7 reasons why you should switch to ethical banks

Our financial choices can create positive change, both for your personal financial wellbeing and the world around us. 

With a staggering 40% of Australian’s still with the same bank they signed up with as a child, the in-school banking programs employed by the major Australian banks have proved to be incredibly enterprising marketing tools. Having seared their brand’s legacy in customer’s minds, the major retail banks have ensured the ‘if it’s not broke, don’t fix it‘ trope rings true.

But with the glaring issues circulating the major Australian retail banks, funding child exploitation through failing to obey anti-money laundering and counter-terror finance laws and over 35.5 billion dollars loaned to fossil fuels, it’s time for action. 

Don’t get me wrong; the simple changes we’re already making as ethical consumers are positive steps forward, as every little bit counts. However, switching to an environmentally-friendly fund while getting a better deal and giving back to the community isn’t as difficult as it seems.

What is an ethical bank?

Simply, banks pay clients (by giving interest) to hold their funds whilst charging others more interest to borrow said funds; in other words, selling money for profit. The issue here isn’t the profit itself, but how banks use it. Non-ethical banks use these profits to fund industries that potentially do not line up with our own beliefs and values. However ethical banks function to beyond their ‘socially and economic function to be ethical in some way,’ usually by way of following a form of socially and/or environmentally conscious lending criteria. 

Why go with ethical banks?

We make hundreds of choices daily, primarily motivated by an ingrained value system. Suppose it encourages us to buy recycled bin bags at the supermarket or take the bus instead of driving. Does it make sense for us to be paying for these goods with banks that invest in fossil fuels? It seems obvious, putting it this way, that we choose a different financial provider. However, what are some of the other reasons we should change to an ethical bank, and how is it financially beneficial? 

1. They’re transparent about where their profits are going.

Transparency is one of the most obvious reasons to switch to an ethical bank. If you’re aware of where your bank’s profits are going, then the risk of your funds being invested in a cause that doesn’t align with your values is greatly diminished. To find out exactly what your current bank is investing in or loaning to, you can check out Market Forces, a website designed to expose institutions financing environmentally destructive projects. If you’re after advice on which ethical institution might be best for you, especially when it comes to your home loan, check out the link on our homepage.

2. Their customers are some of the most satisfied

If spectacular service is what you’re searching for, look no further than a mutual (ethical) bank. They took the top 5 positions for customer satisfaction in the most recent Roy Morgan Australian banking survey, and delivered the highest levels of customer satisfaction during the pandemic. They’ve also proven to be more proactive in client contact, helping the financially vulnerable find solutions before significant problems arise. 

  3. There’s power in numbers. 

The mutual banking sector in Australia is growing. In 2019 credit unions, mutual banks, and building societies (read ethicals) lent over 90 billion dollars in housing to Australians. In 2020, there were 67 customer-owned financial institutions with 131 billion in assets and 107 billion dollars in deposits. What this means for clients is that they keep the market diversified, allowing increased competition and choice for consumers. This is a good thing, as we’re both trying to do good and search for the best rate! 

4. Invest back in you and your community. 

Ethical banks are smaller because they’re customer-owned, and focus more on customer wants and needs. What this means for you is a passing on of savings (through lower fees & better rates) and a higher level of customer service. It also means the struggle between investing in customers and investing in shareholders is negated, as customers are shareholders.

5. You could get a better deal. 

If you’re with your current bank because they were who you started with, then it’s highly likely that there are other rates and products better suited to your financial needs and goals. Even if you have changed institutions recently, you may still be able to get a better and more ethical deal. Most ethical banks offer interest rates and fees lower than most retail banks on average, it make sense to see your available options.

For free advice on how to potentially get a better deal and more ethical home loan, click here

6. Feel good factor 

It’s no secret that doing good makes us feel good. After living through 2020, any chance to make a difference to the world and your community is a good thing! As a bonus, when you use a company like Benevolence Financial Group to find a more ethical home loan, you can invest back into your community through their company charity partnerships. 

7. Making the switch isn’t that hard.

One of the most significant barriers to switching financial providers is the perceived level of effort involved in the process. However it’s not that dauting considering out of three-in-five Australians who have switched banks, 67% found a better deal. 

Overall, switching to a more socially and environmentally responsible financial institution has substantial benefits for your personal financial wellbeing and the wellbeing of the environment and community around you. If you’re wondering where to start when switching banks and home loans, let Benevolence Financial Group guide you. Our free brokerage services can help you ensure you’re getting the best ethical loan for your financial needs.  

Disclaimer: The information provided is general in nature and does not constitute financial advice. Please speak to us for recommendations on your individual circumstance and requirements.