File photo. Photo: RNZ
The banking sector lacks competition, a Commerce Commission draft report, released on Thursday, has found.
It was asked by the government in June 2023 to look into the potential barriers or behaviours affecting competition and quality of services in personal banking.
The commission's draft report into the personal banking sector said there was a two-tier market in which the big four Australian owned banks have the major share.
The sector lacked disruptive forces to drive change and deliver benefits to consumers, it said.
Commerce Commission chair John Small said the four major banks - ANZ, ASB, BNZ and Westpac - focused more on "price-matching strategies" which result in "very stable market shares".
He said disruption needed to be "baked in" to push aggressive competition which consumers were missing out on.
"Ongoing disruption is key to promoting enduring competition in this sector. Today's maverick could be tomorrow's oligopolist, so the aim should be to ensure contestability over the longer-term."
It has recommended reducing barriers for those seeking to take on the major banks.
One way would be to encourage innovative players to enter the market, Small said.
It is recommending the government look at ways to beef up Kiwibank by increasing its capital and making it a 'disruptive competitor'.
The report also suggested speeding up the move to have open banking operating by mid-2026, to allow consumers to switch banks easily.
The report also said customers needed to have the tools to make informed decisions about their banking providers.
'The glory days of ANZ and ASB are over'
"It's the supermarket moment for the banks," Monopoly Watch director Tex Edwards told Morning Report.
"The glory days of ANZ and ASB are over."
He was upset that the report did not recommend breaking up ANZ and ASB, "which is precedented in the UK".
It would be brave of the government to not see a problem with the banking sector after this report, he said.
New Zealand was 15 years behind the OECD on open banking, Edwards said.
As for Kiwibank, it had been "a toy of the incumbent big-four oligopoly".
He said it has failed to deliver disruption and doubted a recapitalised reinvigorated Kiwibank would "break up such a cosy club of big four Australian banks".
"Kiwibank is going to be under scrutiny."
"The glory days of ANZ and ASB are over" - Monopoly Watch director Tex Edwards
The Commerce Commission study looked at banking services for personal or household use, that included current account, deposit, and overdraft account services, personal loans, and mortgage and credit card lending.
For the study, the commission spoke to businesses, consumer groups and industry bodies, providers of personal banking services, and consumers. It also aimed to engage with Māori.
The commission will now take feedback on the preliminary findings and recommendations. The final report will be released in August 2024.