Banking on the Community

Banking on the Community

Bendigo Bank's pioneering idea makes banking a community effortAt a time when banks in general have been receiving a bad press over fees and branch closures, Bendigo Bank has been in the news for the right reasons. In November 1997 Bendigo Bank announced its Community Bank initiative to help rural communities secure long-term branch banking services in response to the closure of country bank branches throughout Australia. When the last bank in a country town closes, the town eventually dies. Research in NSW and Queensland found that on average locals spend $4000 a year less in their home town when they have to travel to reach a bank, as they also tend to shop where they bank.

Local businesses typically lose 20 to 40 per cent of their turnover, and it often becomes unviable for them to remain open. Community Banks operate under a cooperative arrangement whereby the local community provides startup capital and pays the branch running costs, and Bendigo Bank provides banking services and support under the terms of its banking licence. Revenue is shared between Bendigo Bank and the community. The first two Community Banks opened in June 1998 in the Victorian towns of Rupanyup and Minyip.

Community Banks have the look and feel of any other branch of Bendigo Bank. In fact, their establishment has been facilitated by a major upgrade of Bendigo Bank's branch IT systems, that has been under way since 1996 in a $12 million project. The bank has rolled out the new branch delivery system at all of its 77 branches, seven Cassa Commerciale offices in mainland state capitals plus Fremantle and Carlton (which offer niche commercial banking products and services), and, at this stage, seven Community Banks. The new system runs a tailored version of Wang Global's Mosaic OA banking application and Microsoft Office products on a Windows NT 4 platform over a TCP/IP Cisco routed network.

The Mosaic OA software provides teller functions and tools for relationship banking. The bank has also deployed a distributed SQL Server application to consolidate transactions from each branch, as well as Microsoft's Exchange Server has been deployed. The branch delivery system replaces a 15-year-old branch system which used DOS-based terminals and an SNA network.

"The old system had 260 screens that the tellers would have to navigate," says David Cooper, manager information technology, Bendigo Bank. "In the new system they have been condensed down to just 30. So the real benefit is ease of use of the system. It's a very easy banking application on which to train staff.

That's been a huge advantage, especially with the Community Bank rollout." Indeed, tellers in the Rupanyup and Minyip Community Bank branches undertook only Bendigo Bank's one-day Teller Induction Course and were not required to have a banking background. And while Community Banks require no special infrastructure, according to Cooper, the branch delivery system can be tailored to a particular site very quickly. For example, there can be a different mix of tellers and ATMs, depending on demand. The bank is also installing NT4-based videoconferencing systems in the Community Banks and plans to extend this service to its own remote branches. This way, people in such locations can have access to experts, such as financial planners, without having to drive long distances when local expertise is not available.

"The fact that we had branch delivery rolling helped us in being able to set up the community branches quickly, because we included it as part of the branch rollout," adds Vicky Kelly, general manager, operations, Bendigo Bank, to whom Cooper reports. "We also have a standard platform. We decided to standardise on Windows NT and specified that when we put out the tender for the new system.

We've tried to minimise the number of platforms we have to support, because we don't have very many staff and people have to be multiskilled," she says.

Customer First

When Bendigo Bank realised it had to replace its old system -- from a risk management point of view as much as anything else -- it surveyed all of its branches to determine what they were looking for in a replacement. Kelly and her team also held sessions with different groups within the bank: such as loans, investments and electronic banking. According to Kelly, the key requirement of the new system was to streamline the teller processes so that bank staff could spend less time on pure transactions and more time developing customer relationships. The bank then put out what Kelly describes as a deliberately concise request for proposals to test the water and get ideas from vendors about what was available. Kelly received about 25 replies, some of which she says were easily eliminated because they didn't comply with what the bank wanted. An evaluation team consisting of both IT and business people further culled the replies to a shortlist of three. In the next round of evaluations, Kelly says, a key factor was cultural fit and the ethical basis of the organisation with whom the bank would be dealing. "That was weighted heavily in the last round given we had reached the point where we had three parties who could actually do the job," Kelly says. "We feel it's really important for a small organisation like ours to look for vendors we feel are trustworthy and we're comfortable working with. You can't afford to get it wrong."In October 1996 Bendigo Bank selected Olivetti's stand-alone services operation, olsy (which has since merged with Wang Laboratories to form Wang Global), to provide point-of-sale systems, hardware installation, application and infrastructure development, and ongoing maintenance services. "We generally choose major suppliers with whom we will build a relationship and can develop partnerships with, rather than just deal with them as vendors," Kelly says.

"When you deal with multiple suppliers, you spend a lot of time tying everything together and you really don't get good service, because you are only a small player."Over the next year Bendigo Bank worked with Olivetti -- as it still was then -- on developing the infrastructure -- in particular the network design -- for the new system, and on customising the application. "We appointed a project director from Olivetti to oversee the entire project and we had two distinct streams: technical and business. We always try and get the business to own the project, because from past experience, you can give them fabulous developments which they'll ignore if they weren't asked. So we got them involved early and coaxed out of them what they wanted," Kelly says. Olivetti also sat on the project's steering committee. According to Kelly, there was a clear reporting structure that was constantly reviewed and an arbitration line for solving disputes. In December 1997 the bank implemented the branch delivery system in two pilot sites. The first was at its main Bendigo branch, where it ran the new system in parallel with the old -- half the branch on one and half on the other. The second pilot site was also at a local branch of the bank. Then at the end of January 1998 the rollout started proper. The bigger branches went live initially, at a rate of about one a week. This increased to two a week and then four a week as the smaller branches came online.

