Bank switching: Consumer NZ raises concern over banks being left to manage and run switching, calls on the Government to ‘step in and ensure New Zealand has an independent switching service’

Consumer NZ is calling for the Government to help establish an independent bank switching service making it easier for consumers to get the best deals and service, and move more easily between banks.

This comes as research from the consumer advocacy group found people who switch banks often experience positive outcomes and it’s not as hard as it seems. Data gathered by Consumer New Zealand in 2024 showed 87% of people who switched banks said it was easy or very easy. 

But the latest data, from Consumer NZ's 2025 banking survey, showed only 3% of respondents had switched banks in the last year. 

Meanwhile 85% of those surveyed had been with the same bank for the last five years. And over two-thirds of respondents said they were unlikely to switch bank in the next year.

Consumer NZ investigative writer Ruairi O’Shea said the advocacy group thought it should be easier to shop around.

O’Shea said “competition is good for consumers, but we’re not so sure it’s in the banks’ best interests.”

“That’s why we’re concerned that the banks have been left to manage and run the switching service.” 

'Collaborative model'

The bank-owned Payments NZ, which governs the switching framework and standards, said: "Our industry switching process is designed to make it easier for customers to move their regular payments and account details between banks."

By law, some steps in changing banks — such as opening a new account — must be completed by the customer, which naturally limits the degree to which any switching service can be fully automated."

Payments NZ previously said in July that "the suggestion that industry ownership prevents progress overlooks significant improvements already made and ignores the complexity of switching systems internationally".

In September, Payments NZ ran a campaign to raise awareness about the switching process and has a switching website which is designed to give consumers clear information about bank switching.

The pilot, Payments NZ said, will inform the development of a broader national campaign planned for next year.

"We’re also working closely with our participants to identify process improvements to explore longer-term enhancements so the service keeps up with future demand and evolving expectations."

"On Consumer NZ’s comments about independence, the switching process already operates on behalf of all banks under a common set of industry standards and oversight," Payments NZ said.

"This collaborative model ensures consistency, fairness, and equal access while avoiding unnecessary duplication of infrastructure or cost."

‘Let’s make them compete’

The discussion around bank switching comes as Finance Minister Nicola Willis has encouraged borrowers to show they have power by shopping around and haggling with banks.

 

Her comments were made after Westpac became the first of the banks to increase some of its fixed rates, by 30 basis points. It did cut its six-month rate by 20 basis points, while its one year and 18 month rates were unchanged.

And on Friday, The Co-Operative Bank followed - cutting its six month rate by 14 basis points, while adding 30 basis points to its two year and longer fixed rates.

Asked by reporters about Westpac’s decision on Wednesday, Willis said Westpac had made the choice to increase some of its fixed-term mortgage rates but other banks have not.

Her message to New Zealanders was: “Don’t just look at the headline rates, go and hold your bank’s feet to the fire, see if another bank can give you a better rate.”

“Make them compete with each other, don’t just accept that you’re getting the best deal now. Let’s make them compete.”

The reason behind the rising rates is linked to an increase in wholesale market interest rates after November’s Official Cash Rate announcement.

Reserve Bank Governor Anna Breman said; “We have to look at the overall picture, but one way as an economist to describe that is to say that some part of financial conditions have tightened a bit and we have to evaluate how that affects the economy if that’s in line with the transmission that we want in monetary policy.”

‘Set and forget approach’

O’Shea said traditionally, there is a lot of inertia in the banking industry.

“In the supermarket, you might buy whatever pasta is on special, but when it comes to banking, consumers tend to take a ‘set and forget’ approach,” O’Shea said.

“The problem is that switching is perceived to be difficult, and the benefits are perceived to be low.”

Consumer NZ was concerned by the difficulty consumers faced when it came to switching banks. 

“To address this, New Zealand’s banks have been told repeatedly to improve their switching service, and to make it more transparent, to bring it in line with the service offered to customers in the UK.”

O’Shea said the advocacy group was disappointed by the lack of progress made by banks on this service - but they’re not surprised. 

“The lack of competition in the sector allows the banks to generate stable profits without needing to invest in innovation to fight for market share."

“New Zealand has been so slow to implement open banking, and is one of the only countries in the OECD without a real-time payments network," said O’Shea.

Cost difference

Payments NZ previously said in July that the switching process in Aotearoa compared favourably with the one in the UK in several key areas. 

This included:

• Set-up requirements: Both models require customers to open a new account and arrange products in advance, account types.
• Account types: Both models support business, joint and individual accounts.
• Customer choice: In both places, customers can choose their switch date and choose whether to close their old account or have accounts with multiple banks.
• Switch timing: Payments NZ said in the UK, the switching process started seven days before the customer's chosen switch date while in Aotearoa, "banks work directly towards the customer's selected date in a more personalised manner".

Between April and May 2025, Payment NZ said 99% of switches met the five-day service level agreement for the old bank to send information to the new bank and 96% were completed in three days or less. 

"In all cases where switching took longer than five days, this was due to a customer-chosen future switch date." 

Payments NZ said there was also a significant cost difference between the UK model (which was established in 2013) and the New Zealand one.

In 2013, The Guardian reported that there had been a £750 million systems overhaul so that British account holders could switch banks in seven days, and direct debits and payments could be transferred between providers in a week. 

With Consumer NZ calling for an independent switching service, it said from its experience of running Powerswitch, an independent site for comparing and switching power providers, "the figure quoted here is ridiculous".

'We act in the interests of the ecosystem'

Payments NZ said its account switching process was free to use for customers.

"Depending on individual circumstances, there may be costs associated with moving lending or other banking products from one bank to another, such as home loan break fees. Customers should speak directly with their bank to understand these before switching."

Compared to the costs of the UK system, Payments NZ said while it did not have specific cost information to share, its switching process used a personalised model that is tailored to customer needs. 

"This allows it to deliver core functionality at a fraction of the cost of the UK system."

Payments NZ said its "participants (banks) have committed to funding improvements to our switching process through existing budget mechanisms".

"The switching process is one part of the wider work the industry is doing to improve customer choice and competition helping make it easier for New Zealanders to move, compare, and choose the services that best meet their needs."

Payments NZ said: "We remain committed to improving the switching experience for consumers and to providing transparent, accurate information about our work."

"As an industry-owned body, we act in the interests of the ecosystem and are making measurable progress in line with Commerce Commission guidance."

‘Always open to ideas’

Commerce and Consumer Affairs Minister Scott Simpson said: “Open banking went live last week and makes it easier for customers to compare banks by providing a safe, regulated way for New Zealanders to share their financial information."

“The Government is committed to a fair, competitive banking sector, and we’re always open to ideas that could improve outcomes for consumers."

Simpson said he was watching this area closely.

Thinking of switching? Here’s what to look out for

For people thinking about switching, O’Shea said people should check if they’ll be able to pay any break fees.

“You may want to ensure you’ve got a cash reserve while the switch is taking place - it can take up to five days to complete the switch,” O’Shea said.