Shock of the day: banks are rational

According to Kiwibank, the other banks profit maximise:

Most banks are only interested in making as much money as possible out of their current customers, Kiwibank chief executive Sam Knowles says.

Now the actual stuff Sam Knowles says, for example the context of the above quote is really that Kiwibank is trying to build market share (since there is a significant transaction cost for consumers moving around the market) while the other banks are satisfied with their share, and so will be extracting surplus – in other words Kiwibank is keeping prices lower now to “invest” in the future.  Furthermore, I agree with him when he says:

New Zealand should work towards customers having a bank account “for life” and if they want to change banks “you can go and get it done” without any hassle,

As this would improve competition.

However, I just thought it was funny that the quote at the start of this post was the first paragraph in the article.  It is as if the newspaper thought there was something novel in the fact that banks act like everyone else.

  • It’s okay if banks want to gain more market share but at least they still make customer satisfaction as priority

  • That is right customer must be satisfied with the level of service. This the rule.