Beyond Bank Pathways

What is a mutual bank?

What does the word ‘bank’ mean to you?

Typically, a bank is considered an impersonal, profit-driven, financial institution. It’s a slave to its shareholders and operates to maximise its profits for their benefit.

Well, not all banks are like this. There are many types of financial institutions, including two types of banks. They’re traditional ‘banks’ and ‘mutual banks’.

What’s the difference between a traditional bank and a mutual bank?

Traditional banks are 100% owned by their investor shareholders. These shareholders aren’t necessarily customers but, because they own shares in the bank, they have the right to vote on constitutional matters and steer its direction. The more shares one owns, the more constitutional power one has. These banks strive to increase their share price and return higher dividends to their shareholders.

Mutual banks (also called Customer Owned Banks) are 100% owned by their customers. These customers are sometimes called members, and each customer/member has equal constitutional power. Mutual banks do not serve sharemarket investors and generally do not pay dividends to shareholders. Profits are reinvested into the mutual bank and are only used to benefit customers and their communities. This may be in the form of lower lending rates, higher investment rates, lower fees, better banking products, better service or community initiatives.

Mutual banks may be considered not-for-profit organisations.

There are other types of customer-owned financial institutions, including credit unions and mutual building societies. Unlike these types of financial institutions, mutual banks must meet a minimum capital requirement, so they are often larger. This means they can appeal to a wider customer base and can also access a larger pool of depositors.

Mutual banks also offer all standard consumer banking services such as credit cards, personal loans, home loans, online savings accounts and internet and mobile banking.

The fifth pillar

Collectively, customer-owned banking institutions make up the ‘fifth pillar’ of Australia’s banking sector and sit behind the four major banks in terms of total assets.

As at June 2013, the customer-owned banking sector has combined assets of $84.5 billion, growing by 5.4% annually. The Australian customer-owned banking sector serves approximately 4.5 million customers – or one in five of the total population.

Leaders in customer satisfaction

The latest independent research also shows that the customer-owned banking sector leads the market for customer satisfaction. Roy Morgan Research analysis conducted in January 2013 found mutual banks have a customer satisfaction ranking of 92.5% while, collectively, the major four banks lag behind on 81.1%.

Have you got any questions about mutual banks? Feel free to leave a comment below.

^Wayne Matters, Deputy Chief Executive Officer, Beyond Bank Australia


  1. Gordon A. Shaw

    A Mutual Bank projects as similar to the former State Bank, Victoria, which was a Peoples Bank – truly a Bank for the People. Profits were kept to a minimum as a result of fair trading in the form of housing interest rates, fees and benefits to customers and the community at large. 50% of all profit was released to the State Government, with the balance used to increase services to the public.
    Such was the loyalty to this Bank by the public that some 80% of all housing loans in Victoria were provided by this Bank.
    It remains as a great shame that, through Govermental intervention at both Federal and State levels, the State Bank of Victoria was “merged” with the Commonwealth Bank and a Public Company was formed, from which point, effectively, the business community gained access to the peoples money which, hitherto, was provided for housing purposes at a genuine concessional rate.

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