking by 2026.
He emphasised the strategic importance of these developments, stating, “Now if open banking gets off to a really strong start, being able to handle that scale through the existing platform isn’t a sensible decision.”
Utilising profits for strategic growth
Amidst discussing financial results and strategic investments, Jurkovich pointed out the disparities in capital access between Kiwibank and the larger Australian-owned banks, which are currently navigating surplus capital issues.
Kiwibank’s record profits are being strategically reinvested to strengthen its balance sheet and support its growth and digital transformation, balancing necessary investments against the backdrop of regulatory changes and market competition.
