Macquarie targets full-service banking with investment in a core banking system

Macquarie Group surprised the market yesterday with the news that it was in the second year of a five-year program to build a core banking system. The A$250 million project will give Macquarie the technology to compete as a full-service retail and business bank.

Macquarie's group head of banking and financial services, Greg Ward, said Macquarie did not currently have a core banking system. It is installing an SAP system.

Ward said the project was going well and could be finished in four years. The first new product to run on the system will be a transaction account, which the bank is trialling now and hopes to launch in the middle of the year.

"It will have real-time transaction processing. Clients want that and the regulators want that," Ward said.

He said he was anticipating a pick-up in deposit inflows when the new system allowed Macquarie to offer a full product suite.

The group is also investing in digital banking services.

"We don't have a branch network, so growing customer engagement through digital channels is a big opportunity for us," Ward said.

The focus of development will be the local market. The group has tried a number of banking ventures overseas, including mortgage businesses in Italy and Canada, without success.

Over the past few years it has made 16 "exits" from offshore banking businesses.

Another area of development will be finding more institutional partners. Ward said 90 per cent of Macquarie's bank products were sold through intermediaries. These include brokers, such as Yellow Brick Road and Aussie.

Last year the group took over as Woolworths' credit card partner. Ward said this type of business "was a focus".

In business banking Macquarie employs a specialist strategy, catering to business segments where it feels it has expertise. These include strata managers, real estate agents, insurance brokers, accountants, financial planners, insolvency practitioners and lawyers.

"We are banking about 80 per cent of the country's strata managers. It would be fair to say that anyone in that industry who wants advice on their banking needs would come to us," Ward said.

The business loan book has grown from $3.8 billion at the end of March last year to $4.6 billion at the end of December.