| 15.04,12. 03:27 AM |
The credit unions go bank-ward
April 15, 2012
IN a bid to attract a new customers, credit unions and building societies have become "banks" to broaden their grab for cash.
Heritage Bank, which switched from Heritage Building Society in December last year, is already experiencing a surge of inquiries about home loans.
"In February alone, we experienced an 82 per cent increase in the amount of home loan inquiries through our call centre and website, compared to the average of the previous five months," spokesman Andrew Fox said.
It is one of six mutuals to take on the bank label following approval last year from Australian Prudential Regulation Authority.
Others include Bankmecu (former Mecu), Teachers Mutual Bank (Teachers Credit Union), Police & Nurses Mutual Bank (Police & Nurses Credit Union), Defence Bank (Defence Force Credit Union), and QT Mutual Bank (Queensland Teachers Credit Union).
Financial experts believe the main reason for the switch is to increase competition and that the word "bank" leads to a feeling of greater safety and security.
"Research showed a lack of understanding about the term "building society," Mr Fox said.
"People, especially younger people, just don't know the term or think it means the organisation only does home loans. However, everyone knows and understands what the term 'bank' means."
Part of the 2010 banking reform package advised the finance regulator to fast-track the approval process for mutuals and credit unions to use the word "bank" in its name as a means to increase competition in the sector.
RateCity CEO Damian Smith said we will see most mutual banks progressively widen their eligibility so that anyone can join.
Analysis by the financial comparison website (RateCity) for The Sunday Telegraph found the six mutual banks that recently changed their names are more competitive, on average, compared to the Big Four for standard variable rates on home loans.
Mr Smith said this was good news for consumers, with the banking's "fifth pillar" providing much-needed competition to the major banks.