BANKING: by Peter WestmoreNews Weekly
Kiwibank takes off in New Zealand
, May 4, 2002
By the end of April, the new government-owned Kiwibank will have established half of its projected 300 branches around New Zealand, as the new bank moves to become a major player in the NZ banking system, most of which is foreign-owned.
Established by the Government as a New Zealand Post offshoot, Kiwibank is targeting the personal banking market with a promise of low fees and a pledge to keep profits in New Zealand.
Although the new bank is an initiative of the present Labour-led Coalition Government, the company chairman, Jim Bolger, is a former National Party Prime Minister, ensuring that the new bank had wide public support.Support
While offering face-to-face over the counter service to customers, Kiwibank is also focused on winning support from people using ATMs and Internet banking.
It says its focus "will be easy-to-understand, popular banking services. Initially the bank will offer savings accounts, everyday accounts with EFTPOS cards and cheque books, credit cards and mortgages. It will also provide telephone and Internet banking and access to ATMs".
Kiwibank claims it will have the largest branch network in the country and will be the only bank to offer customers the convenience of retail trading hours - including weekend banking. However, it will not offer corporate or business banking services.
At the time of its launch in February, the bank released a comparative table showing that a family could reduce its transaction fees by an average of 50 per cent by switching its accounts to Kiwibank.
Customers who switch their existing home loans or take out new loans were offered 6.1 per cent variable rates and the same fixed rate for one year, about 0.5 per cent lower than their competitors. Home loans with Kiwibank have no application fee.
The new bank also offers children's savings accounts, which pay 4.5 per cent interest no matter how much is in the account; a "Bill Blaster" account, where customers pay a set amount into the account each month and their bills are paid automatically on time; and a cash manager facility, which provides for multiple accounts with interest paid on the combined total.
Kiwibank is signing up hundreds of customers a day, including the Deputy Prime Minister, Jim Anderton, who promoted the Kiwibank concept, and Finance Minister, Jim Cullen.
Mr Cullen and his wife have transferred some of their accounts to Kiwibank. The Finance Minister said the decision reflected their confidence in the new bank and the competitive package it was offering.
Kiwibank's External Relations Manager, Bruce Thompson, said the demand was so great some customers were waiting up to two weeks to join. "We are just delighted with the support," he said.
The launch has had some hiccups, however.
Some New Zealand Post franchisers are unhappy with the transaction fee being offered by Kiwibank and have indicated they will not sign up.
The bank also had teething trouble with its computer systems, vital for an operation which must provide instant access for both customers and branch staff throughout the country.
As a result, its parent company, New Zealand Post, is in process of replacing its old network with a new IP network provided by TelstraClear.
To shorten customer queues and reduce costs, Kiwibank is putting a lot of faith in Internet and interactive voice response phone banking.
Eventually, the facility to open a new account, or even for a new customer to join the bank will also be provided over the Internet.Key strategy
"It is a key strategy for us to establish a lead in Internet banking, because that is the cheapest channel", said Ron van de Riet, Kiwibank's IT head.
"The problem with [existing] Internet banking is that it's too hard," he said, and because of unfriendly interfaces, other banks have been limited in the functionality they can provide.
Claire Matthews, Acting Director of the Centre for Banking Studies at Massey University, said, "It had the advantage over existing financial institutions of not having a need to deal with any legacy banking systems, although interconnectivity with New Zealand Post's existing computing system would obviously be in its interests.
"In addition, it could obtain the newest technology available, which is an important consideration given the speed with which technology changes and the reliance that a banking operation must place on its IT."
She added, "Internet banking is significantly cheaper than branch banking, though the specific costs are difficult to determine, with estimates for Internet transactions of 1c to 10c each, against $1.70 to $2.30 for an in-branch transaction."
With a large customer base and modern technology, Kiwibank is set to give the foreign-owned banks a run for their money.