Banks, credit unions, and non-bank lenders: What’s the difference?
- Australia's financial institutions generally fall into three categories: banks, customer-owned banks, and non-bank lenders.
- Banks, customer-owned banks, and non-bank lenders all compete in the home loan market, but differ in their ownership, funding and regulation.
- The best loan or savings product can come from any type of institution, so it pays to compare rates, fees and features rather than focusing on the label.
Look beyond the big four banks and Australia's financial sector quickly becomes a crowded field.
Hundreds of authorised institutions compete for savers' deposits, while thousands of lenders vie for borrowers' attention.
This means you’re spoiled for choice, but it can also be a bit confusing, not to mention overwhelming, to sort through all of your options. Thankfully, virtually every financial institution that operates in Australia fits into one of three categories.
Understanding what sets them apart can help you make sense of the market and shop with a little more confidence.
Australia's three main types of lenders
Here's how banks, mutual banks, and non-bank lenders compare at a glance:
| Banks | Mutual banks | Non-bank lenders | |
|---|---|---|---|
| Can accept deposits? | ✅ Yes | ✅ Yes | ❌ No |
| Owned by | Shareholders | Customers (members) | Private owners or shareholders |
| Can offer home loans? | ✅ Yes | ✅ Yes | ✅ Yes |
| Financial Claims Scheme (deposit guarantee) | ✅ Yes | ✅ Yes | ❌ Not applicable |
| Regulation | APRA-regulated ADIs | APRA-regulated ADIs | ASIC-regulated lenders |
What is a bank?
A bank is a financial service with an authorised deposit-taking institution (ADI) licence that allows it to accept customer deposits.
Generally, a bank pays customers interest on deposits, and uses these deposits to fund loans on which it earns interest itself, of course at higher rates. Most major retail banks are commercial, run for profit and listed on the Australian Securities Exchange (ASX). There are alternatives that aren’t, but we’ll get to that.
As of July 2026, these were the top ten biggest banks in Australia by value of customer deposits:
Rank | Bank | Value (billion) |
1 | Commonwealth Bank | $461.746 |
2 | Westpac | $360.475 |
3 | NAB | $241.518 |
4 | ANZ | $196.178 |
5 | Macquarie Bank | $112.206 |
6 | ING Bank | $56.137 |
7 | Bendigo & Adelaide Bank | $50.596 |
8 | Suncorp | $39.143 |
9 | Bank of Queensland | $31.992 |
10 | People First Bank | $17.910 |
And by the size of home loan book (both owner-occupier and investment):
Rank | Bank | Value (billion) |
1 | Commonwealth Bank | $630.50 |
2 | Westpac | $514.80 |
3 | NAB | $349.70 |
4 | ANZ | $327.80 |
5 | Macquarie Bank | $180.30 |
6 | ING Bank | $73.60 |
7 | Bendigo & Adelaide Bank | $64.40 |
8 | Suncorp | $57.10 |
9 | Bank of Queensland | $51.40 |
10 | HSBC | $34.90 |
The ‘big four’ banks
The banking sector in Australia is dominated by four institutions: Commonwealth Bank, Westpac, NAB and ANZ, often called the ‘big four’.
Almost 75% of outstanding mortgages are with one of these four, along with roughly 74% of all customer deposits. This makes Australia one of the most consolidated banking sectors in the world, which concerns some people.
In 2023, the ACCC tried to prevent ANZ from acquiring Suncorp because of the risk it would further entrench the dominance of the big four, and increase the chance of non-competitive pricing, which is bad for consumers. This decision was overturned by the Australian Competition Tribunal.
Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner-occupiers.
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Extra Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.94% p.a. | 5.98% p.a. | $2,978 | Principal & Interest | Variable | $0 | $530 | 90% |
| Promoted | Disclosure | ||||||||||
5.89% p.a. | 5.80% p.a. | $2,962 | Principal & Interest | Variable | $0 | $0 | 80% |
| Promoted | Disclosure | ||||||||||
5.99% p.a. | 6.02% p.a. | $2,995 | Principal & Interest | Fixed | $0 | $0 | 60% |
| Promoted | Disclosure | ||||||||||
5.93% p.a. | 5.93% p.a. | $2,975 | Principal & Interest | Variable | $0 | $395 | 70% | Disclosure |
What is a credit union?
Customer-owned banks, such as credit unions, building societies, and mutual banks are ADIs owned by members. They usually operate pretty much like regular banks, except there are no shareholders - they are primarily operated to serve customers, rather than generate a profit for investors.
Speaking on the Savings Tip Jar podcast, Customer Owned Banking Association Chief Impact Officer Stephanie Elliot said customer-owned banks differ fundamentally from shareholder-owned institutions because their customers are also their owners:
“A shareholder-owned bank needs to provide dividends and returns to its shareholders, which can create a conflict between what's good for the bank's owners and what's good for the bank's customers," she said.
