How Bendigo is finding its inner challenger to the big banks
Marnie Baker has a plan that will give the regional bank a chance to be all things to customers – and shareholders.
Bendigo Bank is the product of as many as 80 mergers over a period of more than 160 years.
As a rule, even the most simple bank acquisitions take many years to work through. This suggests that on the averages, Bendigo didn’t get around to merging the last one before a new opportunity came its way.
This has left the small bank with massive duplication, too many brands, excessive systems that don’t work together and a lender that is labour-intensive where bigger rivals have automated long ago.
Now it’s up to Marnie Baker to sort it out.
The Bendigo chief executive wants to give her regional bank a chance of being its best self. And with digital banking tools and cloud computing now readily available, it has a shot.
Bendigo “is the only credible challenger to the majors”, Baker says. No other small bank has the reach or the business mix of Bendigo, and now it’s time to sweat the business.
But it will come at a cost, both in terms of investment dollars and management time.
And this is the challenge. Where bigger rivals have struggled to clean up and simplify, can Baker turn this community-minded main street bank into a fast-moving digital lender?
The Bendigo boss issued an update on her strategy to investors in Sydney. Here the message revolved around three areas: reducing complexity, investing into the bank where it is needed while bringing its fiercely loyal customers along.
Baker has been busy. In four years, she has slashed the number of costly core bank systems from eight to just three. This will move to one next year. She has halved the number of IT applications to 328, with more to come and nearly half of the bank’s systems are running on a lower cost and more powerful cloud network
A big part of Baker’s work is cutting Bendigo’s myriad brands, which often operate on their own separate systems. Delphi Bank (the former Bank of Cyprus Australia) are Alliance Bank have been decommissioned. The next brands in her sights are Rural Bank and Adelaide Bank, which are quietly being retired.
Bendigo has used Adelaide solely in the mortgage broker channel. All mortgage broker sales are now being moved across to Bendigo’s ultra-fast digital loans platform. Early experience has conditional mortgages under the Bendigo brand approved in just six minutes. Unconditional loans, which generally need a basic check, can be approved in 90 minutes, giving Bendigo some of the fastest turnaround times in Australia.
It has already approved $200m of mortgages on the new fully automated platform, which is gradually being rolled out to broker networks. The early experience from one lending aggregator Finsure has seen the volume of loans increase from 1-2 loan approvals per day under the Adelaide brand to now running at 5-10 per day on the new system.
Up and away
In other areas, Bendigo is making another play at business and agribusiness banking – two areas Baker admits it has neglected in recent years. Bendigo’s heartland market is small-to-mid business, smaller commercial property, and farming, and it is now adding the untapped potential of microbusiness. Again this is being built on a new digital platform and the strategy is being overseen by Adam Rowse, an Australian, who most recently oversaw thousands of bankers heading up small to mid-sized business banking in London for UK giant Barclays.
Finally, Baker took a chance to showcase the neobank Up. This is one brand that is likely to stay. Up already has 840,000 customers after just six years. You probably haven’t heard of it because it is aimed squarely at people under 30, and nearly all of those customers are new to Bendigo.
The same customers are growing up and starting to take out mortgages, with $370m in home loans settled, with much of that time the lending platform was in soft launch and testing mode.
However, the real play is in the sticky deposits it offers, with more than $2bn now on the platform.
They are small but significant steps in the tech transformation of Bendigo.
However, the perennial challenge for the bank hasn’t changed. That is how to generate competitive return on the shareholder funds it invests.
Baker says the payback will come in the meaningful productivity gains. And that’s about having a cost base “that allows you to make an appropriate return for sustainable growth”.
So too, Bendigo will be able to serve its customers better. Importantly, it will help deliver sharper pricing.
Combined, “that’s going to open up and unleash the opportunity,” she says.
Originally published as How Bendigo is finding its inner challenger to the big banks
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