Robert MacCulloch
Robert MacCulloch is a native of New Zealand. Robert worked at the Reserve Bank of NZ before he travelled to the UK to complete a PhD in Economics at Oxford University.
Every day Kiwis are ripped off by the Big Banks. Every day you use payWave 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, “How can we legally steal money from our customers?”, and the lawyers duly oblige. Anything for the work, of course. Now the Commerce Commission comes up with a report telling us what we already knew – they’re a big fat oligopoly. It says NZ needs to better “capitalize” Kiwi Bank. “A well-capitalized Kiwi bank is seen as pivotal to introduce disruptive competition,” says commission chair John Small (in between writing Gaza tweets). Minister Willis has asked Treasury to engage with Kiwi Bank’s parent, Kiwi Group Capital, on options for raising capital, including from KiwiSaver funds and NZ investment funds...” Bad idea.
So what’s the best solution? The problem that 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 and cost of changing direct debits, direct credits, telling your employer – the whole thing’s a nightmare. The banks use these switching costs against you. They’re why the big supermarkets and big airlines 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 Airpoints “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 Kiwi Bank 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 eight students at schools in NZ and simply open an 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 virus immunized for goodness sake – now financially immunize them and 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. It’s not a big job. Do it for the next 10 years. That’s a cohort of one million, growing up and 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 throw a fit in no short 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 the 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 NZ’s largest bank in the first place. They knew about switching costs even back 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://evrimagaci.org/tpg/new-zealand-unveils-major-banking-reforms-amid-competition-crisis-31855
This article was originally published by Down to Earth Kiwi.
