Celebrating what New Zealand is good at seems a natural choice to me. And New Zealand’s simple approach to governance is often a critical component. This is the first piece of what will be a regular column in Insights called ‘Smaller, Lighter, Faster’ looking at New Zealand industries that perform well because they operate without excessive government intervention.

Friends returning from overseas working holidays often comment about how life in New Zealand seems so much simpler: less time gets wasted here on procedures and bureaucracy. My recent postgraduate study of the country’s EFTPOS payment system strongly supported the observation that a simple regulatory environment can play a key role in setting New Zealand apart. It was central to the development of EFTPOS – a system more widely used and more successful than many others around the world.

In EFTPOS, New Zealand has one of the three most well used electronic payment systems in the world (the other two being in Iceland and Norway). This is because, when EFTPOS was set up, behind New Zealand’s system lay a simple regulatory environment that didn’t place barriers between banks and other types of financial organisations that might be involved with EFTPOS.

From the mid-1980s, New Zealand’s system of banking regulation meant that any company that met specific criteria could become a registered bank. This meant there was no special advantage to being one. Rather than protect their patch, banks were more willing to cooperate with one another and other financial organisations. When two banks created the attractive system that eventually became EFTPOS, all New Zealand banks cooperated to implement it, making it successful throughout the country.

Unfortunately, New Zealand’s experience is uncommon. The Australian government maintained complex regulations separating banks, building societies, and credit unions: banks weren’t willing to cooperate with one another on an EFTPOS system. What emerged was a handful of small, less successful networks rather than one big EFTPOS scheme.

EFTPOS is an example of New Zealand performing well with new technology. It shows that less onerous regulation can aid us in our economic performance.

Next time, I’ll look at New Zealand’s environment for smart electricity meters that measure usage: a case where our government’s refusal to become involved with a technology has actually accelerated its development.

Mike Wilkinson is a commentator on the economics of new technology. For further reading on this subject, see this guest post he wrote for Kiwiblog.