Westpac is refunding about $65 million to 200,000 customers who did not receive discounts on insurance and other products to which they were entitled.
The customers with Westpac premier advantage packages - or advantage packages with St George, BankSA, or Bank of Melbourne - did not receive the proper discounts on home and contents insurance, and term deposits.
Westpac notified the financial regulator and is contacting customers over an issue it says dates back to 2010.
Westpac retail boss George Frazis said all benefits are now applied automatically, removing the possibility of future errors.
"Westpac apologises unreservedly for a process that did not suit customers," Mr Frazis said.
"By automating the discounts, we have ensured that our customers will not be affected in this way again."
Customers automatically received discounts on core products such as home loans, credit cards, or transaction accounts, but ancillary products fell through the cracks.
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