Every day Kiwis are ripped off by the Big Banks. Every day you use Pay Wave the Banks pinch money out of your account. That's how banks make their dough these days. They hire a team of lawyers from one of NZ's big firms and ask them, "How can we legally steal money from our customers?", and the lawyers duly oblige. Now the Commerce Commission comes up with a report telling us what we already knew - that they're a big fat oligopoly.
It says NZ needs to better "capitalize" Kiwi Bank. Willis has asked Treasury to engage with Kiwi Bank's parent company Kiwi Group Capital on options for raising new capital, including from Kiwi Saver funds & NZ investment funds .." Bad idea. "A well-capitalized Kiwi bank is seen as pivotal to introduce disruptive competition," says Commission Chair John Small.
So what's the best solution? The main problem which has cemented the private bank's monopoly positions is "switching costs" - once you're locked into the bank that you open an account with as a child, you're unlikely to ever switch throughout your life-time. The hassle & cost of changing your direct debits, direct credits, telling your employer - the whole thing is a nightmare. The big private banks use these switching costs against you. By the way, its also why the Big Supermarkets and Big Airlines like Air NZ have "Loyalty Programs" (like Airpoints). They're not loyal to you at all. What they're doing is making it harder for you to leave them. They're creating "switching costs". If you dump Air NZ as your chosen carrier, then you lose your Air Points "privileges". That's how they lock you in. Then they hike their ticket prices on you. Bastards. The Big Banks play this game the best, preying on children.
So is the solution to better capitalize KiwiBank through use of "KiwiSaver" and "Kiwi investment funds", like Willis said? No. Here's the way to do it. Get the thousands of folks who work at the Ministry of Education to actually do some productive work for once - go around Year 8 students at all schools in NZ and simply open a Kiwi Saver account for each and every one of them. Make it so easy, so much fun and so cool that they're all proud to have their Kiwi Bank account. They're all immunized for goodness sakes - now financially immunize them & protect them from the vampire squid of big banking trying to infect them with a financial virus at a young age. There are less than 100,000 of them. Its not a big job. Then do the same for the next ten years. That's cohort of 1 million growing up banking with Kiwi Bank. Once they get jobs they will "capitalize" Kiwi Bank automatically by virtue of their pay going into their account. The Big Banks will tremble in no sort order, complaining of foul play. That means you must be doing something right. It will break the Big Bank Monopoly within just a few years. It will also come at almost no cost to the taxpayer, unlike finding endless billions to "recapitalize" Kiwi Bank using some hair-brained Willis / Treasury scheme.
In hindsight, by the way, me old mate Richard Prebble, who reads this Blog, may have a bit to answer for in this regard. His Labour Government famously privatized Post Office Savings Bank, which they called "Post Bank", as part of the 1980s "free market reforms". School kids like me used to have accounts there, since we all went to the Post Office. Who bought Post Bank? Big Bad ANZ Bank. That's probably how they became to be NZ's largest bank in in the first place. They knew about switching costs bank in 1989. What do you have to say about that, eh Richard? Did you enable this banking monopoly? Let's bust it for good.
Sources:
https://www.rnz.co.nz/news/business/525671/comcom-report-willis-adamant-she-wants-action-on-banking-sector-reforms
https://evrimagaci.org/tpg/new-zealand-unveils-major-banking-reforms-amid-competition-crisis-31855
https://comcom.govt.nz/__data/assets/pdf_file/0019/362035/Final-report-Personal-banking-services-market-study-20-August-2024.pdf
So what's the best solution? The main problem which has cemented the private bank's monopoly positions is "switching costs" - once you're locked into the bank that you open an account with as a child, you're unlikely to ever switch throughout your life-time. The hassle & cost of changing your direct debits, direct credits, telling your employer - the whole thing is a nightmare. The big private banks use these switching costs against you. By the way, its also why the Big Supermarkets and Big Airlines like Air NZ have "Loyalty Programs" (like Airpoints). They're not loyal to you at all. What they're doing is making it harder for you to leave them. They're creating "switching costs". If you dump Air NZ as your chosen carrier, then you lose your Air Points "privileges". That's how they lock you in. Then they hike their ticket prices on you. Bastards. The Big Banks play this game the best, preying on children.
So is the solution to better capitalize KiwiBank through use of "KiwiSaver" and "Kiwi investment funds", like Willis said? No. Here's the way to do it. Get the thousands of folks who work at the Ministry of Education to actually do some productive work for once - go around Year 8 students at all schools in NZ and simply open a Kiwi Saver account for each and every one of them. Make it so easy, so much fun and so cool that they're all proud to have their Kiwi Bank account. They're all immunized for goodness sakes - now financially immunize them & protect them from the vampire squid of big banking trying to infect them with a financial virus at a young age. There are less than 100,000 of them. Its not a big job. Then do the same for the next ten years. That's cohort of 1 million growing up banking with Kiwi Bank. Once they get jobs they will "capitalize" Kiwi Bank automatically by virtue of their pay going into their account. The Big Banks will tremble in no sort order, complaining of foul play. That means you must be doing something right. It will break the Big Bank Monopoly within just a few years. It will also come at almost no cost to the taxpayer, unlike finding endless billions to "recapitalize" Kiwi Bank using some hair-brained Willis / Treasury scheme.
In hindsight, by the way, me old mate Richard Prebble, who reads this Blog, may have a bit to answer for in this regard. His Labour Government famously privatized Post Office Savings Bank, which they called "Post Bank", as part of the 1980s "free market reforms". School kids like me used to have accounts there, since we all went to the Post Office. Who bought Post Bank? Big Bad ANZ Bank. That's probably how they became to be NZ's largest bank in in the first place. They knew about switching costs bank in 1989. What do you have to say about that, eh Richard? Did you enable this banking monopoly? Let's bust it for good.
Sources:
https://www.rnz.co.nz/news/business/525671/comcom-report-willis-adamant-she-wants-action-on-banking-sector-reforms
https://evrimagaci.org/tpg/new-zealand-unveils-major-banking-reforms-amid-competition-crisis-31855
https://comcom.govt.nz/__data/assets/pdf_file/0019/362035/Final-report-Personal-banking-services-market-study-20-August-2024.pdf
2 comments:
quote - "Get the thousands of folks who work at the Ministry of Education to actually do some productive work for once - go around Year 8 students at all schools in NZ and simply open a Kiwi Saver account for each and every one of them. Make it so easy, so much fun and so cool that they're all proud to have their Kiwi Bank account". end quote.
Gee that is what Parents & Teachers did in the 'years gone by', when all children at Primary School were encouraged (no doubt with subtle hints from Teachers to Parents) to open a Savings Account with - The New Zealand Post Office.. WOW how time shave changed - or have they?
Just a "hint", from those savings days " I am a wealth person - NOT". 2 shillings and sixpence a week doth not make a Donald Trump at the end of school years.
Professor MacCulloch, I have to say that I am at a loss to understand just how my bank is ripping me off whenever I use PayWave. The debit on my bank statement matches the total on my supermarket receipt, and there is no charge shown on the receipt for using PayWave. Do you mean that the supermarket pays the bank whenever a shopper uses PayWave and that this cost is built into the supermarket’s pricing?
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