Borrow
COBA warns of ‘a python squeeze to competition in retail banking’
Retail banking industry advocates fear that new regulations will further entrench the dominance of Australia’s big four.
COBA warns of ‘a python squeeze to competition in retail banking’
Retail banking industry advocates fear that new regulations will further entrench the dominance of Australia’s big four.
The Consumer Owned Banking Association (COBA) has rallied against increased compliance regulation in a formal submission to the Senate committee on Australia as a technology and financial centre.
Warning that competition in the retail banking sector is being burdened by over-regulation, the organisation called on policymakers and regulators “to recognise and respond to the impact on competition, innovation and consumer choice of constantly ratcheting up regulatory compliance costs”.
“New entrants to retail banking, such as neobanks, and existing challenger banks, such as customer-owned banks, are critical to applying competitive pressure to the major banks,” said COBA CEO Michael Lawrence.
However, “Neobanks and COBA members face the same regulatory and operating environment, and that is an established oligopoly where the four major banks hold substantial market power over their competitors and consumers.”
Mr Lawrence warned that increased compliance obligations will hit challengers in the industry much harder than it does incumbents, due to the difference in the economies of scale involved.
He said that the cost of forcing neobanks to divert scarce resources away from customer service and innovation in order to manage compliance will have broader negative outcomes for the retail banking industry for consumers.
According to the report, the current environment of very low interest rates not only hurts savers, it is harmful to banking competition.
“The margin compression caused by very low rates hits smaller banks harder than the major banks.”
Describing the burden of compliance as a python squeeze on competition, Mr Lawrence said that “the ultimate losers from this entrenched trend are all banking customers who need a vibrant, dynamic and innovative retail banking market”.
COBA’s submission to the committee makes a number of recommendations, including the development of a regulatory initiative grid modelled on that of the United Kingdom and post-implementation reviews for all major regulatory changes.
The report also emphasised the need for better coordination of regulatory initiatives in order to minimise the burden on stakeholders in the industry. The COBA advocated for Australian regulators to adopt a one-in, one-out approach, “whereby any newly introduced burdens are offset by removing equivalent burdens in the same policy areas”.
“Policymakers and regulators must urgently change course to deliver better regulation and better regulatory policymaking,” Mr Lawrence said.
About the author
About the author
Banking
Global banknote study reveals gender disparity: Only 7.54% depict women
A recent study by TradersBest has uncovered a significant gender disparity on the world's banknotes, with findings indicating that out of 716 individuals featured across 115 countries, only 54 are ...Read more
Banking
JPMorgan Chase leads the global banking sector in AI adoption, outpacing rivals
A recent study indicated that JPMorgan Chase has positioned itself as the leading force among financial institutions embracing artificial intelligence (AI) for enhancing customer satisfaction and ...Read more
Banking
Exact Payments acknowledged as a leading payments ISV by the Electronic Transactions Association
The Electronic Transactions Association (ETA), a prominent advocacy and trade association for the payments industry, has recognized Exact Payments as one of the Top 10 Payments Independent Software ...Read more
Banking
The future of digital banking in Australia: Trends and implications for investors
As technology continues to reshape our lives, its influence on the financial sector is particularly transformative. One sector at the epicentre of this change is banking. Read more
Banking
ANZ sued for allegedly misleading customers
The corporate regulator has commenced civil proceedings in Federal Court. Read more
Banking
Banks report $14.4bn profit amid pressure on net interest margins
Australia’s major banks have reported a significant boost to their bottom lines and returns in the first half of the 2022 financial year, signaling sector-wide resilience despite persistent pressure ...Read more
Banking
Major banks report rising profits
NAB and ANZ announced their half-year results this week. Read more
Banking
Modernisation of direct debit system suffers setback
According to the Reserve Bank (RBA), several major banks will not be able to meet the current timeline for the launch of the PayTo service. Read more
Banking
Global banknote study reveals gender disparity: Only 7.54% depict women
A recent study by TradersBest has uncovered a significant gender disparity on the world's banknotes, with findings indicating that out of 716 individuals featured across 115 countries, only 54 are ...Read more
Banking
JPMorgan Chase leads the global banking sector in AI adoption, outpacing rivals
A recent study indicated that JPMorgan Chase has positioned itself as the leading force among financial institutions embracing artificial intelligence (AI) for enhancing customer satisfaction and ...Read more
Banking
Exact Payments acknowledged as a leading payments ISV by the Electronic Transactions Association
The Electronic Transactions Association (ETA), a prominent advocacy and trade association for the payments industry, has recognized Exact Payments as one of the Top 10 Payments Independent Software ...Read more
Banking
The future of digital banking in Australia: Trends and implications for investors
As technology continues to reshape our lives, its influence on the financial sector is particularly transformative. One sector at the epicentre of this change is banking. Read more
Banking
ANZ sued for allegedly misleading customers
The corporate regulator has commenced civil proceedings in Federal Court. Read more
Banking
Banks report $14.4bn profit amid pressure on net interest margins
Australia’s major banks have reported a significant boost to their bottom lines and returns in the first half of the 2022 financial year, signaling sector-wide resilience despite persistent pressure ...Read more
Banking
Major banks report rising profits
NAB and ANZ announced their half-year results this week. Read more
Banking
Modernisation of direct debit system suffers setback
According to the Reserve Bank (RBA), several major banks will not be able to meet the current timeline for the launch of the PayTo service. Read more