The banking sector lacks competition, a Commerce Commission draft report has found.
It was asked by the government in June 2023 to look into the potential barriers or behaviours affecting competition and quality of services in personal banking.
The commisison's draft report into the personal banking sector said there was a two-tier market in which the big four Australian owned banks have the major share.
The sector lacked disruptive forces to drive change and deliver benefits to consumers, it said.
Commerce Commission chair John Small said the four major banks - ANZ, ASB, BNZ and Westpac - focused more on "price-matching strategies" which result in "very stable market shares".
He said disruption needed to be "baked in" to push aggressive competition which consumers were missing out on.
"Ongoing disruption is key to promoting enduring competition in this sector. Today's maverick could be tomorrow's oligopolist, so the aim should be to ensure contestability over the longer-term."
It has recommended reducing barriers for those seeking to take on the major banks.
One way would be to encourage innovative players to enter the market, Small said.
The report also said customers needed to have the tools to make informed decisions about their banking providers.
It looked at banking services for personal or household use, that included current account, deposit, and overdraft account services, personal loans, and mortgage and credit card lending.
For the study, the commission spoke to businesses, consumer groups and industry bodies, providers of personal banking services, and consumers. It also aimed to engage with Māori.
The commission will now take feedback on the preliminary findings and recommendations. The final report will be released in August 2024.
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