Nicola Willis is stirring things up in the New Zealand banking sector by suggesting a review of the capital requirements for banking registration. The idea is to create a more level playing field, making it easier for smaller banks and new entrants to compete with the big Australian-owned banks. For a challenger like Emerge, that’s music to our ears. For context, here in the land of the long white cloud, you need $30m to start the conversation. In the UK it's £1m.

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Good news for Innovators

Lower capital requirements will be the opening act we've been waiting for. If you've ever tried to elbow your way into a market where four big players have the lion’s share, you’ll know how tough it is. Lowering the barriers to entry will allow new players to innovate, offer better services, and ultimately, give customers choice. In a nutshell, it’s about creating an environment where customer-focused, tech-enabled institutions can thrive. Look at what we're shipping, vs the interface and intel offered up by the legacy institutions...

And again, we can look to so many overseas jurisdictions where this has borne out. We're really not in uncharted territory here.

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But is Kiwibank the candidate to lead the charge?

While Kiwibank is certainly a Kiwi icon, let’s face it, it hasn’t been the poster child for rapid innovation. Yes, they’re undergoing a significant tech re-platforming, swapping out their legacy systems for a shiny new cloud-native stack. This is no small feat, and I tip my hat to them for taking it on. However, as much as I respect the effort, we have to ask: Is Kiwibank truly ready to lead the charge in bringing real competition to the Aussie banks?

The Commerce Commission’s recent report on banking competition made it clear that for real disruption to occur, smaller banks need to improve their capital positions and embrace new technologies. Kiwibank is slated to be fully compliant with open banking by 2026... Which is two whole years behind the big four (and two years later than was mandated)... In the fast-moving world of fintech, two years is an eternity. For us, in that time, we sprinted to 200,000 customers on SquareOne, from a standing start and with a tiny team... And then delivered Emerge to market as a fully-fledged SME bank alternative. And we're just getting started.

In another 2 years, I expect us to be credibly rivalling the 2nd tier banks in NZ, and quite possibly giving the big 4 a nudge... Aspirational? Yes. But again, look to global markets to see this trend... unfold time... and again.

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Where Does That Leave Us?

At Emerge, we’re excited by the possibilities that a more competitive landscape will bring. But we also recognise that simply lowering capital requirements isn't a silver bullet. For real change to happen, we need to see a combination of regulatory support, technological innovation, and a commitment to customer-centric services. And while Kiwibank has a solid foundation, a government-owned entity is simply not the disruptor we need to address the banking oligopoly.

So here's hoping that as RBNZ reviews settings, it does so with an eye on fostering real, meaningful competition. Because at the end of the day, it’s not just about having more banks—it's about having better banks.

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Cheers,

Jovan