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Banking Newsletter - December 2013

In this edition we cover social media risks, customer value proposition in a digital age, dividend washing, major banks and mutuals 2013 performance.

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Banking Newsletter - December 2013

Mutuals get tech-savvy 

It hasn’t been a great couple of years for Australian credit unions, building societies and mutual banks (the Mutuals). Costs of bad debts rose, capital levels increased, total members dropped by 1.3 percent and total branches fell by 3.6 percent.

Not that it’s all bad news, capital levels remain high with an average capital adequacy ratio of 17.9 percent and deposits and net assets grew by 2.6 percent and 6.3 percent respectively.


Most importantly, however, is the fact that during the past year there has been less asset growth and operating profits after tax declined by 1.3 percent.


All of which are clear signs that the industry is facing a series of complex challenges.
Not only are the Big 4 banks securing profits year-after-year but are increasing their investment into technology and social media. The Mutuals cannot afford to fall behind. They need to look closely at the ongoing relevance and purpose of their branches, the need for innovation and collaboration to grow, and the necessity of retaining and expanding their youth market.


Today, however, Mutuals remain a good distance behind other financial services institutions when it comes to technology and engaging their audience through social media. Thankfully, they’re investing in closing that distance.


This is one of the key themes identified in KPMG’s Financial Institutions Performance Survey - Mutuals 2013 (which includes financial performance analysis of nine building societies, six mutual banks and 52 of the largest credit unions authorised by APRA).


Put simply, technological innovation provides the sector with its greatest opportunity, whether through new products or the ability to reach more people in more varied locations. It is an area where the sector is working hard on all aspects of its business model from the front to backend of operations.


A snapshot of their activities (as shown in the Mutuals 2013 survey) over the past year highlights their efforts to keep both the Big 4 banks and each other in sight:

  • There was a 111 percent increase in Mutuals advertising their social media presence on their website.
  • The industry continued to invest in mobile banking with 74 percent expecting to spend more on mobile technology in 2014.
  • Mobile applications are on the increase with 124 percent more than last year.
  • Modernising branches is a focus with 30 percent considering stabilising or increasing branches next year. Improvements include implementing a new look and feel, greater use of technology, cashiers without windows, using electronic cash deposit and withdrawal boxes, and the integration of financial planning services.


There is no doubt that technology offers both risk and growth potential. With the right capabilities in place, they can better satisfy their existing customer needs while reaching new geographic areas (and customers) without having to build physical store fronts.
And yet this is essential for Mutuals to stay competitive and lean.

 

By continuing to focus on innovation, productivity improvements and cost reduction, they can move forward in a stronger position than ever before.

Peter Russell

Partner, National Head of Mutuals

parussell@kpmg.com.au

+61 2 9335 7731

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 In this issue

 

Mutuals Survey 2013

Mutuals Survey 2013
An analysis of the results from KPMG's Credit Unions and Building Societies (Mutuals) survey for 2013.

Video: Mutuals Survey 2013 summary

Video: Mutuals Survey 2013 summary
Peter Russell, KPMG's Head of Mutuals and Claire Gilmartin in KPMG's Financial Services practice present the key findings of the Mutuals Survey 2013.