Foreign presence dominates in New Zealand

Less than 2 percent of the total tangible assets in the New Zealand banking sector are held by New Zealand-owned registered banks. Australian banks have a major involvement in the country, owning 10 of the current 19 registered banks, according to the latest country report from Lafferty Group’s World Cards Intelligence (WCI) database.

The retail banking sector is dominated by five major banks: Westpac, ASB, ANZ National, BNZ and to a lesser extent Kiwibank. Collectively these banks control around 90 percent of banking assets, and Westpac, ASB, ANZ National and BNZ are owned by Australian parent companies.

New Zealand has a highly banked population with the vast majority of New Zealanders holding a bank account. In terms of overall banking services, adult New Zealanders are thought to hold more than 10 million accounts with registered banks according to the New Zealand Bankers’ Association.

The WCI report also states that the banking infrastructure is highly developed with 1,190 branches, 2,480 ATMs and over 150,000 POS terminals. Internet banking is relatively widespread, with over 65 percent of the banked population indicating that they had used internet banking services in 2009. The popularity of internet banking is further evidenced by an estimated 150 million online banking related transactions in 2010.


New Zealand’s banking system has largely withstood the global financial crisis and several banks, via their Australian parent banking groups, were included in the Global Finance ‘World’s 50 Safest Banks’ list. The country’s big banks have not faced the same stress that has seen some of Europe and America’s banks face economic ruin. Strong Australian banks were able to support their New Zealand subsidiaries, which helped shelter banks from the worst of the crisis.

After steady growth in the New Zealand economy since 2000, supported by the strengthening of domestic demand and exports, in early 2008 the country slipped into recession. Indeed the contraction of the economy, which was fuelled by falling house prices, rising oil and food costs and a fall in demand for exports started even before the global financial meltdown in September/October 2008.

The situation has become significantly worse in recent months as the poor global financial climate has impacted upon the New Zealand economy. Poor liquidity and tightening borrowing conditions are affecting many businesses throughout the country, while household balance sheets are under increasing strain and there are concerns regarding the ability of many consumers to service debts.

In an attempt to ease the country out of recession and to help stimulate the housing market, the RBNZ cut interest rates in March 2009 by 1.5 percentage points, to a record low of 3.5 percent. This is down from 8.7 percent just seven months previously. While the RBNZ says it is not ruling out further cuts, it expects this to be less dramatic and rates are unlikely to fall below 2.5 percent.

However, many analysts predict the RBNZ is overestimating the speed with which New Zealand can climb out of recession and that interest rates could fall below 2 percent by the end of 2009.

In November 2008, the New Zealand Government announced a raft of measures as part of its fiscal stimulus package to improve the economy. This included injecting $4 billion into the economy, cutting personal income and a number of infrastructure and public works projects.

Three issuers dominate the credit cards market: ANZ National, BNZ, and Westpac. These banks account for over three-quarters of cards issued in New Zealand – a highly concentrated banking market.

ASB and Kiwibank are also significant issuers which have grown their presence over the last five years.


ANZ National, the largest issuer in New Zealand, represents the merger of ANZ and National Bank of New Zealand. However, both banks maintain separate brand identities. Prior to this merger in 2004, BNZ was the largest issuer in New Zealand.

ANZ is the country’s largest credit card issuer with over $1 billion in credit card outstandings and just over 740,000 cards. The bank issues 12 credit card products in New Zealand: eight Visa (including Standard, Gold, Titanium and Low Rate) and four MasterCard (including Standard, Gold and Low Rate). Towards the end of 2010 the bank launched New Zealand’s first contactless ‘tap and go’ credit cards.

BNZ is a member of the National Australia Bank Group, a financial services group with assets spread across the Asia-Pacific region and in the UK. It is New Zealand’s second largest issuer with a market share of 26 percent. However, it is one of the more prudent lenders in New Zealand, with outstanding balances representing an estimated 23 percent market share.

Westpac is New Zealand’s third largest issuer of credit cards, with an estimated 25 percent market share of cards in issue in 2010. The bank is known as the country’s leading SME lender and the principal banking services provider to the New Zealand government. Westpac issues six consumer credit card products in New Zealand: four MasterCard (Standard, Gold, Titanium and Low Rate) and two Visa (Standard and Gold).

RBNZ acts as the regulator of banks and overseer of the payment system to ensure stability in the financial sector. In 2003 it was given formal legal jurisdiction over the payment system, which included giving it the power to obtain and publish information.

It does not have the authority to scrutinise the pricing of financial service providers, the authority for which rests with the Commerce Commission.

The Commerce Commission is the industry watchdog of the financial services industry and is responsible for promoting competition and prohibiting misleading and deceptive conduct by market participants.

The Commission has exercised increased regulation on the credit cards market, following similar moves by Australia regulators.

The body took part in the development of the Fair Trading Act of 1986, aimed at encouraging competition and protecting consumers from misleading and deceptive conduct and unfair trading practices. The jurisdiction of the Act covers all aspects of the promotion and sale of goods and services – from advertising and pricing to sales strategies and finance agreements.

In November 2006, the Commerce Commission filed a case against Visa, MasterCard and their 11-member financial institutions alleging that they had breached the Fair Trading Act by price-fixing on interchange rates. The commission claimed their practices as anti-competitive when they fixed merchant service charges at about 1.8 percent per transaction.

The Commission and MasterCard resolved the claims in August 2009, paving the way for interchange fees in New Zealand to be set by competition. Institutions that have reached settlements with the Commission are ANZ National, ASB, Westpac New Zealand Ltd, Bank of New Zealand, Kiwibank/New Zealand Post, TSB Bank and The Warehouse Financial Services Limited.

As a result of the latest settlements, retailers will benefit from significant new product offerings, and interchange fees using Visa and MasterCard credit cards will decrease.

In 2010 MasterCard and Visa in 2009 changed their rules to permit New Zealand merchants to impose a surcharge on the use of their cards.

Under the new rules, merchants who choose to surcharge are required to inform their customers of the added charge before the completion of the transaction, and the amount of the surcharge must bear a reasonable relationship to the merchant’s cost of accepting MasterCard or Visa cards.

Visa and MasterCard will set maximum interchange rates for all New Zealand-acquired transactions. Effective issuer rates or any effective bilaterally agreed rate must not exceed MasterCard and Visa’s published rates.