Kiwibank is now 20 years old. Photo / Getty Images
When Kiwibank launched in 2002 it was handed $65 million to get started and had just a handful of staff in its call centre.
The brainchild of politician Jim Anderton, the state-owned bank has now grown to serve over one million customers and has $30 billion of assets.
But it still only has around 7 per cent of the morgage lending market with the big four Australian-owned banks ANZ, ASB, BNZ and Westpac collectively having 80 per cent.
Sam Knowles, Kiwibank's first chief executive who headed the bank for close to 10 years, says it wasn't easy at the beginning but the bank achieved fast growth in a short period of time with support from NZ Post's 200 branches.
"Getting in the door in terms of getting into the payments system was quite challenging - there was only one bank that really supported us through that process - that was the National Bank - Sir John Anderson.
"He was the only supporter from the main banks who thought a competitor would reduce the impact of regulatory oversight. It was an interesting journey."
Knowles said having the support of its shareholder gave it a huge competitive advantage.
"We went from zero branches to 200 in four months. And 200 was more than any other bank."
While it was challenging to get the NZ Post staff focused on being bankers Knowles said the bank was built under budget and broke even earlier than its business case predicted, which was unusual for a start-up.
"There were so few stories globally about banks starting and ending up big in a short space of time - partly because it was quite risky and partly because that is the nature of the sector that customers don't move very much."
Under Knowles' leadership it hit 700,000 customers, more than 1000 employees and $20b in assets. But the last 10 years has seen a tougher environment.
"In terms of judging how successful Kiwibank is you have got to understand the context of the sector and what has been happening in financial services. The Government has focused far more on resilience and conduct over customer cost and that has increased cost in some ways and reduced the ability to be a really active competitor.
"With compliance that is quite scale-driven - the bigger you are the much bigger the cost base you have to spread it over - starting a bank today would be a lot harder than 20 years ago."
Knowles reckons Kiwibank has definitely had an impact on pricing in terms of fees and rates for customers.
"It certainly forced the banks to be focused on the wider community social aspects."
He said 20 years was not a long time in banking. "All the other four big banks started some time in the 19th century. They have been here over 100 years. You've got to think about it in that context."
He said there was still a lot more opportunity for Kiwibank to grow and for NZ banking to become more competitive over time but it needed more access to capital.
"In the end what has constrained Kiwibank is shareholder appetite - that's a call for Government because banks do need a lot of capital to grow quickly and obviously having a major shareholder who has got a very mature business that is under quite a lot of stress is not the way you grow a bank quickly."
Knowles believes the Government should consider a partial float of the bank under the review of its ownership structure that is currently under way. But the Government has said that is not up for consideration.
Sam Stubbs, chief executive of KiwiSaver provider Simplicity, believes either the Government should beef up Kiwibank with more capital or sell it up and crack down on the banking sector to stop them making large profits which go back to their Australian shareholders.
"I had always thought the intention there was to beef it up. That hasn't happened so we have this very unfortunate situation now where Kiwibank is actually a pretty well run business - it has very good people running it but it is stuck in this horrible business model of being undercapitalised and because you have a state-owned undercapitalised bank that creates for everybody - every New Zealander would think that bank profits are being held in check by the presence of Kiwibank.
"That is completely wrong. In fact the Aussie banks are allowed to run rampant because they can say we have got Kiwibank, it's a competitor. But it is just not true. They have never been viable competition because they haven't had enough money."
But Bruce McLachlan, CEO of Fisher Funds and former chief executive of the Co-operative Bank, believes Kiwibank has had a material impact on the retail banking environment.
"I think if you look at the first 10 years of Kiwibank if you look at the customers it acquired, the market share it acquired and what happened to market-based fees during that first decade I will challenge anyone to say that Kiwibank didn't have a material impact on retail banking.
"What I would say though is when people look at the size and scale of Kiwibank versus the banking industry, Kiwibank in that first decade was really only in retail [banking] and if you look at retail, it's not a small part of the market but very large parts of banks' balance sheets are in the big end of town - business banking, corporate banking which is sectors Kiwibank wasn't in. If you look at its share of the retail banking market it was definitely successful and it definitely had an impact."
"Clearly the second 10 years has been more challenging for them. It really enjoyed a price differential in that first 10 years. Virtually every product category Kiwibank had a market-leading position on price. Of course the second 10 years they couldn't keep on doing that because they had to start turning their mind to making a profit."
McLachlan said it was up to the customers to say if there was still a place in New Zealand for a government-owned bank.
