Report met with a mixture of praise and scepticism
The Commerce Commission’s recent report on competition within New Zealand’s banking sector has been met with a mix of praise and scepticism. Released earlier this week, the report, spanning nearly 400 pages, provides a comprehensive analysis of the current banking landscape but has been criticized for offering limited actionable solutions.
David Cunningham, CEO of Squirrel, provided a critical review of the long-awaited report, highlighting the report’s effectiveness. According to Cunningham, while the analysis is thorough, the report is lacking in actionable recommendations. Out of the 14 proposals outlined, he contended that only one could potentially drive meaningful change and noted that even that is not a novel concept.
Recommendations from the report
The Commerce Commission’s report focuses on various aspects of banking competition, from home loans to deposit handling. Here’s a breakdown of some key recommendations and the industry’s reaction:
- Capitalise Kiwibank: Cunningham viewed this recommendation as the most impactful. By investing significantly in Kiwibank, the aim is to enhance its competitiveness and disrupt the dominance of the big four banks. Cunningham argued that this move could compel larger banks to improve their offerings to retain market share.
- Open banking: Recommendations #2 and #3 advocate for the implementation and government support of open banking by mid-2026. Open banking aims to facilitate greater access to customer data for third-party providers, potentially fostering innovation. However, Cunningham said that while beneficial, these measures may not significantly alter the competitive dynamics of the sector.
- Comparability of home loan offers: The proposal to standardise loan offers for easier comparison is seen as a positive step for consumers but unlikely to substantially shift competitive forces.
- Improving switching services: Cunningham criticised the recommendation to enhance the ease of switching banks, arguing that the current process is already efficient and that further investment may not deliver significant benefits.
- Reducing barriers for smaller institutions: Recommendations around lowering barriers for non-bank deposit takers and adjusting the Deposit Insurance Scheme are noted as potentially beneficial but fraught with challenges.
Cunningham expressed scepticism about several recommendations, including those aimed at improving basic account access and reducing barriers to lending on Māori freehold land. He argued that these measures, while well-intentioned, are unlikely to significantly impact overall competition.
Unaddressed opportunities?
Cunningham also said there was a notable omission in the report: the lack of consideration for attracting global players to the New Zealand market. He pointed to the success of Macquarie Bank in Australia as a model for how international competitors could invigorate the market.
Do you have any ideas on how to stimulate competition in the New Zealand banking sector? Let us know in the comments below.
