The success of Kiwibank
18 July 2002
The success of Kiwibank
Kiwibank is proving a success
When the government made the decision to allow NZ Post to go ahead with starting a publicly-owned New Zealand bank, the promise was:
- Kiwibank would have lower fees.
- Kiwibank would have more branches than any other bank.
- Kiwibank would benefit customers of other banks by keeping them honest, producing lower fees and interest rates at all banks.
Kiwibank has delivered on all of these promises.
It was always forecast that Kiwibank would become profitable in three years. The bank remains on target to meet that aim.
Critics claimed that Kiwibank would not attract new customers. The rate of new customers joining Kiwibank has reached more than 500 per week.
Kiwibank has had such a significant influence in the market that it has already paid its way.
Kiwibank has delivered lower fees
Kiwibank entered the market with fees averaging thirty per cent lower than those charged by the overseas banks.
It has had an immediate effect in driving down fees at other banks.
Westpac launched a 15c eft-pos fee in February which was then matched in June by the ASB.
The ANZ has announced a new lower fee structure.
According to the Consumers Institute chief executive David Russell, “Kiwibank, with its low fees and simple accounts, was forcing the big banks to review their offerings. Kiwibank was "undoubtedly part of the reason".’
Kiwibank is delivering lower interest rates
A 1% rise in mortgage rates adds about $52 per month to the expenses of an average $100,000.
This month the overseas banks raised their floating rates to between 7.75 and 8 per cent.
As the overseas banks were doing that, Kiwibank announced it was bringing in a six-month rate of 6.95 per cent and holding its floating rate at 7.10 per cent.
Online money magazine Good Returns editor Philip Macalister said the big banks are being “greedy’. Kiwibank is “keeping the big banks honest,’ he said.
Kiwibank’s fixed rates would save a household with an average mortgage up to $1000.
The need for Kiwibank remains
Despite the presence of Kiwibank in the home lending market, overseas banks are continuing to charge interest rate margins higher than they charge overseas.
"I guess profiteering is an emotional word, but they have got their rates at 8 per cent, they're making a 2 per cent margin -- that's the highest margin I'm aware of in this market."
Kiwibank chief executive Sam Knowles, National Radio, 12 July 2002.
The Australian-owned banks give New Zealand a raw deal that they wouldn’t dare to try in their own country. The two percent margin that Australian banks are charging in New Zealand is significantly higher than their usual margin.
Kiwibank is opening more branches than the overseas banks
By the end of this month Kiwibank will have the largest network of branches of any bank in New Zealand.
It is moving back into a number of areas which had lost their banking services over recent years. This includes Featherston and Greytown in the Wairarapa, Kawakawa in the Far North and Darfield in Canterbury.
Kiwibank will also be the only bank in more than 30 suburban areas of towns and cities across the country.
After a decade and a half of relentless branch closures by the overseas banks, Kiwibank has been opening branches at the rate of up to twenty a week.
Branches will continue to open through to the end of the year.
Customers are joining Kiwibank
Kiwibank is signing up around 500 customers a day with only half of its network open.
Support for Kiwibank is coming from across the income and age spectrum.
The main reasons that people join Kiwibank are its New Zealand ownership, much lower fees and very competitive interest rates.
Kiwibank has introduced welcome new banking products
New banking services introduced by Kiwibank are genuinely different and better for the consumer - not just the same accounts that the overseas banks offer dressed up with different names:
PayStream will automatically split your pay by set amounts or percentages into your chosen Kiwibank accounts. This saves you having to set up automatic transfers or doing manual transfers every month.
Sweep accounts automatically ensure your money is always earning maximum interest. The customer chooses a minimum and maximum amount to keep in their day-to-day account. Everything over the maximum is “swept’ into a savings account, where it earns higher interest. When your day-to-day account balance falls below the minimum, the minimum required is “swept’ back into the day-to-day account.
Dynamic Sweep automatically transfers money from other accounts when you make an ATN of eft-pos withdrawal. So you don’t get embarrassed because one account is empty when there is plenty available in another account.
Kiwibank has been established to meet the banking needs of retail consumers.
But small businesses are paying high bank fees too.
At the moment, Kiwibank is not offering a service for small businesses, although it does accept banking business from sole traders and community groups.
Kiwibank needs time to roll out its remaining branches. After that, the Progressive Coalition believes the Government should allow it to expand its services as its independent board sees fit to offer services to small businesses.
The corporate banking
market in New Zealand is well served. But there is close to
a quarter of a million small businesses in New Zealand and
we would rather that they spent their cash on growing their
businesses than expanding the profits of the Australian
banks through excessive fees and businesses lending rates.