11 January 2019
Forget the hype about neobanks – the mutual sector already provides a perfect alternative to the big banks that’s truly customer-focussed, Heritage Bank CEO Peter Lock said today.
Mr Lock said discussion about how the Royal Commission would impact the banking sector had generated a lot of hype about people turning to neobanks or digital banks, rather than the big banks.
But Mr Lock said neobanks could turn out to be “wolves in sheep’s clothing”, as many were being founded by big investors whose appetite for profit was just as strong as the big banks themselves.
Mr Lock said the neobank hype paid a disservice to the capabilities of the mutual sector, which already provided a proven alternative that gave customers the kind of satisfying banking experience they were seeking.
“More than 4 million Australians bank with a mutual, and customer-owned institutions hold almost $116 billion in total assets,” Mr Lock said.
“Forget the hype about neobanks – mutuals are the tried and tested alternative.
“Unlike many neobanks, mutuals aren’t owned by big investors looking to make a profit. If you’re turning to them to escape the profit-maximisation excesses of the big banks, then you should think again.
“There’s nothing that digital banks and neobanks offer that customer-owned institutions such as Heritage Bank don’t already offer to people frustrated by the listed banks.
“Customer-owned banks offer market-leading technology, along with great service, highly competitive pricing and a commitment to the best interests of the customers.
‘Our customer satisfaction ratings are way ahead of the big banks and we aren’t a purely digital platform that is based around technology.
“At Heritage Bank, and the other large mutuals, you get digital capabilities but also branch networks and access to locally-based people who can help sort out any issues you might have.”
Mr Lock said people needed to understand that the customer-owned banks operated on a very different model to the listed banks, and did not have the same profit maximisation incentives that generated behavior called out at the Royal Commission.
“Regardless of their rhetoric, the listed banks face an inherent conflict between the interests of their customers and the interests of their shareholders,” he said
“At the end of the day, the listed model exists to serve their shareholders above all else, not customers. They maxmise profit to pay their shareholders the best dividends they can.
“The mutual model is the opposite – we exist only to serve our customers.
“We don’t pay dividends to shareholders. We keep any profit we make and put that back into supporting the business and giving customers great value.”