Prime Minister Jacinda Ardern has asked whether banks are 'demonstrating social licence and commitment to the communities by taking the profits that they are'. Photo / Jed Bradley, File
Prime Minister Jacinda Ardern has asked whether banks are 'demonstrating social licence and commitment to the communities by taking the profits that they are'. Photo / Jed Bradley, File
EDITORIAL
Jacinda Ardern waded into banks making record billion-dollar profits this week, referring to whether they should reassess their “social licence to operate”.
Her comments followed ANZ New Zealand on Tuesday announcing a record profit of $2.3 billion, up 20 per cent on the prior financial year, and Westpac NewZealand on Monday revealing a 12 per cent boost to its net profit which hit $1.047b. BNZ followed that up yesterday with profits up 7 per cent or $92 million to $1.4 billion for the year to September 30. BNZ’s total operating income rose 9.5 per cent to $3.131b with a strong rise in its net interest income which was up 14.8 per cent to $2.604b.
The banks are doing their level best to explain these figures at a time New Zealanders in general are tightening belts to survive rising inflation and the crippling cost of living. ANZ chief executive Antonia Watson says the profit margins are “about the middle of the road for the top NZX companies” while BNZ chief Dan Huggins says New Zealand’s economy has been more resilient than expected and the majority of the bank’s customers “are in good shape”.
On the other side of the coin, Simplicity chief executive Sam Stubbs says banks are raking in too much and the Government could show it cares by taking action, pointing out it could have bought in open banking and account number portability years ago. Number portability is essentially keeping the same bank account numbers while moving to other banks, just as mobile phone numbers have become portable.
Simplicity co-founder Sam Stubbs. Photo / Supplied, File
Open banking allows third-party payment services and other financial service providers to access banking transactions and other data from banks and financial institutions. This, in turn, enables secure interoperability in the banking industry and leads to lower transaction fees and reduced service costs.
It was initiated as an experiment by the German Federal Post Office in 1980 by using five external computers and inviting 2000 people to take part. The test showed users could carry out banking transactions from their homes and ensuing developments included the introduction of personal identification (PIN) numbers. Europe has followed the German lead, including the UK in 2017. America has a limited form known as “screen scraping” and Australia introduced open banking in July last year.
So what are the drawbacks? One is low credibility with customers. Australia experienced some apathy to open banking, perhaps due to customers not knowing how it worked. Banks have also resisted the transfer of services they traditionally controlled to a third-party fintech market. Open banking is also a further nail in the coffin for interpersonal relationships between customers and banks.
Sharing data is the biggest concern, with the heightened risk of information breaches and cyber-attacks, and banks have raised objections around their increased exposure. But overseas territories have negotiated their way through this with protocols that can be mirrored here.
Given the successful adoption around the world, this Government might be better off asking itself why its “social licence” has taken so long to bring it in also.
