Westpac keeps core government transactions contract, other banks get peripheral services

Bill English and Steven Joyce today announced Westpac was the winning bidder for the core contract.

The local arm of Westpac Banking Corp has kept its contract with the New Zealand government to provide core transactions but will have to share peripheral services with its rivals.

Finance Minister Bill English and Economic Development Minister Steven Joyce today announced Westpac was the winning bidder for the core contract, which accounts for $229 billion worth of credit and $219 billion of debit transactions each year. Westpac will continue to provide core transactional services, foreign exchange transactions, payment services and card services.

Other successful bids will see foreign exchange transactions provided by ANZ Bank New Zealand, ASB Bank, Bank of New Zealand and Citibank, payment services offered by ANZ, ASB, BNZ, and Kiwibank, and card services from ASB, BNZ, and Citibank, the ministers said in a joint statement.

Lower fees were negotiated and the all-of-government contract is expected to save about $120 million a year. Westpac's core contract will run for another eight years, while the foreign exchange transactions, payments services, and card services are all three-year deals with two rights of renewal for a further three and two years respectively.

"The new contracts will deliver cost savings for government agencies and all New Zealanders," Mr English said. "They will ensure that banking services are fit for purpose and provide value for money."

The deal is in line with the Ministry of Business' preferred option in a discussion paper preceding the tender for core transactional banking services currently under the master contract to be ring-fenced, along with up to seven other sub-categories, including school banking, trust accounts, international payments and credit/purchasing cards.

Government agencies have 93 Crown accounts, 78 departmental accounts and 175 trust accounts. The Treasury processes the biggest volume, with $245 billion of cash in and out each year. On a merchant services level, the public sector operates 170 merchant services with $718 million worth of transactions. The state has 7811 cards on issue across the sector.

Mr English first flagged plans to open up banking services to tender in 2010, amid a push by Mr Joyce to seek all-of-government contracts for everything from legal services to advertising, travel costs, office consumables, computers and vehicles in an effort to wring out cost savings and urging from the Green Party, which thought Westpac had held the contract uncontested for too long.

The winning bidders committed to establishing a $10 million innovation fund to improve banking systems for the wider public benefit.

Westpac NZ chief executive David McLean said the government spelled out its digital aspirations, something he said his bank believes it can meet.