The Banking Association says customers already have free will and choice to change banks

A draft Commerce Commission report's found a two-tier system divides smaller banks from ANZ, ASB, BNZ and Westpac -- and there's a lack of competition.

It says the four have an apparent focus on maintaining profit margins -- resulting in under-investment in platforms and low innovation.

It's recommends the Government improve capital for Kiwibank and smaller banks.

Banker's Association Chief Executive Roger Beaumont says it is a competitive market -- with at least 13 retail banks.

He says for a country with a population the size of Sydney, that's an impressive range.