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Commerce Commission Banking Conference

I spent a couple of days this week attending the ComCom's conference on its market study on banking. It was like a flashback to the days of the Telecom breakup in the 2000s. A few key observations:

The Commissioners are an impressive bunch. Under the strong leadership of Dr John Small they managed to make some ultra-dry topics in a very adversarial environment come to life. Despite the potential for confrontation the climate was totally cordial. (Maybe the representatives of the big banks know in their hearts that their position is indefensible and are just going through the motions?)

There was much debate about the role of Kiwibank (with 7% market share) and the regional banks as a handbrake on the margins of the 4 majors. The big 4 argued that although their headline rates may seem common across the board, there is ample scope to negotiate region by region depending on local competition. It seems one way to get the best prices is to "multi-bank" by having an account with more than one . That idea takes me back to when consumers needed a Telecom mobile phone and a Vodafone mobile phone because of a failed market.

Speaking of Telecom, I was surprised at the number of attendees who I had come across 15-20 years back while engaged in the telecommunications market reform in one capacity or other. Maybe there is something about failed markets that attracts people to a career either dealing to them or defending them?

I sat through a long session about open banking - the banking equivalent of number portability. There is a strong and highly competitive fintech sector offering advanced technology including open banking to the banks. Sadly they seem to be slow attracting the banks' interest. Bank spokespeople sound interested but the reaction soon turns to the standard rhetoric of incumbents - it will take a long time; we cant afford it because we are loaded down with regulatory costs; New Zealand is a difficulty country in which to be a bank, and so on.

Sound familiar?

And while I see the benefits of open banking, I dont see it as the savior of the consumer.

Kent Duston announced the formation of his new Banking Reform Coalition. While I am pleased to see that, I want to correct a media report suggesting that I am a part of it. Im not - my passion is for the grocery market where I have a good deal of subject matter expertise. I had no knowledge of the proposed Banking Reform Group until 5 days ago and am not associated with it.

In summary, I dont envy the Commissioners their task. As with groceries, the core problem is our weak competition law that allows market concentration far too easily. We should have learned that from the telco, building products, fuel, grocery and banking markets. Unless the politicians show some really strong understanding and leadership in these complex but crucial fields, we are on the way to making NZ a totally unaffordable country in which to live while overseas businesses dominate our key industries and export our national capital.


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