2020 saw Australia’s mutual banks, building societies and credit unions (the ‘Mutuals’) record total asset growth similar to 2019, as the sector continues its focus on their ‘customer-centricity’ and trust and loyalty within their communities despite the challenging operating environment.
Bushfires, floods and COVID-19, alongside the continued competitive pressure of a low interest rate environment, were all reflected in increased loan loss provisioning and higher increase in investment in people and technology. As a consequence, financial results of the Mutuals for 2020 were impacted. At the same time, the financial services industry more broadly continues to face high levels of political, regulatory and media scrutiny.
Front of mind for Mutuals in this challenging environment is how best to leverage their member and community based trust and agility in order to remain resilient in the face of these headwinds, and how to transform the business with a focus on customers’ needs. Mutuals have been focusing on a number of factors impacting their businesses over the past 12 months including the operational impacts arising from the rapid shift to remote working, taking advantage of access to the Reserve Bank of Australia’s Term Funding Facility and the lower rate funding this provides, and the need for greater online presence for their customers.
The survey has also highlighted 7 current and emerging topics that are front of mind for a Mutual, including:
|1.||Regulatory Resilience – Race to compliance – How can Mutuals reprioritise efforts to respond to amendments to the regulatory change agenda? What are the different strategies to respond?|
|2.||Operational Resilience – How do Mutuals remain operationally resilient in the face of a global pandemic, and other challenges?|
|3.||Transformation and Simplification – What are the next steps and priorities in the Mutuals growth and transformation journey? Where should Mutuals focus in order to simplify the customer experience and enhance core capabilities?|
|4.||Cost Optimisation – What levers are available for Mutuals to pull to optimise their cost base, whilst remaining agile? When should these levers be pulled to remain resilient?|
|5.||Trust agenda in unprecedented times – How can Mutuals use their existing bond with the customer and community to navigate challenges together and with the customer?|
|6.||Evolving Customer Behaviour – How are customer behaviours and preferences evolving during COVID-19 and which features will persist beyond the pandemic?
Increasing focus on Environmental, Social and Governance (ESG)
Watch our report contributors speak to their respective observations on the Mutual sector and the broader banking sector overall.
1Loan deferrals calculated based on APRA’s Temporary loan repayment deferrals due to COVID-19, June 2020.