Banking experts are generally supportive of proposed merger between the Greater Bank and the Newcastle Permanent but remain wary the deal could become a double-edged sword.
The two mutual banks announced on Tuesday they had signed a memorandum of understanding to explore a potential merger, possibly as soon as early next year.
The new entity would become Australia's largest customer owned bank with assets valued at $19.8 billion.
The announcement came with a guarantee that there would be no forced redundancies or branch closures for at least two years following the merger. The institutions would also retain their separate identities.
Most of the customers who took to the online discussion site Reddit to discuss the merger agreed the proposal made sense.
"As long as they stay customer-owned, this will be a big win for Newcastle. If this is just one-step in a path to listing on the stock exchange then it will be a big loss," one member wrote.
Another shared the concern about privatisation.
"Members of both should vote against this unless the demutualisation of the combined organisation is prohibited under the new constitution," they wrote.
Banking and finance expert Professor Jerry Parwada from the University of NSW's business school said customers' reservations about the long term future of the merged entity were valid, however, he said the merger made sense from a strategic perspective.
"I can understand the concerns of individual customers but in terms of the system we need to consider everything against the dominance of the big four banks (Commonwealth, Westpac, NAB and ANZ)," he said.
"At a systemic level this will give the two entities some scale amongst very small banks."
In order to put the size of the new entity in perspective against the big four banks Professor Parwada said the combined assets of Australia's customer owned banks represented about 14 per cent of the value of the smallest of the big four banks.
Dr Mirella Atherton from the University of Newcastle's law school said while the merger would bring stability, it was also likely to increase costs for consumers.
"There's a lot of positives but there is also a downside. We also need to watch how data is being used and stored," she said.
Finance Sector Union National secretary Julia Angrisano welcomed the moratorium on job cuts but said she was concerned about the future role of retail branches.
"In the last 18 months the big four banks have abandoned local and regional communities with large numbers of branch closures," she said.
"These communities rely on the mutual sector to provide them with low cost banking services that aren't driven by the need to maximise profit, and it is of great concern when member owned banking services aren't acting in the interests of their members."
"The mutual sector has been contracting in the last decade as small mutual banks continue to amalgamate in order to meet the tight regulatory framework leaving fewer small member owned services that can tailor their services to the needs of the community."
