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Connexus : Issue 37
Queensland Teachers' Credit Union (QTCU) prides itself on being an early mover. It was one of the first financial institutions to have ATMs. More recently, it was one of the first to offer loans that track the Reserve Bank's official cash rate. Now the Brisbane-based credit union is seeking to become Australia's first mutual bank and has applied to the Australian Prudential Regulation Authority (APRA) to change its name to QT Mutual Bank. While some other credit unions are taking a wait-and-see approach on the mutual bank concept, QTCU CEO Mike Murphy is in no doubt. "We believe it's the right way forward for our organisation," he says. QTCU's members are backing the move. At a special general meeting in June, 96.49 per cent of those voting were in support of the name change. Murphy says becoming a mutual bank is crucial to QTCU's plans to evolve and grow as it takes on the major banks and strong Queensland banks such as Suncorp and BOQ. "We want to attack their market share and we believe this gives us the best opportunity to create awareness and attract additional members and business to the organisation." The mutual bank move is part of a broader industry discussion over branding strategies and whether terminology such as 'credit union', 'mutual' and 'authorised deposit- taking institution' simply confuses the general public. Abacus is backing the mutual bank term and is particularly opposed to the unfashionable ADI tag. "The problem with the ADI term is that it has no resonance in the community. It doesn't mean anything to anyone," says Abacus CEO Louise Petschler. "It's a real barrier for our mutual member organisations because they're lumped in as non-banks when, in fact, they are highly-regulated banking institutions." Abacus has called for a switch to a term such as 'authorised banking institution' to ensure potential members of credit unions and building societies know "we've got the same standing as the banks in terms of regulation and banking". "So far the government hasn't accepted that proposal, but it has had a look at the restrictions around use of the term 'bank' by ADIs," says Petschler. Sticking point A sticking point with plans to allow credit unions and building societies to become mutual banks is a stipulation that an institution must have $50 million in tier-one capital to qualify. It's a hurdle that Petschler says is "way out of date" given today's harmonised, Basel-compliant financial system. While arguing the move is an individual branding decision that will appeal to some institutions, she acknowledges that it poses challenges. "We have 4.5 million members now who made a deliberate decision not to be with a bank, to do their banking with a credit union or building society, and the challenge is redefining what we mean by a mutual bank and mutual banking so we don't look like carbon copies of the big banks." CUA, the nation's largest credit union, is closely monitoring the debate. www.abacus.org.au 21 Connexus MARKETING Campaign boosts awareness The industry marketing campaign for mutuals seems to have been money well spent. Abacus CEO Louise Petschler says the $9 million 'Comes back to you' promotion has had to stretch to cover national television and print advertising, and a range of public relations events. Now the results are starting to show. "We have seen a jump in terms of top-of-mind awareness [of mutuals] from 31 to 40 per cent through that program, and a significant increase in terms of our public profile and also market-share growth." She says the outcomes must be viewed in the context that the equivalent of less than half of Commonwealth Bank boss Ralph Norris's take-home pay was spent on the national advertising. The money for the first run of promotional work has been spent, and the next phase will depend on additional funding, she says. Getting extra funding from mutuals is a "significant ask" given that they also have to fund their own marketing. "We'll be very much in the phase of selling the benefits of the promotion and reminding our institutions why it's a great opportunity to make this kind of investment at the moment," she says. "The reality is that we have to make that kind of investment if we want to be seen as the new pillar in terms of banking competition."