Now in its 38th year, KPMG’s latest review of the mutual banking sector in 2025 considers how innovation rooted in purpose can contribute to the long-term advancement of the sector.
The sector is facing continued change, the report observes, as increased regulation, higher member expectations, and tighter margins drive strategic mergers in the industry.
However, the sector remains resilient, with strong deposit growth and a continued commitment to community and member support, despite a tricky environment marked by cost-of-living pressures and economic uncertainty. In this week’s feature article, we unpack some of the key insights and takeaways from KPMG’s report.
Survey results
Surveying leaders within mutual banks, credit unions, and building societies on risks, challenges, and opportunities in the customer-owned banking sector, KPMG found almost 80 per cent are confident about their three-year growth prospects. This is compared to 60 per cent in the year prior.
Survey respondents highlighted cost reduction, as well as innovation, as the top tech challenges over this three-year period.
Meanwhile, in the near term, some 86 per cent of respondents said maintaining profitable and sustainable growth remains their top priority.
Key focus areas
In its report, KPMG identified six focus areas facing the mutual banking sector in Australia: navigating consolidation, collaboration, growth beyond margins, balancing value and transformation, digital transformation, and growing cyber risks impacting trust.
Digital transformation remains a recurring theme, with investment spend stretched on core banking and digitisation. However, by simplifying technology, digitising member journeys, and modernising core systems, mutual banks can boost efficiency and member services and stay competitive while maintaining their personal touch with members. Moreover, amid growing cyber risks, building a strong cyber culture, using AI wisely, and investing in training will help strengthen mutual banks’ resilience while helping protect members.
On the topic of AI, the report additionally notes that most mutual banks are tackling digital transformation alone. Collaboration could be the solution towards better member results, faster progress, and reduced costs.
More broadly, while deposits remain strong, traditional profits are challenged by rising competition that is squeezing margins. On this, KPMG points out mutuals are reassessing priorities, focusing on financial stability, growth, and new ways to deliver value for members.
Total asset growth
otal assets rose 6.2 per cent in 2025 to $165.8 billion, up from $156.1 billion in 2024. According to the report, this increase reflects a competitive lending environment that remains affected by declining housing affordability, economic uncertainty, interest rate pressures, elevated inflation, tariff volatility, digital disruption, and a continually evolving regulatory and compliance landscape.
In 2025, ongoing inflation in the Australian economy contributed to significant cost-of-living pressures, with an increasing number of households experiencing mortgage stress. According to KPMG’s survey respondents, the mutual banks’ structure, commitment to ethical banking, and emphasis on member experience and community engagement are important factors in maintaining their competitiveness within the wider banking industry.
The full KPMG report, as well an interactive dashboard exploring the performance and trends in the sector in 2025, can be found here.