Regaining that competitive edge
Today, economic headwinds and geopolitical uncertainties encircle the global economy. Despite these concerns, Australia's mutuals ('credit unions') have fared reasonably well. As per KPMG's Mutuals Industry Review 2022, mutuals increased net assets by 7.8 per cent to $11.2 billion in the 2022 financial year.
But these financials alone may not paint a complete picture of Australia's mutuals: in August 2023, the credit ratings agency S&P Global Ratings detailed a range of issues, from eroding member loyalty in a price-sensitive market to a lack of cost efficiencies and digital technology investments, holding mutuals back and blunting their competitive edge.
While some of the issues have been challenged, there's no doubt a pressing need for mutuals to transform. Rapid technological advancements continue to reshape member lives, leading to evolving expectations for faster and better services at competitive price points.
So far, mutuals have remained hesitant to embark on this digital transformation journey for various reasons, some out of fear that such a venture will likely be cost-prohibitive and take inordinately long to yield tangible results.
Such a fear, however, may be far from the truth.
Dispelling myths: How SaaS can level the playing field
Evolutions of models like software as a service (SaaS) are enabling financial institutions to scale better, faster, and cheaper. Instead of a upfront heavy capital expenditure model, SaaS offers an affordable, pay-as-you-go subscription model for mutuals.
SaaS providers also take broad responsibility for technology operations, software and security updates, as well as help with operational and regulatory compliance. Beyond these advantages, modern SaaS solutions can supercharge growth for mutuals by enabling them to capitalise on new market opportunities faster, reduce member churn, and manage increasing risk and compliance requirements effectively and on time.
In essence, SaaS levels the playing field for mutuals and leveraging SaaS can help mutuals go toe-to-toe with larger banks.
Embarking on the SaaS journey
Mutuals also inherently have cost structures and priorities different from large banks, and embarking on the SaaS journey will require them to be prudent. Instead of pursuing a large-scale transformation, mutuals can consider taking incremental steps for focus areas aligned with their identified business objectives.
Identifying an institution's business objectives and building a business case for transformation is the first step. However, mutuals may not have this expertise. An experienced consulting partner can help conduct an unbiased assessment of the mutuals' readiness to embark on a SaaS journey and define goals to create, deliver, and realise value.
The next crucial step is identifying the right partner for this journey — the SaaS provider. Here, mutuals should ask themselves the following questions:
1. Is the solution market-ready for Australia, and does the provider have a proven track record in the region with knowledge and experience in implementing local market practices, interfaces, and regulations?
2. Does the SaaS provider have the capabilities to provide not just present-day services but also those in line with the continuously evolving needs of the market, regulatory compliance, and technological landscapes?
3. Does the SaaS offering provide a sandbox environment or ready reference bank set up to help mutuals familiarise, understand, and assess the system's capabilities as well as manage change better?
Lessons from successful transformations
In any transformation, it is critical to manage change. Mutuals' transformation leaders must have a comprehensive plan for the identified scope and the right metrics that align with their business objectives. Strong program management and governance are essential to keep execution on track and manage risks.
As some processes that mutuals have followed for years may not be suited to scale with SaaS, mutuals need to be open to adapt. For example, reducing variations, simplifying and standardising member journeys can lower the cost of operations. This may very well entail rethinking the entire journey, but embracing this way of working can help mutuals reap greater rewards.
Workforce adoption and usage are crucial metrics to measure successful change; mutuals must train their staff to steer them through this transformation. Knowledge management and learning environments are instrumental for effective workforce learning.
But no successful digital transformation comes without a collaborative partnership. And the key to mutuals' success lies in seeing the service provider not just as a software vendor but as an equal partner in the journey.
By embarking on a digital transformation journey with the right SaaS partner, mutuals can redefine their businesses with SaaS, be agile in responding to evolving market dynamics, and regain their competitive edge.
Krishnaswamy (Kitty) Subbarao
Global Head Product Management & Strategy, Infosys Finacle
Krishnaswamy Subbarao (Kitty) is the global head for product management of Finacle Business Unit. He has more than 5 years of professional experience at Finacle. He is responsible for conceptualizing and building next generation products at finacle. He is instrumental in progressive modernization of Finacle Platform and building new and reimagined products in the areas of origination, Asset Liability Management, Origination, Wealth Management and Treasury. Prior to Joining Finacle Kitty has worked in in financial product companies Infosys, Misys, and Intellect. He has played various roles across engineering, product management, client engagement and consulting. He has done CXO consulting engagements enabling business transformation for Fortune 100 clients. Kitty also founded two startups in the areas of Industry 4.0 and Robotic Process Automation. He holds bachelor degree of engineering from Mysore University.
Theo Albers
AVP & Head of Business – ANZ, Infosys Finacle
Theo heads the business for Infosys Finacle for the Australia and New Zealand market, supported by a team comprising of sales, business consulting, pre-sales, delivery and marketing. He comes with a strong technical background, and ample experience in complex multi stakeholder strategic delivery programs. From his many years of experience Theo has good knowledge of banking software functional capabilities, ability to design solution offerings and services to support customers strategic objectives by applying technology to address real world problems.