"A customer-owned bank is different to this because it doesn't have this conflict... So there’s a fundamental difference there, because it means that these banks exist only to serve their customers. And that means that all of the profits that the bank makes are reinvested back into doing good for the customers and the community.”
Customer-owned banks can sometimes be industry-specific: Teachers Mutual Bank and Firefighters Mutual Bank are examples of customer-owned banks that only offer services to employees in their sectors.
Others, like Heritage Bank or Great Southern Bank, offer services available to everyone.
While plenty of Aussies do their banking with customer-owned banks, there’s still a way to go before challenging the majors.
KPMG's Mutuals Industry Review 2025 found the sector's assets grew to $165.8 billion, with mutual banks continuing to account for only a small share of total ADI assets.
Despite being the country's largest mutual, People First Bank's $25.3 billion asset base at June 2025 remains a fraction of the majors. Commonwealth Bank oversees more than $1.3 trillion in assets, while Westpac holds more than $1.1 trillion.
Top 10 credit unions in Australia
There are more than 70 customer-owned banks in Australia. The biggest (by total assets as of July 2026) are:
People First Bank
Newcastle Greater Mutual Group
Great Southern Bank
Bank Australia
Teachers Mutual Bank
Beyond Bank
P&N Bank
IMB Bank
Defence Bank
Unity Bank
What are building societies?
A building society is another common name for a customer-owned bank. While building societies and credit unions were once distinct categories, regulatory changes have blurred those differences, and many have since rebranded as banks.
Today, building societies, credit unions, and mutual banks all operate under the same customer-owned model, where customers are also the owners.
Are credit unions safe?
Customer-owned banks, whether a credit union, mutual bank, or building society, have to abide by the same rules as retail banks, which means they have to be just as safe.
All ADIs, including customer-owned banks, are covered by the Australian government's deposit guarantee of up to $250,000 per customer per institution. That means if you have money deposited with a mutual bank that collapses, the Government will make you whole, up to $250,000.
This is pretty unlikely though - the last ADI to collapse in Australia was Queensland Permanent Building Society in 1977.
Read more: What happens if your bank or lender collapses?
What is a non-bank?
Non-bank lenders are financial institutions that don't hold an ADI licence, meaning they can't offer deposit products. Non-bank lenders fund their loans from wholesale investors, either within Australia or overseas.
Since non-bank lenders are not ADIs, they are not regulated by APRA (the Australian Prudential Regulatory Authority). However, any institution that offers lending products still needs to abide by the National Consumer Credit Protection Act (NCCP), which is overseen by ASIC (the Australian Securities & Investments Commission).
Some non-bank lenders you might have heard of include:
Firstmac
Liberty
Pepper Money
Resimac
There aren't as many non-banks out there now compared to the 1990s and the early 2000s. Following the GFC and the resulting credit squeeze, many were forced out of the market or swallowed up by larger lenders.
Are non-bank lenders legit?
Non-bank lenders need to follow the National Credit Code, or risk the ire of ASIC. Among many other requirements, that means that non-bank lenders need to:
Display a comparison rate along with the advertised interest rate
Practice responsible lending
Have a financial hardship team available to assist struggling borrowers
There's a perception that non-bank lenders have "looser" lending standards than ADIs, but that's not necessarily true.
While some are more flexible with who they lend to, such as self-employed workers and those with fluctuating credit histories, it is still within a non-bank lender's best interest to have strong lending standards.
Some non-bank lenders often have stricter standards than many ADIs. For example, many non-bank home loans are restricted to borrowers with a deposit of at least 20%.
However, some rules apply to ADIs that don’t apply to non-bank lenders. For example, the home loan serviceability buffer is mandated by APRA, so technically non-bank lenders don’t need to stress test loan applications like this (although many still do to meet responsible lending obligations).
Another example is the "speed limit" APRA introduced in 2014 that restricted the amount of investment home loans that ADIs could issue. This forced many ADIs to hike interest rates on investment home loans. But since these restrictions did not apply to non-banks, many non-bank lenders were able to maintain competitive interest rates on investment home loans.
Should you choose a bank, mutual, or non-bank lender?
There's no definitive answer to which type of bank or lender is better since no two banks or lenders are the same - no matter if they're both retail banks, customer-owned banks or non-banks.
When looking for great-value loans and deposit products on the market, you'll see a mixture of retail banks, customer-owned banks and non-banks all offering some of the best interest rates. See for yourself:
Competition in the market forces institutions of all types to offer value to customers - otherwise you’ll just go somewhere else. It’s smart to focus on comparing financial products by rates, fees and features, rather than the type of institution offering it.
Savings.com.au's two cents
At the end of the day, the organisational structure of your financial institution should be largely irrelevant. The main thing you should be focusing on is what you're after in a product, whether that's good rates and fees, convenience and good online functionality, or a combination of everything.
Taking the time to explore the entire market, and compare all the various options available to you, can make a big difference to your wallet.