Report shows where customer-owned banks outpace major banks and highlights current challenges
Customer-owned banks contribute nearly nine times more to their communities than major banks, as a percentage of their profits, according to a new report.
Credit unions and mutual banks allocated 5.2% of their profits to community and charitable organisations, totalling $38.4 million, compared to the 0.6% donated by the big four banks.
“Customer-owned banks are deeply rooted in the communities they serve and often support grassroots organisations to meet the unique needs of their members and local areas,” said Michael Lawrence (pictured left), chief executive of the Customer Owned Banking Association (COBA).
The 2024 Customer Owned Banking Impact Report, authored by economist Nicki Hutley (pictured right), also revealed that customer-owned banks provided average variable home loan rates 0.4 percentage points lower than those offered by major banks – a difference that can result in over $2,000 in annual interest savings on a $600,000 mortgage.
“Customer-owned banks prioritise their members and communities over profit, allowing them to offer competitive rates and reinvest profits into services and local initiatives,” Hutley said.
However, the report also pointed to a lack of competition in Australia’s banking sector, which is dominated by the major banks. Smaller institutions, such as customer-owned banks, often face regulatory disadvantages.
“Customer-owned banks are crucial for a competitive financial system, giving Australians a genuine alternative to the shareholder-driven model. Government and regulators must ensure that consumers have real choices,” Hutley added.
The report also noted that customer-owned banks consistently lead in customer satisfaction, maintaining higher ratings than major banks for over 20 years. With over 11,500 full-time employees, many of whom are based outside major cities, the sector plays a key role in regional economies. The average employee tenure of 7.5 years in the sector is more than double the national average.
“Customer-owned banks understand the value of a thriving workforce, which is essential for delivering top-tier service and community engagement,” Lawrence said.
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