Kiwi Bank - please can we think outside the box!

It’s both fascinating and a bit depressing to read and listen to different views on the opportunity which rethinking government’s involvement with Kiwi bank could open up.

The investment community looks forward to the emergence of a new substantial listed entity on New Zealand’s depleted stock exchange. Kiwi bank’s chief executive is looking forward to building on the new tools and products he believes the bank would be better placed to market.

The stated rationale is freeing up Kiwi bank to challenge the major four Australian banks. The collective thinking seems to be that freeing Kiwi bank from government’s apron strings will somehow put competitive pressure on the four majors resulting in better and more cost-effective service to the overall benefit of both business and non-business customers

There seems to have been little thought given to whether allowing a minnow to grow will somehow impose a strong discipline on four sharks. Nor has there been any apparent thought to where disruption could be most effective in terms of benefits for New Zealand. It very much looks as though thinking is taking place inside a box which is all about competitive banking.

Let’s try and step outside the bank box and see what the wider landscape shows. Start by reflecting on what are the really serious concerns about current and likely future banking services. It’s about access as branches continue to close. It’s about the digitally disadvantaged - perhaps as many as 20% of New Zealand’s citizens have varying degrees of difficulty with access because of digital exclusion. It’s about the mission a bank might have.

The four majors clearly focus on maximising returns to shareholders. It’s probably not being too unkind to suggest that what look like initiatives to demonstrate their concerns for communities are driven primarily by a wish to counter adverse criticism.

Does a bank, particularly a freed up Kiwi bank, need to act solely as a conventional bank with some smart tricks up its sleeve in areas such as IT? Look elsewhere and the answer is clearly no.

Much present commentary about banking services in New Zealand is really querying whether the term services make sense. Ideally the term should imply an interest in the quality of outcomes for the person served based on an understanding of their particular needs and circumstances. Clearly there are a very large number of customers who at the very least have significant doubts about whether conventional banks are interested in the quality of the outcomes they get as customers as compared with the quality of the profits the bank gets from the customer.

Look around the world and there are a number of entities categorised as banks which have much more of a genuine service focus. Australia’s Bendigo & Adelaide Bank describes itself as a community enterprise and really means it. It’s developed practices through its community banking network and more generally which make it an important and highly regarded contributor to community well-being. It has spent many years getting to understand the needs and circumstances of the communities it serves and in ensuring that its presence enhances community well-being.

The specific model which underpinned Bendigo’s community banking strategy has now passed its use by date - it was based on franchising individual community owned bricks and mortar bank branches with a profit share arrangement ensuring significant benefits back to individual communities. Internet banking means Bendigo is now looking for different approaches still very much within its commitment to being a community enterprise.

From New Zealand’s perspective the lesson from the Bendigo experience is not so much the specific approach Bendigo took, as the culture and philosophy underpinning it; a community enterprise providing services and generating income through a range of commercial activities but always infused by a sense and practice of service to community.

Now come back to Kiwi Bank and ask what might happen if it began exploring the potential from treating the provision of banking services, and the way those were provided, as a means for improving the well-being of the communities it serves.

This immediately opens up a whole set of possibilities in terms of potential partners and different approaches to service design.

Could Kiwi bank become a partner with councils, especially rural and provincial councils, adopting a shared service approach to access and customer/citizen servicing and perhaps shared financial systems? Should it explore how, and in partnership with whom, it could start dealing with digital exclusion. What about partnering with councils, and with the energy sector, facilitating the shift from grid-dependency to self-dependency. Is there an opportunity to work with communities to create opportunities for managing the transition of ownership in local businesses as owners retire? This would resonate strongly with the growing interest in community wealth building as a way of protecting local wealth.

Kiwi bank is not just another second-tier bank which currently happens to be government owned. Much more importantly it is a repository of an important set of service skills which imaginatively managed could make an enormous contribution to improving the well-being of much of New Zealand.

Time for an action-oriented conversation before the opportunity is lost.