Heritage Bank plans leap into new core banking system

Heritage Bank may be able to “leapfrog” a planned digital transformation upgrade of its own if a "merger of equals" with Adelaide-based People’s Choice Credit Union is approved.

Peter Lock.

In this week’s episode of the iTnews Podcast, Heritage Bank CEO Peter Lock discusses the pending unification of the two organisations and how the IT ambitions of both are aligned.

First proposed in 2021, it is expected the merger will result in one of Australia’s largest customer-owned banking institutions - with around 700,000 members and $22 billion in total assets.

After final approval from members, regulators and the government, the Toowoomba-based mutual plans to integrate its core banking systems with People's Choice, creating a mutual alternative to the major banks.

People’s Choice is already digitising by adopting core banking platform Fiserv and a new CRM system by Salesforce.

Lock said that, through its own process, Heritage Bank had independently also selected Fiserv as its preferred future core banking platform.

"Obviously that makes the merger a lot more attractive when we're moving toward a single platform," he said, adding that Heritage Bank would move to Fiserv "whether the merge is successful or not."

"We have made that decision that our core platform is no longer fit for the bank that we want to become, and we needed to move to a platform that was going to enable us to accelerate our digital offerings," Lock said.

“The upgrade that People's Choice are going through at the moment is the platform that we would've chosen. They'll complete that upgrade and then we [will] jump into that.

“It makes it sound very easy and I know it's not, but that's a leapfrog that we would've made anyway.

“We believe that it will enable the newly-merged entity to have a really contemporary banking platform and ancillary systems that enable us to continue to deliver the digital transformation that all banks require.

“We are confident that we'll be up the front of the pack now, not lagging behind it.”

IT integration talk

Lock said that the two organisations are having conversations about future integration strategies.

"We do have integration streams working between the two organisations at the moment in dealing with the practicalities of getting [us] operating as one bank [from] day one," he said.

He believed a technology transition would "take three or so years to do.”

"We've identified the different systems that operate between the two organisations," Lock said.

“We're at a stage now of really needing to choose which systems, apart from the core, will be the systems that we deem to be the best fit for the merged entity.

“We have to look at which ones we believe are going to offer the best outcomes for the target markets that we're aiming for."

That would mean picking one product origination platform, one credit risk management system, one set of fraud protection systens, one customer relationship management system, one credit framework, and more.

“We will move to one single operating system, one set of procedures and one platform… the synergies that come out of that are where the benefits of the merger are found," Lock said.

Growth strategy

The merged entity has ambitions to grow its base from 770,000 members to "1 million, and then further.”

“To do that, we've got to have the types of products and the channels that will be attractive to new members, as well as being adaptive to our existing members," Lock said.

Lock hopes a new core banking platform will help attract a younger customer demographic, while keeping its existing customer base happy.

New CIO

Whilst the new board and executive structure of the proposed merged entity has been announced, with Lock staying on as CEO of the new entity, he added that a chief information officer (CIO) position is currently in recruitment and should be announced around the same time as final merger approvals.

Lock also said once approvals are in place, an “IT bridge” will be implemented between the two organisations' systems so members can continue to bank seamlessly.

“It's just whether they can come in and start doing transactions under the signage of the other bank, but all normal banking services from both brands will continue as normal.”   

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