The Big 4

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I’ve worked with the big banks as my clients for over 15years. The red one, the yellow one, and both of the blue ones. I’ve helped build brand strategies, customer value propositions, creative campaigns and enduring brand platforms for them. It’s good business; the banks spend big money on marketing. Tens of millions of dollars every year. Why? After all, the conventional wisdom says that banking is the category where marketing is least effective. It’s bloody hard to change banks, even if you want to. And most people move their banking not to one they really like, but away from one they’ve grown to hate.

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Here's the real reason: social license.

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Its’ very important that the four big Australian banks are liked and trusted in New Zealand. After all, this is the most profitable market for them by far. They make some of the highest profit margins in the world here, so they’re very keen to protect it. How do they make those super normal profits? In essence, by charging Kiwis more than they should for borrowing, and paying us far less interest than they should for saving.

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The banking sector plays an important role in the New Zealand economy. We need banks. But the truth is that the banks we currently rely on, are also taking billions of dollars of excessive profit out of New Zealanders pockets, into their own profits. Why? Because they can.  

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When the Commerce Commission asked Antonia Watson (CEO ANZNZ) how she justifies making super profits, she replied:

‍“[It is] just the amount that shareholders like to get to say, ‘It’s worth me investing here rather than somewhere else’”.

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So the CEO of New Zealand’s biggest bank justifies excessive profits by saying that’s how much the owners want to make.  In other words it’s OK to rip off New Zealanders as long as the Australian shareholders are happy.

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Even our Government openly agrees that Kiwi are being shortchanged by these banks. Nicola Willis, Minister of Finance said:

‍“The New Zealand banking industry resembles a cosy pillowfight, with profit margins coming first and everyday Kiwis coming second”.

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The Commerce Commission, in their final report on the banking sector agreed with the Government. The Commission said its 14-month study found:

“a stable, highly profitable, two-tier oligopoly with no disruptive maverick and a lack of obvious or aggressive price competition”.

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Commission chair John Small said recent investigations had reinforced views competition was not working as it should in the sector, and consumers were missing out as a result.

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So you can see why the banks spend all that money on marketing. They need to make us feel good about them while they’re effectively robbing us. Pablo Escobar spent millions in Columbian communities building thousands of homes, and funding schools and hospitals. Fundamentally to make people feel good about him even though he was harming them. The banks spend tens of millions on ads that feature an endearing young couple, a cricket mad family and a kid that befriends a monster. And they spend millions more sponsoring sports teams, festivals, community groups and stadiums. But it’s a drop in the Tasman Sea compared to the billions of dollars they’re taking out of Kiwis’ pockets and into their Australian profits.

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These marketing campaigns all have different logos on them. But they’re all for the same thing. Building a strong brand is essentially about reducing elasticity of demand. So when price goes up (or in this case savings rates go down), demand won’t be affected. The banking industry has been spending millions to enable them to give us a terrible return on our money for many years, and has been reaping the rewards.

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I’m a founder of a business that’s obsessed with bringing fairness to financial services. And you’ll see more like us, because the time has come for change.