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Kiwibank hopes banking can copy telecoms sector and introduce bank account number portability

Kiwibank hopes banking can copy telecoms sector and introduce bank account number portability

By Gareth Vaughan

Kiwibank’s new chief executive Paul Brock wants to see the banking industry emulate its telecommunications counterpart and introduce bank account number portability so when customers switch banks they can take their bank account number with them.

Brock, who has recently taken the reins at Kiwibank from Sam Knowles, told he’d “love to” see bank account number portability introduced.

“I think that would really make it very straightforward (for customers’ to switch banks,” Brock said.

“But I think there are challenges that would need to be worked through to see whether we could make that happen.”

These involved the payments industry and banking systems, with significant effort probably needed from the bigger banks likely to be required to make big systems changes, Brock added.

“But I don’t think it’s impossible. I think it’s something that should be on the radar in the medium-term.”

Brock’s comments come as the industry gears up to make it easier for customers to switch banks from December with a new company, Payments NZ, being established to take over the New Zealand Bankers’ Association’s (NZBA’s) Electronic Credit Systems Code and the Direct Debit Systems Code, which document operational agreements and arrangements among member banks for clearing electronic credits and direct debits.

Payments NZ is owned by ANZ, Westpac, ASB, BNZ, Kiwibank, HSBC, TSB and Citibank.

More cooperation

The plan is for greater cooperation between banks, simplifying how customers switch between banks and reducing the hassle. The idea is that customers will merely have to notify the bank they want to take their business to, fill out a form and sign it, and their old bank will then hand over all their details, including any direct debit payments, with all this detail switched to the new bank, with a new account number.

Karen Scott-Howman, NZBA regulatory director and acting chief executive, says all her organisation’s member banks that undertake retail payment interchange and settlement are involved in the move and support it. She said it was difficult to know exactly what impact the changes will have on the number of customers’ switching between banks, but it will become easier to do so. Whilst banks already have the ability to assist customers in bank switching, there have been limited industry standards to date around dealing with automatic payments, direct debits and timeframes for completing payment changes.

Scott-Howman said the NZBA wasn’t aware of another country that had a system for changing banks like the one being implemented here.

A spokeswoman for ANZ, the country’s biggest bank, said ANZ fully supported the move, because it was good for customers and good for the banking sector as a whole.

Brock said there was a big group of New Zealanders who don’t currently switch banks because it is challenging for them to do so.

“I think the key thing is the fact that it (the new system) enables choice,” said Brock.

Given Kiwibank ranked high in customer satisfaction surveys, (see the latest Roy Morgan customer satissfaction survey here with Kiwibank second behind TSB Bank) it should be good for the state owned bank’s growth.

“(But) I wouldn’t like to predict how much.”

Since opening for business in 2002, Kiwibank says it has attracted more than 700,000 customers.

Brock said ultimately he was “very keen” to see bank account number portability. However, he acknowledged Kiwibank hadn’t done a lot of work on it yet.

“When you’re up against these challenges and you try to get agreement in industries, you’ve really got to take one step at a time,” Brock said.

And the changes due for implementation in December were a great first step.

“Which is to agree that if the customer gives us their approval, we can share information.”

Nearly half a million

In the telecoms sector number portability, both for landlines and mobile phones, was introduced on April 1, 2007. This means customers switching between service providers can keep their existing number when they move. According to the Telecommunications Carriers Forum (TCF), whose members include all the major telcos, 475,736 customers have switched service provider and taken either their landline or mobile phone number with them since April 1, 2007.

The TCF says the introduction of number portability was the culmination of three years of intensive work by the industry, costing about NZ$100 million.

“The complexity of the project required an unprecedented level of industry cooperation and commitment, requiring changes to networks and billing systems, as well as the creation of the Industry Portability Management System (IPMS), a centralised industry system to manage the porting process,” the TCF notes.

However, by reducing the barriers to changing telecoms suppliers, the industry has “empowered consumers and businesses” to choose the service provider that best meets their needs.

Brock suggested moving to bank account number portability would probably require more than the cooperation between rival banks evident in the current changes underway.

“I would’ve thought legislation (would be necessary),” Brock said.

Like the telecoms industry, where Telecom and Vodafone are the dominant companies, the big four of the banking sector – ASB, ANZ, BNZ and Westpac which hold more than 90% of banking assets – also loom large over their rivals.

“Getting agreement in any industry where you’ve got some big players is always challenging because you’ve got a lot of different motivations as to why we should do things,” Brock added.

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