ASB Chief Executive Vittoria Shortt says the big banks are seeing a surge of competition from specialised providers that offer competing products in targeted areas.
Rabobank competes in rural lending, Kiwibank in consumer lending. Sharesies competes with their savings and wealth creation products, buy now pay later in consumer lending, and Apple is challenging payments.
“Every part of the competitive landscape that I look across has got a very different set of competitors, and I think that's fundamentally changing the landscape of competition in this country,” she told Parliament’s Finance and Expenditure Committee (FEC).
“Those competitors I've just mentioned, they're not small, they are material. Rabo is material in rural [banking]; Kiwibank has over a million customers, and buy-now-pay-later has had a material impact on unsecured lending”.
Parliament has been conducting an inquiry into banking competition and profitability, with a focus on rural lending, following a Commerce Commission market study.
The Commission's final report noted the big four banks - ANZ, ASB, BNZ and Westpac - have high and largely stable market shares, holding 85% to 90% of the assets of all registered banks in New Zealand.
While the Government works on implementing the Commission’s recommendations, the FEC has been grilling bank bosses in hearings which sometimes stray towards populism.
A big effort has been made to highlight the large salaries of the chief executives. Shortt was on a $1.2 million base rate, plus bonuses which brought her up to $5.2 million during the 2024 fiscal year.
During an earlier hearing, ANZ chief executive Antonia Watson told the Committee she couldn’t easily summarise her total compensation package but earned $2 million in cash.
Committee members have also pushed for the bank leaders to say their nominal profits out loud, as they are big numbers: $1.364 billion for ASB and $2.135 billion for ANZ.
When asked how that level of profitability was justifiable, ASB chair Therese Walsh—a friend and former colleague of Prime Minister Christopher Luxon—said that was the rate of return required by overseas investors in exchange for capital.
Shortt said about half profit was paid out to shareholders as dividends and the rest was used to develop new products or as capital to support more lending.
In regards to competition, Walsh agreed there was growing pressure from tech businesses looking to capture market share in specific areas of banking.
“The biggest of all is yet to come. If you look around the world it is big tech that is coming in and fundamentally changing banking,” she said.
Apple and Google both have high-profile payment offerings. Apple has taken it one step further and offered users a high-yield savings account.
Amazon also has payments and does small business lending to retailers using its marketplace, Facebook has trialed offering small business loans in developing countries through WhatsApp.
Walsh said it was important for regulators to ensure there was an even playing field that didn’t give big foreign nationals, like Apple and Google, an unfair advantage in the sector.
“We are concerned that … these new entrants will come in and only be interested in the profit pool they perceive as favourable and not deliver all the banking services to all New Zealanders”.
“And secondly, that they are not required to fully participate in New Zealand society; pay taxes, employ people, meet the rules and regulations, etcetera”.
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Committee members have also pushed for the bank leaders to say their nominal profits out loud, as they are big numbers: $1.364 billion for ASB and $2.135 billion for ANZ.
if the profits numbers are not in the billions, we will still not have competition, and will have a financial crisis.
I don't get why it hasn't happened sooner. Our mortgage for example, the bank makes a massive margin on it, why isn't there an online service without all the costs of a bank (we don't need branches etc) that will do it much cheaper? Something like Harmony but for home loans, where they clip a few fractions of a percent.
why isn't there an online service without all the costs of a bank (we don't need branches etc) that will do it much cheaper?
Probably because the ROI and ROE (effort) doesn't add up. While efficiencies might be gained by lower overhead costs, you still need volume to make it worthwhile.
What, like having people borrow directly from the Reserve Bank? I'd be all for borrowing from the RBNZ if they offered 30 year fixed rate fixes at 3%, we could call it State Advances Loans or something like that.
Have the IRD deduct mortgage payments via my employer at PAYE, the mechanism already exists for Student Loans. If I'm made redundant (like many now are facing), it's unlikely the Government would foreclose.
I'd be all for fixing a broken market and getting mortgages down to 15 years, or maybe 7 like the historical debt jubilees.
Imagine what all that freed up cash could do for the economy. Imagine if people could save more of their money instead of houses being savings.
Come off it Vittoria. These other providers are at the margins and unlikely to enter the home loan market where the big four do most of their lending. Let's be honest, you are likely to simply purchase any local provider that threatens to take any meaningful piece of the pie.
A big effort has been made to highlight the large salaries of the chief executives. Shortt was on a $1.2 million base rate, plus bonuses which brought her up to $5.2 million during the 2024 fiscal year.
Imagine the bonuses must be based on hawking mortgages given that it's their main crust.
Why is Shortt getting these bonuses when it's the foot soldiers getting people to sign on the dotted line?
We're talking the same person who said the Funding for Lending program was 'an investment in NZ'.
She should be thrown to the lions, not making out like a bandit.
The interesting factor in payments innovation is the stranglehold Visa maintain, with the banks' blessing. All very well for Apple and Amazon to be a threat in finance, but in the developed world they do it through the lens of what Visa will grant them.
As soon as you find markets where Visa hasn't been admitted or is sidelined, you see majorly different payment ecosystems. The cost of transactions is far lower without banks and processors taking a 1%+ cut at both ends of the transaction.
Paywave was some kind of genius lockin Visa foisted on the world and banks pretend it's only possible through credit card networks. When China wasn't able to use NFC for non-credit-card transactions because of Apple's rules, they invented the now ubiquitous payment QR code, which is really a horrible hack. But needs must.
Seems only BNZ is trying to leverage open banking to get into this space, while all the rest drag their feet as long as possible.
What I would like them to look at is the SWIFT system clipping a big chunk of the ticket everytime I receive an international invoice payment. It can vary wildly but is usually over $100. There is no way to tell which banks in the chain took what, or what exchange rates they use, as I found out in one instance where $300 mysteriously disappeared. It feels like a con.
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