“Every part of the competitive landscape that I look across has got a very different set of competitors. I think that’s fundamentally changing the landscape of competition in this country.”
Shortt singled out Rabobank for increasing its share in the agricultural lending space, and Kiwibank in the consumer lending domain.
She also pointed to Sharesies’ growth, as a share-trading platform, buy-now-pay-later providers proving a popular alternative to credit cards, and Apple making waves in the payments space.
“Those competitors I just mentioned, they’re not small. They are material,” Shortt said.
“The biggest of all is yet to come, and that’s the big tech. If you look around the world, it’s big tech that’s coming in and fundamentally changing banking.”
ASB chairwoman Dame Therese Walsh was concerned big technology companies would target favourable parts of the market, rather than deliver services to everyone.
“The market is fragmenting. There’s intense competition everywhere in different ways and in different parts,” she said.
2degrees founder and Monopoly Watch research director Tex Edwards did not agree with much Walsh and Shortt said, but was aware of the rise of financial technology.
“Kiwibank isn’t going to fix the problem, because we are in a new age of digital engagement and banking services,” Edwards told committee members.
To be a disruptor, he said Kiwibank needed to lower its operating costs, which would be difficult without the scale of the big four Australian-owned banks.
Edwards commented, the Government investing a couple of hundred million in tech companies such as Dosh, which is trying to get a banking licence from the Reserve Bank, would be more fruitful than putting that level of capital into Kiwibank.
“That’s not to say that Kiwibank shouldn’t be polished up as a competitor. But the committee shouldn’t look to that as being the only saviour for consumers,” he said.
While Edwards stressed that better capitalising innovative fintechs was key, he had a go at BNZ for buying the Kiwi open banking start-up, BlinkPay.
However, Martien Lubberink — a Victoria University of Wellington associate professor, who helped create bank regulations in Europe — believed this was the exact sort of thing that would bring innovation to the sector.
He said the big banks were strong, stable, and best equipped to be the innovators; regulators just needed to force their hands.
“The Government should tell banks what to do, particularly the big banks because they can carry the weight,” Lubberink said.
In Europe, “it’s all directed from the top”. Where in New Zealand, Lubberink believed there were “too many captains on the ship”, or different ministers and agencies responsible for overseeing different parts of the banking sector.
“We have various regulating parties and they all are responsible for the banking sector, and at the same time, no one is really responsible,” he said.
Coming in to bat for the non-banks, Financial Services Federation chief executive Lyn McMorran said the specialist finance sector was better placed than the big banks to move with the times.
She noted the popularity of buy now pay later, particularly among younger people.
On the one hand, she said it was important not to stifle competition. But on the other, she said, “We also need to be really careful the offerings are safe… particularly if people are depositing money into a fintech situation. How safe is that? Is that going to be subject to the deposit compensation scheme?”
The committees will continue hearing from submitters in coming weeks. Rabobank presented last week, and ANZ last month.
The Government is simultaneously considering its response to the various recommendations the Commerce Commission made in its big market study, including diluting the Government’s ownership of Kiwibank.
Jenée Tibshraeny is the Herald’s Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
