​Teachers Mutual Bank opens shared services to take on big four

The financial institution is banking on shared services to change the way mutual banks do business and boost 'operational collaboration' in the sector.

Teachers Mutual Bank has realised the power in numbers by launching a shared digital services offering that allows customer-owned banks in Australia to enter vendor contracts as a group.

In a bid to boost what he called operational collaboration in the mutual bank sector, Teachers Mutual Bank CIO David Chapman told ZDNet the decision to kick off such an initiative came down to cost savings.

"It's not rocket science -- it really comes down to economies of scale," he said. "Individually we are relatively small companies to the big four banks."

"Collaboration is certainly something that's pretty high in the mutual industry; it's costing us too much money to do this individually."

According to Chapman, the use of shared services could potentially create a multi-billion dollar consortium that can tender as a whole and allow each participant to enjoy significant reductions in operational costs. By partnering, such arrangements could also see the sharing of digital services and third-party information access among one another.

He expects embracing shared digital and data services to revolutionise the way mutual banks do business, and add a critical competitive edge for the mutual sector as a whole.

"If you're opening an account through a vendor worth AU$100 billion, well then they'll give you very significant discounts on the services they provide compared to if you're going as a AU$1 billion organisation," Chapman explained.

"If you look at the mutual industry together, we're about AU$100 billion -- which is bigger than HSBC. AU$100 billion worth of business -- now vendors are very, very interested in that."

Chapman has been with Teachers Mutual Bank for almost five years, leaving his role as a program director at Westpac and as the head of consumer technologies at American Express prior to that.

"Coming from the Westpacs of the world I'm aware of what discounts you can get and what benefits you can realise in terms of economies of scale simply through volume," he explained.

"The decisions we make on the products we produce and the services we provide are startlingly different [from Westpac]. The decisions we made in Westpac were very much around money, the discussions here are very much around the fact we want to stay a viable financial services company ... the focus of the topics are about what the members need."

Chapman said his organisation has developed a technology that pulls data out of an Ultrax backend banking system -- which the vast majority of mutuals use -- and produces a standard SQL warehouse, with an extensible data model built-in.

"We've also developed some really nice technology based on the Dell Boomi product that allows us to connect that to more internal data sources or external data sources and deliver it to whatever application requires it -- classic example these days being the fintechs that are all coming along and saying: 'We want to plug in to your organisation, how do we do it?' We've got the answer to that and we intend to share that out as a service," Chapman said.

"We're sharing the tech to do it with others, and we're going to help them do it by giving that capability, but we're not going to have any of their data on our site -- we're not touching that.

"It's not competitive advantage, it's something we all have to do, so why not save on it."

The AU$6 billion financial institution has been working on developing shared services arrangements and licence agreements for quite some time, Chapman explained.

"We've already signed a number of them, so we're at a point now where we've developed capability -- the enterprise data warehouse space," he said. "And then there's the ancillary or commodities services: Print services, penetration testing, regulatory services, voice and data communication, things where there's no competitive advantage to having a printer; the competitive advantage is what you do with that printer, for example."

When it comes to the backend of the Teachers Mutual Bank, Chapman explained that the organisation has opted to utilise its own datacentres rather than push storage out to other providers, and host its core banking system in-house as well.

"We will look to doing that one day, no doubt about it, we've had discussions already starting around if we really want to keep maintaining all of this," he said.

"It's historical, to a large degree, when I came in we had our own datacentres, both a primary and disaster recovery -- they're now spanned so it's active-active environment -- much more robust and resilient.

"It's just the investment in the technology that was already there -- you can't just toss and scrap all that overnight. We have plans to go in to another space, but nothing concrete as yet."

Looking forward, Teachers Mutual Bank will continue to invest in warehousing, pushing into analytics quite strongly, with Chapman noting the future world of analytics is already a big discussion point within the organisation.