Photo source: Flickr
Commerce and Consumer Affairs Minister Andrew Bayly has urged New Zealand’s financial sector to accelerate progress in innovation and regulation, emphasising that the government will not lead the way.
Speaking at the Payments NZ conference, Bayly expressed his frustration with the current state of the banking industry, stating, “Just get on with it.” He highlighted the need for industry stakeholders to take initiative and ensure that meaningful changes are implemented in the coming year.
Regulatory Concerns
The recent findings from the Commerce Commission reveal a troubling lack of competition within New Zealand’s banking sector, dominated by four major Australian-owned banks—ANZ, ASB, BNZ, and Westpac—which control nearly 90% of the market. The Commission’s report describes this environment as a “stable, highly profitable, two-tier oligopoly” with minimal price competition.
In response to these findings, Bayly has called for immediate action from banks to enhance their regulatory frameworks without excessive government intervention.
During a panel discussion at the conference, bank CEOs voiced concerns about “regulatory congestion” stifling innovation. ANZ’s CEO Antonia Watson remarked on the delicate balance between regulation and innovation, while Westpac CEO Catherine McGrath called for clearer regulatory guidance to foster a more innovative banking environment.
Key Initiatives Underway
Bayly outlined three critical recommendations for banks to implement: a Confirmation of Payee (CoP) system, an update to the Code of Banking Practice, and the exploration of a voluntary reimbursement scheme for victims of authorised payment scams.
The CoP system is set to launch in December and aims to provide customers with reassurance when making domestic payments by allowing them to verify that account names match account numbers before transactions are completed.
While progress is being made on the scam reimbursement scheme, Bayly indicated that it has not yet reached its final stage. He also anticipates updates on the Code of Banking Practice in the near future.
Open Banking as a Game-Changer
The government has committed to implementing open banking by June 2026, following recommendations from the Commerce Commission. This initiative is expected to boost competition and consumer choice within the sector. A significant question remains regarding whether banks will be allowed to charge fees for access to customer data.
Bayly emphasised that open banking is one of the “crucial elements” needed to improve competition in personal banking services. He expects industry cooperation in implementing these recommendations, saying that “Consumers should benefit from the value and choice that competition brings.”
The Path Forward
The Commerce Commission has conducted extensive research into the banking sector and engaged with various stakeholders to identify necessary changes. Its recommendations aim to support new entrants into the market and reduce barriers to competition. The Commission’s Chair, John Small, noted that stimulating competition requires a multifaceted approach to ensure sustainable change.
As New Zealand’s banking sector grapples with these challenges, there is hope that regulatory reforms and initiatives like open banking will pave the way for a more competitive setting that benefits consumers across the country.