Customer-owned banking goes from strength to strength

Australia’s customer-owned banking sector currently consists of 82 credit unions, 10 mutual banks and 7 mutual building societies, collectively assisting the needs of more than 4 million members. Canstar caught up with the Customer-owned Banking Association (COBA) CEO, Louise Petschler, for a Q&A.

Q: In various industry surveys, customer satisfaction with their chosen customer-owned institution tends to be very high. In your experience, what is that customers love so much about the model?

A: There is something really special in knowing that you are the complete focus. There is none of the tension that the big banks have to deliver profits to external shareholders. Because our customers are our owners, we can focus 100% on their needs. That?s what drives the consistently high customer satisfaction results. You can have confidence that you won?t be viewed as just part of a profit pool – you are the focus, it?s about serving you and your community.

Credit unions, building societies and mutual banks return profits back into providing better rates, fairer fees, responsible lending and outstanding customer service.  We also give back to local communities. Our ability to focus on customers and communities means we can deliver ethical, socially responsible banking with greater flexibility for different communities. We also have a focus on local employment and investment that stimulate the local economy and support local schools, hospitals, sporting clubs and other community groups and charities.

Q: What are the biggest challenges that customer-owned institutions face in gaining market share?

A: Our biggest challenge is awareness – we still don?t have a clear and consistent profile as a category in the general community, so outside our more than four million customers there are lots of Australians to whom we are a mystery. Lots of people don?t realise we are regulated to exactly the same standard as the big 4 banks, that we are covered by the same deposit guarantee, that we have market leading pricing and full service retail banking solutions – and that anyone can join a customer owned banking institution. So that?s a big challenge for us that we need to fix.

There are other challenges, like removing the structural barriers to competition to allow smaller institutions to compete more fairly. That?s why COBA has been advocating for a stronger fairer banking system through the Financial System Inquiry.  We have taken very much a pro-consumer and pro-competition stance, including pushing for better disclosure so Australians can make an informed choice about who they bank with. Our consumer surveys have consistently shown that people are confused about the big bank sub-brands and we think there needs to better disclosure in this area.

Q: What future opportunities does technology offer for customer-owned institutions?

A: Australians are eager to embrace new payments technology which is an opportunity for our sector. People still want to bank with someone that is regulated and safe. That brings us into the mix. Digital disruption is driving mobile payment strategies and that?s presenting many new opportunities for the global customer-owned banking movement to grow. We have a tremendous national and global network we can draw on and as small, customer focused institutions we should be able to be nimble and quick in adopting new solutions. It was credit unions that introduced ATMs, EFTPOS and many other advances in Australia to serve our customers more effectively and we will continue to build on that tradition. It?s definitely an exciting time for innovation and change in banking.

Q: You have been involved in the customer-owned sector for a long time – what is it that you personally love about it?

A: I love being part of an industry that is so genuinely committed to making people?s lives better.  We aren?t here to rip you off, or take excessive profits from your community. We are here to deliver competitive, fair, ethical banking and financial services options to Australians from all walks of life that builds their financial independence. We have a clear set of values – we are democratic, transparent, socially responsible, and non-discriminatory – and that values-based model has so much to offer in financial services, where sadly we see so many examples of poor practice, greed and vested interests. And I love the people who work in our industry, they are truly passionate, committed professionals who put those values into practice day after day, it?s an honour to work with them.

Each year Canstar assess the products and services offered by many of Australia?s customer-owned banking institutions.