The original plan was that the rollout would take 18 months; but the bank condensed this down to 12, which included the Cassa and Community branches that the team hadn't allowed for at the outset. In fact, Kelly believes that technically it could have been achieved in one month, if there had been the resources to train all the staff and ensure they were using the system correctly to maximise its benefits. According to Kelly, the branches "love the new system" and the later branches to come online were nagging to get it in.

"It's fast, it's efficient and keeps queues down, which is always an issue in the branches where they want customers to be looked after and served as quickly as possible. It also cuts down the requirement for local knowledge of where things are and frees staff up to do development work with the customer," she says. "Before the branch delivery system you could walk past a branch at 5.45pm and they would still be there balancing. Now you'll be lucky to find them there at 5pm," Cooper concurs.

Bendigo Bank has an ongoing support contract with Wang Global for the branches, and Cooper admits that they'll have to keep an eye on bandwidth and start looking at performance issues of the network, given the bank's future plans.

The Community Banks initiative continue to develop and will need to be brought online. Bendigo Bank is rolling out an Internet banking system in 1999. The bank has also entered into a joint venture with Elders in which Bendigo will offer banking expertise, products and services on Elders' premises using the bank's IT platform.

And It's on Budget

Kelly attributes the project's success to date to three critical factors. The first was the platform and the application Bendigo Bank selected to meet its needs. The second was getting user ownership of the system and not having to fight to get the users to accept it. Finally, it was the way the bank structured the project, and the partnership it had with its supplier. "There have been lots of these [projects] that have gone before and didn't make it or only partially succeeded. But I think this one has given us everything we wanted. It has certainly exceeded our expectations in how quickly we could do it and in the outcomes we've achieved. And I don't think you'll find any other bank that's rolled out something like this or had such a major project that it's kept on budget," Kelly says.

Where Branch Delivery Fits

Bendigo Bank Group of companies was formed in 1995 after a long history operating as Bendigo Building Society stemming since 1858. The bank has acquired a number of other financial institutions in recent years, including Capital Building Society, Compass Building Society, National Mortgage Marker and the Australian arm of the Italian bank, Monte Paschi di Siena. A publicly listed company on the Australian Stock Exchange, Bendigo Bank has total assets of $3.1 billion and shareholder equity of $149 million. In 1994, the then Bendigo Building Society bucked the trend of the day and effectively "insourced" its information technology. Previously, the bank had been using a Sydney bureau service to run its core data processing operations, but in March that year signed a contract with Hitachi Data Systems (HDS) to supply an HDS mainframe and systems integration facility. At that time, according to David Cooper, manager information technology, the bank had a small local area network, but there was not a lot of PC activity, with dumb terminal access being the order of the day. Since the rollout of the branch delivery system began, that has all changed. The mainframe still runs a key back-end application to handle transaction processing and customer databases; but, says Cooper, "the rest of the applications live down in the open environment". HDS now plays a much smaller role, providing specific services to the bank, such as systems programming, on an ad hoc basis.

"When we are developing and installing [a new system] we utilise the vendor's skills, but we always put our own people in the project so that we transfer knowledge. Then we generally do all the support and minor developments ourselves, but get the vendor involved again to help us with things like capacity planning," Vicky Kelly, general manager, operations, Bendigo Bank, says. Bendigo Bank employs a total of 38 IT staff. Cooper says the number has increased, as have their skills, as the bank has moved into a more open environment. Kelly has experienced mixed fortunes in attracting and retaining IT staff at Bendigo. The bank attracts a number of people, who come from the country but move to the city to find work. Unfortunately for Bendigo, the people tend to migrate back as opportunities arise at the bank, because they prefer to live in the country. "The problem we have is in hiring people in very specialist roles, or areas of knowledge such as CICS," Kelly says. "However, once people are here, we generally retain them because they come for the lifestyle, not the money, whereas in the city, people often move around for the money."Both Cooper and Kelly admit, though, that recruitment has been made harder by the demand Y2K has created for IT staff. Interestingly, in Bendigo Bank's case, most work in ensuring year 2000 compliance has been in testing rather than rectification. With the exception of its accounting package, which is being upgraded to a Windows NT, Y2K-compliant version this month, the bank has tested all of its platforms through to April 2000. And, according to Kelly, all systems have been found to be compliant.

What the Business Thinks

The Community Bank initiative might be good PR for Bendigo Bank, but Scott Pilkington, manager, sales & operations, makes no bones about it being a commercial decision. "It's a good spend of our money, and we expect our shareholders to receive a good return out of this," says Pilkington. "We could open a branch site as we know it, and it might take five years for it to break even. In the Community Banks we're looking to break even after the first year.

In fact, some of the targets that have been set for them for 12 months have been met in three months. "It's the community that's putting up the capital. We have the infrastructure and expertise to be able to help them leverage it and be successful, and, of course, the technology now lets us do that. It would have been impossible without the platform we have in place." Pilkington played a key role in the branch delivery system as manager, special projects. At the outset, he says, business buy-in was critical, but as a result the business was delivered everything it wanted.

According to Pilkington, the IT platform now in place enables the bank to provide multiple channels of delivery, whether it's by branch, Community Bank, ATM or electronic medium such as Internet banking. This in turn enables the bank to be very nimble in reacting to the market and in the way it delivers services to customers. "No matter through which channel customers choose to deal with us -- and it's important that they choose -- we have this infrastructure behind it that empowers us at the point-of-sale. Our aim is to make customers successful because successful customers mean a successful bank," he says.

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

Join the newsletter!


Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

More about Australian Securities ExchangeBendigo BankCassa AustraliaCommunity BanksFinancial InstitutionsHDSHitachi AustraliaHitachi DataHitachi VantaraHitachi VantaraMicrosoftOlivettiPilkingtonWangWang GlobalWang Laboratories

Show Comments