Mutual sector struggling for growth

Australia’s credit unions, building societies and mutual banks delivered a vastly different result to the major banks this year. Operating profit after tax for the mutuals fell by 1.5 percent continuing a three-year trend.

Faced with a perfect storm of increased competition for home loans, cheap funding from wholesale markets, continued low interest rates and the need to reinvest in new technologies and capabilities, the industry has undoubtedly reached an inflection point.

The advent of technology and the rise of social networks has fueled a shift towards a customer-led economy. Customers are now able to access information anytime and anywhere, which in turn expands choice for them and increased competition for the customer’s dollar. The one-size-fits-all approach no longer works in the age of all things internet. Customers are not just spoilt for choice, they are also on a constant lookout for the next offering that meets their unique needs.

There is no question that the industry needs to transform itself to attract new and younger customers. The mutuals have taken first steps through technology and innovation by upgrading online banking and mobile services. But more needs to be done to show their customers that they are indeed offering a unique value proposition, different to that of the major banks.

To create customers and win their loyalty in today’s highly competitive market, the organisation that earns the customer’s dollar is the one that manages to meet the customer’s needs seamlessly. And as customer-owned businesses, the mutuals are uniquely differentiated and well placed to do just that.

Mutuals Industry Review 2014
Press Release
 
Peter is the author of this survey, which examines the performance and role of the mutuals in Australia’s financial services sector for the financial year ending 30 June 2014. It considers financial performance, as well as responses to a qualitative questionnaire covering the risks, challenges and opportunities facing the industry.
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