Damon Mcknight
Australia has a small number of large banks in the market, with the country's banking industry historically dominated by a few big players. However, customer-owned banks have emerged as a viable alternative, with these smaller institutions providing a more community-focused and environmentally conscious approach to banking. Customer-owned banks, also known as mutual banks, are owned and controlled by their customers, who have an equal shareholding regardless of their deposits or loans. This means that customers have a say in how the bank is run and where profits are invested, with these institutions not driven primarily by profit but rather by the interests of their members.
| Characteristics | Values |
|---|---|
| Number of customer-owned banks in Australia | 53 |
| Number of customers/members | 4.6 million |
| Total assets | Over A$138 billion |
| Largest customer-owned bank | Great Southern Bank |
| First customer-owned bank | Bank Australia |
| Customer-owned banks' net-zero target year | 2035 |
| Number of institutions a decade ago | Twice the current number |
| Worth of the sector in assets | $150 billion |
| Customer-owned banks' advantages | Lower interest rates, better service, no upfront fees, low ongoing fees, better rates on savings accounts, faster turnaround times |
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What You'll Learn
Customer-owned banks' history in Australia
Customer-owned banks, or mutual banks, are an integral part of Australia's banking system, with a history spanning over 150 years. These banks are unique as they are owned by their customers, who are considered mutual shareholders. This ownership structure allows them to pursue a balance between profit and purpose, prioritising the interests of their customers over external investors.
The history of customer-owned banks in Australia can be traced back to the emergence of building societies and credit unions, which flourished due to regulatory restrictions on traditional banks. In the past, banks in Australia were classified as either savings banks or trading banks, with savings banks being largely owned by state governments and offering minimal interest to depositors. This created an opportunity for non-bank financial institutions, such as building societies and credit unions, to fill the gap in the market by providing higher interest rates and more flexible services.
In the mid-1960s, the Australian banking industry began to slowly deregulate, removing the distinction between trading and savings banks and allowing all banks to operate in the money market. This period also saw the abolishment of foreign exchange controls and the introduction of a floating Australian dollar in 1983. Despite these changes, Australia continued to have a relatively small number of large banks compared to other countries due to various factors, including the difficulty for foreign banks to establish branches in the country until the 1980s.
The first customer-owned bank in Australia was established in 2011, when Bank Australia (formerly known as bankmecu) changed its business name from Bankmecu. This change was made to overcome adverse perceptions of smaller deposit-taking entities, and it marked a significant step forward for the customer-owned banking sector. Since then, several other credit unions and building societies have followed suit, rebranding themselves as banks to enhance their reputation and attract a wider range of customers.
Today, customer-owned banks continue to play a crucial role in the Australian banking landscape, with 53 to 56 institutions servicing approximately 4.6 to 5 million customers and holding total assets of over $138 billion to $150 billion. These banks have been recognised for their innovation and commitment to delivering first-class financial services, being the first to introduce 24-hour ATMs, EFTPOS facilities, and the trial of Visa Disposal Stored Value Cards. They have also been early adopters of mobile payment systems like Apple Pay and Android Pay. Customer-owned banks in Australia focus on various initiatives, including climate action, nature and biodiversity, First Nations Recognition and Respect, and affordable and accessible housing.
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Benefits of customer-owned banks
Customer-owned banks in Australia have several benefits over traditional banks. Firstly, they are able to pursue a balance between profit and purpose because they answer only to their customers, not to external investors. This means that customers are prioritised, and decisions are made with a positive impact on people, communities, and the planet.
Customer-owned banks, also known as mutual banks, building societies, or credit unions, do not have external shareholders. This means that profits go back to benefit customers and their communities. With no shareholders to please, these banks can focus on what is best for their customers, resulting in high levels of customer satisfaction.
Being customer-owned means that customers have a say in how the bank is run. Each customer has an equal share in the bank and, therefore, voting rights. This gives customers a voice and allows them to influence the issues the bank takes action on.
Customer-owned banks also tend to offer better rates on savings accounts and home loan products, as they have to be competitive to attract customers. They may also offer faster turnaround times on loan applications and have more user-friendly apps with unique features and capabilities.
The Customer Owned Banking Association (COBA) is the industry body representing 53 credit unions, building societies, and mutual banks in Australia. The sector is worth $150 billion in assets and services 4.6 million customers.
