The Community-Owned banking landscape: Leveraging technology to enhance member experience.

Australia’s banking landscape is wide and varied and the fortitude of the mutuals in a changing landscape is evident, however, so is the sector’s vulnerability. With increasing pressure from regulatory changes and limited access to ready capital highlighting limitations in transformation agility.
The digital transformation agenda of the broader financial industry emphasises how AI technology and innovative data practices can accelerate sustainable growth. However, when compared to the big banks, the mutuals ability to invest deeply in building their own technology is far less feasible.

Partnering with a technology provider enables not only smaller institutions, but those with clear strategic focus on complementary initiatives, to tap into the changing face of financial operations. Guiding them through the ‘transformation age’ and setting them up to reap immediate benefits and advantages aligned with long term business goals.

The cost of doing business
Comparatively smaller, customer-owned banks have higher Cost to Income rations (CTI) when compared with larger competitors, putting added pressure on where money and focus is invested to optimise cost efficiencies. This ‘cost’ extends beyond the monetary investment as other key principles influence efficacy, growth and successful market share.
KPMG’s Mutuals Annual Review Technology’s role in a Prosperous future, identified the key themes particular to the sector:
• Digital Transformation
• AI
• ESG
• Cyber
• Trust
• Regulation
Each of these play an important role in enabling customer-owned banks to grow sustainably, supporting their ability to maintain strong legacy while expanding into new business opportunities that advance the sector, and continue to benefit the member communities they serve.

Digital transformation and AI
Digital transformation optimises operational functions from a process and cost out perspective, and equally important keeps the organisation relevant and competitive.
Regional areas - historically the heartland of customer-owned banks - are faced with the necessity of continuing to provide a valuable service to a community that is continuously evolving in a digital-first environment.
The challenge is in balancing profitability of physical presence (branches) without sacrificing customer connection. Managing ongoing costs with providing an elevated and responsive customer experience- crucial for maintaining existing relationships and building connection for a future generation of customers.

AI fluency and integration is a key part of transformation, capable of accelerating businesses beyond rudimentary automation. Leaving the experimentation of Generative AI in its wake and reaping the reward of considered and tested machine learning to make data more accurate, actionable and auditable.
While function and tactical implementation may be nuanced, the key to increased efficiency and deepening capabilities is to access the data that technology can unlock.
Businesses with limited resources and capital, can augment their technology stack – interoperability that transforms operational processes without the need for holistic replacement of existing systems. 

Speed to market and managed integrations can directly impact business momentum and this is where AI-native technology built on open architecture principles can create immediate and lasting impact. Automated workflow is just one part of automation and activating across the whole automation spectrum can accelerate business efficiency.

Data:Unlocking the transformation ‘gold’.
Not all data is created equal; it’s simply raw information until it’s ‘enriched’.
Raw and ‘unstructured data’ is difficult to navigate, highlighting how fundamental accurate interpretation is to business efficiency.
Enriched data moves past categorisation, to deliver deep insights beyond surface-level that translate into clear, effective actions. Accelerating decisioning and expanding the value of behavioural analytics.

To be effective, data also needs to be ingested from multiple sources. One singular data source won’t give the breadth of intelligence that is required, for example, in the case of assessing serviceability for a home loan. Declared documentation is effective for an entry-level view, useful for projections and initial planning, however validated takes your data game stratospheric. 

Cyber: Protection and trust mechanisms
Cyber and trust are hand in glove, where one can directly influence the potency of the other. Take recent cyber-attacks in the financial sector that hit at the heart of trust, with the resulting business and PR fall out.
Consumers come ready-primed with hesitancy, their vulnerability exacerbated when high value assets (such as finances) are involved.
Technology that is fine-tuned to detect fraud, (most recently highlighted by the surge in liar loans) saves time which can prevent a costly and unnecessary distraction, and quarantines businesses from potential reputational damage - noting trust is difficult to retain once lost.

Regulation
The regulatory environment is constantly evolving, especially in relation to AI. Prudential requirements related to operational risk management (CPS 230) and new legislation such as reforms to the Australian Privacy Act contributing to the pressure.
Accessing technology with inbuilt compliance out-of-the-box, translates to immediate cost savings, reducing overheads with transferred responsibility to an outsourced function.

Community as a super power
Customer-owned banks are intrinsic to rural communities they serve – influencing business strategy and even product structure. The embedded level of trust, developed over generations, can be preserved through utilising the efficiency of technology to mitigate human error and effectively manage risk and compliance.

ESG principles in some part go hand in hand with the ethos of customer-owned banks. How these principles manifest will vary, with prioritisation of certifications such as B Corp - representing a commitment to fundamentally influence a ‘whole-of-business’ approach.

As the customer-owned and mutuals banking sector consolidates (which it’s forecast to do over the next 5-7 years), there will be less opportunity in market. Those that retain agency will come under additional pressure from merged entities with differentiation and advocacy becoming more valuable, particularly relevant within a financial level playing field.

Summary

The health and longevity of the community-owned banking sector depends on financial innovation and business acumen. Playing to strengths, strategic planning and investing and partnering to optimise gains (immediate and long term) could be the deciding factors in deflecting obsolescence.
Continued relevance, especially to younger, digital-native customers, depends on a robust and sustainable digital strategy.
• Market contraction; Mergers and Acquisitions are a very real challenge in the customer-owned banking sphere. Historically mergers consisted of larger mutuals targeting smaller institutions, however since mid 2021, this has shifted to see the merger activity focus on larger lenders joining forces.
• Competition; Bigger banks have both reputational and capital advantages, especially in the Australian retail banking market where $20billion dollars in total assets is emerging as the new benchmark for competitiveness.
• Regulatory requirements; Maintaining compliance can be potentially resource hungry
• Technology transformation; Increased demand and heavy investment fuelled by customer expectations for a fully-digital experience.

Tiimely launched to market with a world-first digital home loan. From a pedigree of economists and lenders, the home loan proposition positioned the technology company well to identify market opportunities and strategise long term to ensure innovation continued to deliver relevance to the financial industry.
With an AI-native approach, Tiimely has been working in tandem withAI and machine learning for more than 8 years. The impact and value have manifest beyond product innovation to influence data interoperability, helping to shape its platform technology, achieve frictionless integration and drive value from intelligent, actionable insights.

Appendix
https://fortiro.com/blog/perspective-liar-loans-responsible-lending-and-document-fraud