The mutual sector has been on a growth path recently, with customer satisfaction hitting new heights. Annie Kane takes a look at the growing power behind mutual lenders.
It’s well known that the feeling of being valued – and being a part of something bigger – is a key driver of satisfaction. Whether it’s employees at work or customers engaging with businesses, everyone wants to feel like they’re listened to and valued. As such, it’s perhaps unsurprising that more and more people are turning to the mutual sector to help form and steer the ship of what their lending institution does and how profit is used.
According to the Customer Owned Banking Association (COBA), more than 4.5 million Australians choose local banks – whether they be mutual banks, credit unions, or building societies.
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In fact, it’s estimated that when all the customer-owned lenders are combined, the sector makes up the fifth-largest hold of deposits outside of the big four.
Earlier this year, the chair of the prudential regulator, Wayne Byres, also noted that the share of assets and mortgage lending held by the mutual sector had stayed steady – despite a number of mergers and acquisitions reducing the number of players in the sector.
Mr Byres said that “if anything”, assets and mortgage lending across the mutual banks has been inching higher in recent years.
“In other words, the trends in the mutual sector are reflective of that for the non-major bank sector more broadly,” he said.
Part of the reason for this growth has been strong satisfaction from consumers. Roy Morgan’s Consumer Banking June 2022 Australia report found that the mutual sector continues to outperform major banks in terms of customer satisfaction.
In the report, building societies (94 per cent) and credit unions (90.9 per cent) saw an increase of customer satisfaction by those who used them as their main financial institution over the past six months, while the major banks (77.4 per cent) saw growing dissatisfaction with their services. The mutual sector overall held 91.6 per cent in customer satisfaction as of June 2022.
The customer-owned banks with the most satisfied main financial institution customers include Teachers Mutual Bank (98 per cent), Heritage Bank (94.8 per cent), Beyond Bank Australia (92.9 per cent), and Greater Bank (91.4 per cent).
Noting the figures, Heritage Bank chief executive Peter Lock said that customer-owned banks such as Heritage offered credible, strong and viable alternatives to the major banks, with a focus on putting the needs of members first, rather than seeking to maximise profit.
“Our focus sits much more clearly on the best interests of our members by providing overall value and personalised experiences, not on generating a financial return to shareholders,” he said.
“What motivates us isn’t how much profit we can make. It’s about helping people and making things possible for our members and the community, not only through financial services, but also by supporting local charities, sporting clubs, and community organisations.
“We’re authentic in our approach and are deliberate about making our members our number one focus, which corresponds with higher satisfaction.”
Moreover, COBA CEO Michael Lawrence said the satisfaction of mutual banking customers comes down to community commitment, competitive rates, and personalised service.
“Enshrined within the DNA of customer-owned banks is the commitment to give back to the communities they serve, putting people before profits and having customers at their core,” he said.
Noting the Roy Morgan results, he said: “These results show that customer-owned banks are well ahead of the pack when it comes to customer satisfaction. They deliver leading products, competitive rates, and services with a personal touch – this is why the significant majority of more than 5 million Australians who bank with a member-owned institution are beyond happy with their choice.
“The customer-owned model is also unique because our members are part of the fabric of local communities across the country, many rural and regional based, and they continue to support these communities,” he said.
Indeed, the mutuals are also strong in the social and environmental space too, with several – including Teachers Mutual Bank Limited – now certified B Corporations, meaning they meet the highest standards of verified social and environmental performance, as well as public transparency and legal accountability.
Moreover, they’re delivering products and adopting technology with speed, too.
According to open banking fintech Frollo, the customer-owned entities accounted for eight out of the top 10 open banking data holders with the shortest time to supply transactional data under the consumer data right (CDR).
The average response time was 0.88 seconds, with mutual banks bcu (0.29 seconds), Beyond Bank (0.31 seconds) and P&N Bank (0.41 seconds) all flagged as fast leaders.
He added that a mutual bank’s focus on “delivering value for customers” has made open banking the “perfect tool” for the customer-owned lenders to “deliver on their promise, by providing financial wellbeing tools, improved access to credit and better deals on their financials”.
“We’re excited to help those early adopters in the mutual bank sector use open banking to deliver better customer outcomes,” Mr Docherty said.
As per the report, open banking is increasingly becoming more common with the number of data holders increasing from 11 to 59 between July 2021 and February 2022.
Out of those that have been named as active data recipients, 23.5 per cent were mutual banks.
Comparatively, other banks made up just 11.8 per cent of the total figure.
Tonina Iannicelli, Beyond Bank’s senior manager, digital, commented that open banking provides the bank with the “opportunity to work for and with our customers by doing the heavy lifting on behalf of our customers,” such as collecting their financial data from various institutions to help manage their finances.
“This is just the start, and we are excited to see how else we can work with our customers to get them decisions quicker, offer services that they value, and continue to nurture our relationship with them,” Ms Iannicelli said.
Brokers have also been enjoying the mutuals recently. According to Momentum Intelligence’s Third-Party Lending Report 2022, which included responses from 1,050 brokers regarding their experiences of the lenders they had used in the last year – two of the top 10 most highly rated lenders were customer-owned.
The 13th annual survey encouraged mortgage brokers across Australia to participate in a self-assessed evaluation of lender performance from their experiences over the last 12 months. It found that Newcastle Permanent was the fifth-most highly rated lender (beating out all four major banks with a score of 79 per cent), while Great Southern Bank was the eighth-most highlight rated lender, at 78 per cent. Great Southern Bank scored the same figure, while Bank Australia was just 1 percentage point behind.
Generally, mutuals were particularly highly valued by brokers for their communication and training, as well as their product range and BDM support. Indeed, some of the mutuals also provide unique and innovative products, such as the ability to utilise offsets with a fixed-rate mortgage.
But it’s not all been smooth sailing for the customer-owned lending space. The past two years have seen a number of mutuals announce mergers and acquisitions, as they combine resources to stay competitive.
In fact, the number of mutual ADIs almost halved between 2010 and 2020, from 116 to 64.
Some of the more recent announcements include Teachers Mutual Bank’s merger with Pulse Credit Union Limited (the latest in a stream of mergers and acquisitions from the mutual banking group), Newcastle Permanent Building Society’s merger with Greater Bank, and Heritage Bank’s proposed merger with People’s Choice Credit Union aims to create an organisation with 720,000 members and total assets of over $22.5 billion)
Speaking of the decision to merge, Mr Lock said: “Bringing our two organisations together has the potential to provide us with a greater capacity to compete against the majors through an increased scale, profile and nationwide presence. It also provides an opportunity to redefine mutual banking for generations to come.
“Both of our organisations share a deep commitment to supporting our members and our local communities. We are excited about the opportunity to enhance our product and service offering, and continue our support for community events and initiatives.”
Looking to the future, COBA’s Mr Lawrence said that while the past six months have seen “some big changes in the banking sector”, he added that the fact satisfaction with people’s lenders had continued to “so strongly serve their member base” demonstrated the value these institutions have beyond dollar figures and rates.
“Customer-owned banks are well ahead of the pack when it comes to customer satisfaction due to our leading products, competitive rates, and services with a personal touch,” he said.