"People vote with their feet. That is the ultimate measure. You would have to say that - I'm not sure anyone could say they are not relevant. Those million clients are saying they are relevant."
But he said personally he was not convinced there needed to be government ownership of a bank in New Zealand.
Current Kiwibank chief executive Steve Jurkovich has been in the job for three years and, unsurprisingly, reckons New Zealand is better off with Kiwibank.
"A million NZers have got an option they wouldn't have had if we weren't around."
But asked how much of a run for their money Kiwibank has given the big four banks Jurkovich says it has varied from time to time.
"I don't think any of them are quaking in their boots about the fact there is a bank that has got about 7 per cent of NZ's customers and less in assets because we don't lend to institutional and agri-banking.
"On a day-to-day basis if someone is thinking about a home loan going to a broker and thinking about their options - I do think we are part of the mix. I think we can be a much bigger part of the mix - but don't get me wrong, I wouldn't in any way signal victory."
Jurkovich said one issue is that banking is a very sticky market.
"We know a very large number of New Zealanders consider us but a much smaller number actually move and that's partly because people consider it hard to move."
That was no longer the case, he said, but there was no driver for the bigger banks to promote that.
Jurkovich said Kiwibank was investing heavily to ensure its growth.
"Proportionally no one would be investing more in the future of their offering than we are.
"We have got a really large investment profile over the last year and a half and the next three coming."
Now on its fourth generation of cloud banking Jurkovich says it will have an offering that is really easy, reliable, safe and fast.
Last year Kiwibank suffered major outages of its online services for a number of weeks as it and other government departments and banks came under a sustained cyber attack.
While no money was put at risk people could not access their accounts prompting frustration and anger, with some threatening to leave the bank.
Jurkovich claims it has seen no material change in customers as a result but admits it didn't deliver a reliable service when it should have.
"We didn't deliver during that period and it was gutting for everyone involved because people were working very hard to make sure we could live up to what we need to live up to.
"Our starting position is regardless of the cause we should have been able to be there for them and yes we weren't alone and yes some other banks had issues but actually that didn't matter. In terms of customers moving, it hasn't been a noticeable difference. But you damage goodwill with customers when you are not available when trying to complete a transaction."
He said that situation had accelerated its spending in that area and it had strengthened its partnerships with global technology players around reliability and availability.
"I'm really confident now we have the best in the world supporting us."
As to whether it has enough access to capital support from shareholders to enable it to grow Jurkovich said it was a question for its shareholders more than the bank itself.
"They will invest if they are seeing the right returns and seeing the right investment profile. It is a matter for them.
"From our perspective we have got a plan that self-funds us and sees us grow. Our numbers are pleasing. We are growing strongly in business banking.
"I think if we were to accelerate our business banking strongly over the next few years that might be one of the questions we have got. But at the moment we have got a plan and have had good availability and support from funding options so I think we probably wouldn't want to grow too much faster than we are at the moment."
But Jurkovich says if you ask him what he wants the bank to look like in five or seven years he would love it to be double the size it is now.
"Other banks in the past in NZ have managed to achieve that so I don't see any reason we can't have a much bigger impact than we have now."
Malia Tu'ulima was there when Kiwibank first started and is now its longest-serving employee.
"My former boss contacted me to see if I wanted to join Kiwibank. I thought about it for a bit. It was the travelling to Wellington that was putting me off because my location at NZ Post was only five minutes down the road from home.
"But then I thought it would be nice to be part of the start-up team for this new bank that belongs to NZ."
She began in its call centre with just a handful of staff.
"Everyone was so excited because we wanted to see who was going to get the very first call into Kiwibank. Unfortunately I didn't take it."
When the phone rang they huddled around the desk of the staffer who took the first call.
"I took the third call that came in to Kiwibank which was from Glenys at our Palmerston North branch. And then every other call seemed to come from Glenys - it was almost like she had me on speed dial. They were great, real memorable days one can never forget."
Since then she has spent most of her career with the bank in the fraud team, although she has recently joined its lending operations team.
"You never forget those moments being part of the start-up crew. It was our own bank for NZ and looking back now after 20 years it was my contribution to the bank to get it to where it is today."
Tu'ulima said it was the people and the management that had kept her working for the bank for so long.
Of her five children four have worked for Kiwibank over the years.
"I remember having a conversation with [former CEO] Paul Brock and him saying we might have to change this bank to the Tu'ulima bank.
"He said how many other children have you got? I said I've got one more at college and he said you might as well put his application form through."
Reserve Bank says leaving banks to their own devices hasn't worked.