Taking on the traditional retail banks
For many years, the Australian banking sector has been dominated by the so-called ‘Big Four’ – a group of organisations and their subsidiaries that hold the majority of the market share in Australia.
This period of dominance is being challenged however, by the emergence of customer-owned banks – also referred to as mutual banks. In this article, we’ll be taking a closer look at how this rapidly evolving sector is taking on the status quo and pushing for a better deal for consumers.
What is a mutual bank?
In terms of services provided, mutual banks are almost exactly the same as a traditional banks. They offer everything from home loans and savings accounts through to home and car insurance. In addition, mutual banks are subject to the same rules and regulations as other financial institutions under the Banking Act.
How are mutual banks different from traditional banks?
The difference is that mutual banks are not designed to solely benefit shareholders. Instead, mutual banks are owned by their customers, or ‘members’, and all of the profit that these organisations make is reinvested in order to better the banking process. This could be through innovative new services, offering lower lending interest rates, or improving customer service.
By eliminating the need to keep shareholders happy, mutual banks are able to take on traditional retail banks in a range of different ways, all with a focus on benefiting the customer and improving the banking experience across Australia.
How does customer-owned banking benefit you?
When it comes to the key areas where community-owned banking benefits consumers, it makes sense to start with the financial side of things. The real difference here is in interest rates.
Information from Canstar reveals that, on average, mutual banks offer significantly lower lending rates than their retail bank counterparts – for example 12.89 per cent versus 17.82 per cent on standard credit cards1. This is in addition to lower upfront and ongoing fees, making mutual banks a far more cost-efficient option whenever interest will be involved.
The difference between mutual and traditional retail banks isn’t just financial though. Due to their size and focus on consumer’s experience, customer-owned organisations are much quicker to embrace technological innovation and move with the times. A great example of this is the adoption of digital wallet services such as Apple Pay. This happened quickly within customer-owned organisations, but has still only been introduced by one of the Big Four retail banks.
Mutual banks and customer service
For proof that mutual banks offer a better deal for the customer, consider some more data from Canstar, which revealed that Australians who bank with customer-owned institutions are more satisfied with the experience than their counterparts at retail banks1.
Finally, perhaps the most important function of mutual banks is within the market as a whole. Customer-owned organisations provide an alternative – an essential factor in keeping the market competitive and diversified.
Here at Beyond Bank, we’re 100 per cent customer-owned and are proud to be able to contribute to a better, fairer banking industry that helps everyone get the best out of their finances. To find out more about what we do, get in touch with our team today.
¹ Canstar – Bank or mutual bank: What’s the difference? June, 2016