Australia’s Banking Duopoly: The Big Four and the Future of Competition (2025)

For decades, the phrase “the Big Four” has defined Australia’s banking landscape. Commonwealth Bank, Westpac, NAB, and ANZ have wielded enormous power, shaping everything from home loan rates to savings account yields. This duopoly—or more accurately, oligopoly—has drawn criticism for stifling competition and innovation. But in 2025, with fresh regulatory reforms and digital disruption, the sector is facing its most significant shake-up in a generation.

What Is a Duopoly, and Why Does It Matter?

In economics, a duopoly describes a market dominated by two main players. In practice, Australia’s banking sector has operated as an oligopoly, with the Big Four holding over 75% of home loans and deposits, according to the Australian Prudential Regulation Authority (APRA) Q1 2025 data. This concentration has delivered stability—but also led to uniform pricing, limited customer choice, and slow digital innovation until recent years.

• Pricing Power: The Big Four have historically set similar interest rates, making it tough for smaller banks and neobanks to undercut them.

• Barriers to Entry: High compliance costs and strict capital requirements have made it difficult for new entrants to gain traction.

• Customer Loyalty: Most Australians still bank where their parents did, further reinforcing the incumbents’ dominance.

2025: A Tipping Point for Competition?

This year, several forces are challenging the traditional duopoly:

• Open Banking Expansion: The Consumer Data Right (CDR) regime, expanded in 2025, now requires all banks (including the Big Four) to share customer data with accredited fintechs upon request. This has made it easier for customers to switch and compare products, with over 2.5 million data-sharing consents issued in the first half of the year.

• Buy Now, Pay Later (BNPL) Regulation: New ASIC guidelines and responsible lending obligations for BNPL providers are levelling the playing field, forcing banks to rethink their credit strategies.

• Digital-First Challengers: Neobanks like Up and digital arms of regional banks are attracting younger customers with slick apps, instant account opening, and competitive rates. While some early neobanks have exited the market, survivors are scaling up fast in 2025.

• Superannuation-Funded Competition: Major industry super funds are now backing digital lending startups, providing fresh capital and alternative mortgage products that bypass traditional banks.

Real-world example: In April 2025, a Melbourne-based fintech, Vaulted, launched a home loan product with a fixed rate 0.35% below the Big Four average—made possible by CDR-enabled data portability and wholesale funding from an industry super fund.

Policy Moves and the Path Forward

The Albanese government and APRA have signalled a willingness to go further. Proposed policy updates include:

• Banking Competition Taskforce: A new taskforce is reviewing vertical integration and the role of big banks in mortgage broking and insurance, with a report due by December 2025.

• Deposit Guarantee Review: There’s growing debate about extending the Financial Claims Scheme cap (currently $250,000 per account-holder) to encourage deposits with smaller institutions.

• Regional Bank Closures: With more than 100 regional branches closed since 2023, policymakers are considering incentives for digital-only competitors to serve rural Australians.

These moves aim to foster a more diverse ecosystem, but the entrenched power of the Big Four remains. As of June 2025, they still command more than 70% of the mortgage market, though their share is slipping—down 4% from two years ago.

What Does This Mean for Everyday Aussies?

For consumers, the slow erosion of the banking duopoly is already bringing benefits:

• Better Rates and Offers: Increased competition means more aggressive cashback offers, lower home loan rates, and higher introductory savings rates.

• Faster, Smarter Banking: Digital challengers are forcing incumbents to upgrade their apps, speed up loan approvals, and offer more personalised products.

• Power to Switch: Open Banking makes it easier than ever to compare and switch accounts with just a few clicks.

But beware: with more choice comes the need for careful comparison. Not all flashy fintechs are created equal, and some may not have the staying power of the Big Four—so always check licensing and security credentials.