KPMG and the Customer Owned Banking Association, Naracoorte Community News

Relative to their financial footprint, customer-owned banks provide support beyond their size to local communities and make a significant contribution to the national economy, according to new research commissioned by the Customer Owned Banking Association (COBA).

The KPMG report Sector Impact Assessment of Customer Owned Banking in Australia found that the 61 customer-owned banks have five million customers and represent 70 per cent of Authorised Deposit-taking Institutions (ADIs) in the Australian market. And despite their relatively small share of market assets ($158.8 billion compared to $4,370 billion for the major banks), the contribution of customer-owned banks to people and communities is proportionately greater.

The report found customer-owned banks punch above their weight because they:

• Are considered the primary financial institution of more than 10 per cent of the adult population, and make up 5.6% of mortgage lending, well above their 3.5 per cent share of overall market assets,
• Provide unparalleled demand for skilled employees in regional locations, and
• Actively contribute in a disproportionate manner to sector-based and geographic communities through generous donations to charitable organisations and community sponsorships.

Minister for Regional Development, Local Government and Territories, and Member for Eden-Monaro, the Hon Kristy McBain MP, said the report recognises the strong investment of customer-owned banking institutions in regional Australia. “We’re seeing more branch closures in our regional communities, which has significant economic and wellbeing impacts on customers and restricts access to financial services,” Minister McBain said.

“But this report shows customer-owned banks are actively working with regional communities to enhance their services, and this investment is improving community cohesion and engagement, creating jobs and skills opportunities, boosting local economies, and ensuring that local businesses can access the services they need to operate.”

KPMG Australia Partner and Chief Economist, Dr Brendan Rynne, said customer owned banks occupy a unique position in Australian banking. “While collectively relatively small when measured by customer numbers, assets, total loans and revenue, Australia’s mutuals sector is large when measured by number of banks, branch footprint, and its presence in regional locations,” Dr Rynne said.

“Customer-owned ADIs are considered the primary financial institution by over 10 percent of the adult population and provide an unparalleled demand for skilled employees in regional Australia.”

COBA commissioned KPMG to measure the contribution of customer-owned banks to their local communities.

Almost three-quarters of the customer-owned industry participated in the research, representing a broad spectrum of the industry.

“Credit unions, building societies, and mutual banks are well known for putting customers first and giving back to communities, however we wanted to go beyond anecdotal evidence to truly quantify the impact our members are making,” said COBA Chief Executive Officer, Michael Lawrence.

“These findings provide strong empirical evidence of the extent to which our members put people before profits. Our sector has a large and growing footprint in Australia, as customers realise the benefits of banking with purpose.”

Strong branch network support jobs

Despite the shift to digital banking, customer-owned banks have maintained a strong branch network and continue to hire more Australians to support their members.

With 720 branches throughout Australia, the sector operates 18 per cent of total bank branches and more than one in five branches in regional areas, compared to the sector holding 3.5 per cent of total bank assets. This represents a significant investment in inperson banking services.

Donations and volunteering

The analysis shows that customer-owned banks also contribute strongly to the communities in which they operate through generous donations and volunteering.

KPMG found the sector distributes around $6 per member per year to charitable organisations and community sponsorships. With a membership of around five million, this is equivalent to about $30 million injected directly into the community. This compares favourably for instance to the four major banks. Analysis suggests that their financial community contributions are circa $2 per customer on average.

Model boosts service and pricing, supports everyday Australians in home ownership

The report found that customer ownership translates into better service and pricing for customers, including an implicit significant lending rate subsidy to members. KPMG estimates this subsidy to equates to a 0.3 per cent discount to the market interest rate – or more than $1,500 in interest annually on a $500,000 mortgage.

For more information contact Gemma Harris gharris2@kpmg.com.au or Phil Shepherd pshepherd2@kpmg.com.au.

This article appeared in the Naracoorte Community News.