Although traditional retail banks are still the biggest players in the finance industry, there are alternatives to banks for excellent household financial services and products. Find out what banking options families have to save and grow their money.
Retail banks are profit-driven and work to benefit their shareholders, often a small group of investors. Each bank is controlled by a board of directors, who make decisions on the types of services offered and the fees charged. Its customers have absolutely no authority in matters regarding the bank’s operations.
Banks are useful in many ways – they serve anyone and everyone and they usually offer a wide range of innovative financial products and services. However, banks also charge higher fees, higher loan interest rates and impose many restrictions.
Unlike banks, credit unions are owned and controlled by their members – people who save and borrow with them. They are popular alternatives to banks for household financial services because they exist to provide affordable services to its members, who often belong to a group or association and who receive their profits through dividends and lower fees and loan interest rates.
Although smaller than banks, credit unions are found to provide excellent customer service. Figures released by Abacus – Australian Mutuals, the association representing credit unions and mutual building societies in Australia show that 85.7% of credit union members and 88.5% of building society members reported high customer satisfaction in a survey done in May 2015. Credit unions can also be more flexible and innovative. In fact, a credit union, not a bank, was the first financial institution in Australia to install an ATM and to use electronic funs transfer at point-of-sale (EFTPOS).
However, there are limited numbers of credit union branches and this can cause some inconvenience to members. And because most credit unions have no international banking ties, they are not very useful for those who travel abroad regularly.
Like credit unions, building societies are smaller, regionally based, with fewer financial products. They are customer-driven too and provide customers a strong sense of community. They have their origins in cooperative movements. In Australia, their numbers have shrunk to only nine presently due to decades of mergers and acquisitions. Even so, building societies have a big role in regional communities and have increased their commitment while bigger banks have closed down their branches and moved away.
Big banks’ aims are to make money, not to serve customers in the real sense. Not surprisingly, they have abandoned many smaller, rural areas, much to the disappointment and inconvenience of regional households. Fortunately, a few banks still care and join forces with local communities to build community banks. Often, the bank provides banking authority, financial services and products while a community-owned company runs the operation. One bank that has undertaken this challenge in Australia is Victoria’s Bendigo Bank.
Retail banks are not the only banking options for families, particularly those living in rural or regional areas. These families can consider more customer-centric alternatives to banks for household financial services such as credit unions, building societies and community banks.