Productivity Commission sends strong message

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Put the customer first in banking

The Productivity Commission’s (PC) report on competition in banking has been released and sends strong messages to regulators and policymakers that regulation is hurting competition and consumers are paying the price.

The PC says the market power of the major banks is supported by layers of public policy and regulatory requirements. The PC finds that: ‘Regulation is dense and it may act against customers’ interests.’

The PC is shining a light on a problem that is not well enough recognised – that more and more regulation can be harmful to consumers because it weakens competition.

The PC finds that competition, more than just price rivalry, drives innovation and overall value for customers.

South West Credit wholeheartedly agrees with the PC that competition must be allowed to flourish.

We would like policymakers to focus on unleashing the competitive potential of existing challenger banks, like South West Credit. This is not suggesting a ‘free kick’ but rather not being disproportionately impacted through a ‘one size fits all’ approach to regulation.

The PC recognises that customer-owned banking institutions like South West Credit may be an exception to the pricing behaviour of other banks because we do not face the same shareholder pressures as other banks.

We want a fair go and that means recognition about the impact of regulatory costs.

High regulatory costs are ultimately borne by consumers. In customer owned banking institutions, every dollar needed to meet regulatory costs is a dollar denied to product innovation, investment in new technology, better service and better pricing.

The cost of regulatory compliance can often be disproportionate to any potential benefit.

The PC Report is a valuable reminder that regulatory costs critically affect competition and consumers pay in the end.

Keeping regulation proportionate based on size and complexity will allow our sector to grow more rapidly. A stronger and more competitive customer owned banking sector will make the major banks think twice about how aggressively they put shareholders ahead of customers.


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