Most banks are only interested in making as much money as possible out of their current customers, Kiwibank chief executive Sam Knowles says.

But Kiwibank was focused on recruiting new customers, he told an inquiry into bank prices set up by opposition MPs.

"We are the challenger bank and they are the incumbents."

While Kiwibank aimed to grow its customer base to increase profit, the Australian-owned banks wanted to make money off current customers, said Knowles.

Kiwibank had managed to find a niche market for clients who wanted a local, low price banking option, he said.

"We say we want to make this profit and how much do we charge to get that.

"They want to make as much money as they can with their base."

Despite the different objectives, Knowles does not believe the other banks were rorting customers.

"It's a competitive market...because of the way they operate there's space for us to offer better deals."

However, the market could be improved, particularly by making it easier to change banks.

New Zealand should work towards customers having a bank account "for life" and if they want to change banks "you can go and get it done" without any hassle, said Knowles.

The inquiry was launched after government MPs on Parliament's finance select committee voted against an official inquiry.

The MPs, from Labour, the Greens and Progressive, were concerned that changes in the Official Cash Rate (OCR) were not being passed on to customers.

Knowles said a "small piece of funding" was influenced by the OCR.

"At the moment it's really quite small."

International funding had been expensive but was now much cheaper, Knowles said.

The market perception of the OCR also affected prices because people changed their habits based on their perceptions for the future, he said.

MPs holding the inquiry congratulated Kiwibank for being the only bank to appear before it.

Knowles said he had gone to the inquiry because parliamentarians were "critical stakeholders" in Kiwibank, which is crown-owned.

MPs would have to ask other banks why they did not appear, he said.

The inquiry will continue to hear oral submissions today and tomorrow.