CUSTOMER-owned banks in Australia provide greater support to local communities beyond their size, and contribute significantly to the national economy according to a new report.
The KPMG report commissioned by the Customer Owned Banking Association found that the 61 customer-owned banks in Australia represent 70% of the Authorised Deposit-taking Institutions (ADIs) in the country, and have five million customers.
Despite their relatively small share of market assets, which amounts to $158.8 billion compared to $4.37 trillion for major banks, the contribution of customer-owned banks is proportionally greater.
The report also states that customer-owned banks are considered the primary financial institution by over 10% of the adult population, and they make up 5.6% of mortgage lending, well above their 3.5% share of overall market assets.
Additionally, the report found that customer-owned banks actively contribute in a disproportionate manner to sector-based and geographic communities through generous donations to charitable organisations and community sponsorships.
The findings of the report were welcomed by the Minister for Regional Development, Local Government and Territories, Kristy McBain, who said that the report recognises the strong investment of customer-owned banking institutions in regional Australia.
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% of total bank branches and more than one in five branches in regional areas, compared to the sector holding 3.5% of total bank assets.
Employment in the sector grew by 4.4% between FY2021 and FY2022, with 11,200 working at a customer-owned bank at the end of the most recent financial year and earning a combined $1.24 billion in wages, the report found.
The report also 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 equates to a 0.3% discount to the market interest rate – or more than $1,500 in interest annually on a $500,000 mortgage.
COBA commissioned KPMG to measure the contribution of customer-owned banks to their local communities.