Mutuals Outperform Traditional Banks

The customer-owned banking model is continuing to outperform traditional banks, “revealing the strength” of the co-operative and mutual sector despite regulatory constraints.

According to KPMG’s annual Mutual Industry Review, the asset growth of mutual banks was 7.8 per cent, compared to 5 per cent for the overall banking sector.

KPMG  put the results down to effective business strategies and risk-management practices, and leveraging digital technology.

The peak body for co-operatives and mutuals also said the performance of customer-owned banks was due to the “strong value proposition”.

Business Council of Co-operatives and Mutuals CEO Melina Morrison told Pro Bono Australia News mutual banks put their customers first.

“The customer is the major beneficiary of the business and the whole focus of the business. It’s why the bank is in business in the first place, is to serve its members and its members are its customers,” Morrison said.

“It is a sign that people are going towards banking and they’re attracted to banking with ethical and customer-focused institutions, so I would say that one of the reasons why they’re growing and they’re strong is because of high customer satisfaction.”

She said the results were “remarkable” given mutuals and co-operatives are operating on an “unlevel playing field”.  

“It is a sign of the resilience of the business model in very challenging times, and what is extra remarkable about this is that they’re doing it with one hand tied behind their back,” she said.

“Not only are they showing very strong performance, but they are showing that they can do that in a regulatory and legislative environment that puts them at a disadvantage.”

The council has repeatedly called for reforms to ensure co-ops and mutuals are able to compete with traditional businesses.

In March a report from a bipartisan Senate inquiry recommended the sector receive more support and recognition from the federal government.

It advised that the Corporations Act be amended to explicitly define customer-owned enterprises and said barriers to innovation, growth and free competition should be addressed.

Earlier this month Labor created a new portfolio to oversee the sector, to be taken on by Shadow Assistant Treasurer Andrew Leigh.

Morrison also called on the public to show support for co-operatives and mutuals by voting with their wallets.

The council launched a #switchnotbitch campaign to educate and encourage consumers to shop around for alternative, trustworthy banking choices.

“Consumers [need] to make a deliberate choice – sure it can be a hassle to change an account over, or switch to another provider – but once you do it, you are actually strengthening competition as well as making a deliberate choice based on your values and ethics,” Morrison said.

“There’s more than 80 credit unions, mutual banks and building societies to start with, not to mention, mutual health insurers, member owner superfunds and customer owned retailers.”