For decades, banks have been the bedrock of Australia’s financial system, shaping how we save, spend, and invest. But in 2025, the financial landscape is transforming at breakneck speed. New technology, regulatory shifts, and the rise of non-bank alternatives have many Australians wondering: are banks still at the centre of our financial lives—or are they being left behind?
Australian Banks in 2025: Still Dominant, But Facing Headwinds
Australia’s ‘Big Four’—Commonwealth Bank, Westpac, NAB, and ANZ—still hold a lion’s share of household deposits, mortgages, and business lending. According to the Australian Prudential Regulation Authority’s March 2025 update, these institutions command over 70% of the home loan market and remain the go-to for everyday banking. Yet, cracks are beginning to show:
- Digital challengers: Neobanks and fintechs like Up, Revolut, and Wise have captured young, tech-savvy customers with slick apps and lower fees.
- Consumer trust: After the Hayne Royal Commission and recent data breaches, trust in traditional banks is recovering, but slowly.
- Profit squeeze: With the RBA’s cash rate holding at 3.85% and fierce competition for deposits, margins are under pressure.
Despite these challenges, banks still offer unique strengths: government-backed deposit guarantees, broad service offerings, and a national branch network (though shrinking each year).
Policy Changes and Regulatory Shifts in 2025
Regulation is evolving to keep pace with a fast-changing industry. In 2025, several policy updates are reshaping how banks operate and compete:
- Open Banking 3.0: The Consumer Data Right (CDR) now lets Australians share more detailed financial data with third parties, making it easier to switch banks or get tailored financial advice.
- Branch closure rules: The Federal Government has introduced new transparency requirements for regional branch closures, aiming to protect vulnerable communities from being left behind.
- Buy Now Pay Later (BNPL) regulation: From July 2025, BNPL providers must hold Australian Credit Licences and comply with responsible lending obligations, levelling the playing field with banks.
- Digital asset custody: APRA has finalised guidance for banks holding cryptocurrencies, setting capital requirements and risk management standards.
These changes are forcing banks to innovate—whether that means better digital experiences, more personalised products, or tighter security for customer data.
How Australians Are Using Banks Differently
The way Australians interact with banks is evolving rapidly:
- Less branch, more app: Over 90% of daily banking is now done via mobile, according to the Australian Banking Association’s 2025 survey. Some rural towns have seen their last physical branch close, but digital inclusion programs are helping bridge the gap.
- Rise of hybrid finance: Many Australians now spread their financial lives across traditional banks, neobanks, and non-bank lenders. For example, a customer might keep their salary with CBA, use Up for budgeting, and Afterpay for online shopping.
- Green banking: Demand for sustainable finance is surging. Major banks have launched new ‘green’ home loans and business lending linked to emissions targets, responding to both consumer demand and government incentives.
Real-world example: Sarah, a Melbourne small business owner, uses NAB for her main business account, Xero for accounting, and a fintech lender for a quick cashflow loan—all seamlessly integrated thanks to Open Banking APIs.
What’s Next for Banks in Australia?
While banks remain crucial to the financial system, the definition of “banking” is broadening. Expect more collaboration between banks and fintechs, greater use of AI-driven personalisation, and continued debate over the social role of banks in supporting communities.
The big question for 2025 and beyond: can Australia’s banks balance stability with innovation, and keep earning customer trust in a world where finance is everywhere?
