The technology costs of launching a Kiwi bank could run into tens of millions of dollars, says banking specialist David Tripe.
As the world switches more to internet, call centre and supermarket banking, he says New Zealand is "unique" in setting up a post office-type banking operation from scratch. Tripe, who is the director of the centre for banking studies at Massey University, has analysed banking systems worldwide.
Last week, NZ Post received “in principle” approval from Treasurer Michael Cullen to run the proposed bank, with government financial help if needed. A final decision is expected before Christmas.
Set-up costs are estimated at $80 million, which Tripe says is realistic. The major cost, he says, will be in staff, but the bank would certainly need a computer system. If it cannot use the existing NZ Post system, Tripe recommends one be bought off the shelf from the US. This would be quicker, probably cheaper and carry less risk. A home-made system could run into problems and New Zealand does not have a good track record in developing its own systems, he says. The cost of this would be millions of dollars, he says, and “we could well be looking at tens of millions. It depends on the quality of the network.”
A new bank with a new system would benefit from using the latest and cheaper technology. But while CRM - customer relationship management - technologies are now “significantly cheaper” than a few years ago, this won’t make much difference in the cost of supplying services. He estimates a possible 10% saving in transaction costs, so that each costs, say $2.20, instead of $2.50.
The bank may not be as good or as successful as people expect. “If I was setting up a bank,” he says, “I would get indications of the network scale. I would use internet browser type interfaces at the delivery but more importantly, I would buy a package so I don’t have to spend a lot of time sorting out the computer systems. If you are starting from scratch, the bank fits the computer system rather than the other way round,” he says.
New Zealand Post is refusing to comment on any of details concerning its business proposal to Treasury. But says spokesman Simon Taylor, in July, it issued a request for information from companies for details on banking application systems and services and the skills needed to run a potential banking system.