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Customer-owned banks' profits
Customer-owned banks in Australia, also known as mutual banks, building societies, or credit unions, operate on a different business model compared to investor-owned banks. Instead of prioritising profits for external shareholders, customer-owned banks focus on delivering benefits to their customers and the communities they serve. This allows them to strike a balance between profit and purpose, guided by their responsible banking policies.
In a customer-owned bank, every customer is a part-owner and has an equal shareholding, regardless of their loan size or deposits. Profits are returned to customers in the form of competitive rates, fair fees, and quality products and services. This profit distribution model ensures that the profits generated by the bank are channelled back into the community it serves.
Customer-owned banks in Australia have a strong emphasis on community impact and social responsibility. They actively involve their customers in deciding where to invest their money and which causes to support through impact funds. Many of these banks have ambitious targets for climate action and focus on areas such as nature and biodiversity, First Nations recognition and respect, and affordable housing.
According to the Customer Owned Banking Association (COBA), the sector includes 53 credit unions, building societies, and mutual banks, collectively known as the "fifth pillar" of Australian banking. While the total assets of the sector are valued at around $150 billion, it represents only a small fraction of the assets held by Australia's largest banks.
Customer-owned banks often provide better rates on savings accounts and home loan products due to their competitive nature and focus on attracting customers. They also tend to have faster turnaround times for loan approvals and pride themselves on innovative digital banking experiences.
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Customer-owned banks' customers
Customer-owned banks in Australia are able to pursue a balance between profit and purpose by answering to their customers, instead of external investors. Customers of these banks are also their owners and part of the community that owns the bank. They are also known as members or mutual shareholders in the institutions.
These banks typically include credit unions, building societies, and mutual banks, and were often founded to provide banking services to a particular profession, such as teachers, police, etc. The Customer Owned Banking Association (COBA) represents 53 credit unions, building societies, and mutual banks in the Australian mutual or cooperative banking sector. Collectively, Australian customer-owned banks service 4.6 million customers, with total assets of over A$138 billion.
Customer-owned banks focus on areas that are important to their customers, such as climate action, nature and biodiversity, First Nations Recognition and Respect, and affordable and accessible housing. For example, Bank Australia, a customer-owned bank, has a net zero by 2035 target and contributes to a conservation reserve in Western Victoria.
Customers of customer-owned banks may also benefit from better deals and rates on savings accounts and home loans, as smaller banks try to attract customers. These banks also tend to be more prolific in giving back to the community.
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Customer-owned banks vs. major banks
Australia's banking industry is notable for the small number of large banks in the market. The country's banking sector is dominated by 'the big four' banks, which are incredibly large and have a huge number of staff and branches.
Customer-owned banks are an alternative to these major banks. The Customer Owned Banking Association (COBA) represents 53 credit unions, building societies, and mutual banks that constitute the Australian mutual or cooperative banking sector. Customer-owned banks service 4.6 million customers or 'members' (who are mutual shareholders in the institutions), with total assets of over A$138 billion.
Customer-owned banks are able to pursue a balance of profit and purpose because they answer to their customers, not external investors. Each member has an equal shareholding of the bank, regardless of the size of their loan or deposits, and these banks do not have shareholders. All profits are returned to customers in the form of competitive rates, fair fees, and quality products and services. Customers get a say in where the bank invests its money and which issues it supports through its impact fund.
Customer-owned banks offer the same products and services as major banks, including home loans, personal finance, term deposit accounts, and credit cards. They also have the same regulations as other banks and lenders, adhering to the Banking Act 1959 and being enforced by the Australian Prudential Regulation Authority (APRA). Deposits up to $250,000 are covered by an Australian government guarantee.
Customer-owned banks typically offer better interest rates than major banks, with lower fees. However, they may only deal with customers who have a good deposit, a clear credit history, can provide complete evidence of their financial situation, are Australian citizens, and work either full or part-time.
Major banks offer the convenience of more physical branches and staff, as well as a one-stop shop for a wide range of financial services. They also provide easier access to ATMs for withdrawing and depositing cash.
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Frequently asked questions
As of 2025, there are 53 customer-owned banks in Australia, according to the Customer Owned Banking Association (COBA).
Customer-owned banks are not listed on the Australian Securities Exchange (ASX) and are instead owned and controlled by their customers, who are considered shareholders in the bank. Each member gets one vote on the bank's governance, including the selection of board members.
Some of the largest customer-owned banks in Australia include Great Southern Bank, Heritage Bank, RACQ Bank, Bank First, Teachers Mutual Bank, and P&N Bank.
