For Peter Lock, nailing down a merger of banking equals was always going to be challenging. And rewarding.
“It's almost a crusade for us to say we want to create the new national icon,” he says.
Lock was under no illusion that combining Heritage Bank (based in Toowoomba) with Adelaide-based People’s Choice would mean rolling up the sleeves, acknowledging the complexities, the views of regulators, and knowing throughout this demanding process that there was a meaningful “fit”.
But apart from all this, at the end of the day nothing really made sense if it didn’t help or improve the lot of members.
After all, that is the driving mantra behind all co-operatives and mutuals.
A slow process
No merger of any size or significance happens overnight. In this case, the genesis was Lock’s first meeting with the head of People’s Choice, Steve Laidlaw, in 2016 at the World Council of Credit Unions conference in Belfast.
“We recognised that putting these together gave us an opportunity to create a national mutual brand, and this hadn't been done for 30 years,” said Lock.
Once the idea was formulated, the hard work began.
“You can look at mergers on paper that might seem like they're a good idea, but if the culture is different within the organisations, it's not going to work,” says Lock.
“And you can get different cultures even within mutuals. But, by and large, mutuals should have the same type of guiding North Star because we want to do the right thing by our members and the right thing by our communities.”
Knowing what needs to be done
Beginning the People First Bank merger process through the COVID pandemic meant upfront and open communication was a priority. Importantly, this would reassure all stakeholders, particularly staff and members, that both sides knew what they were doing. And why they were doing it.
“We also got, importantly, those key decisions out of the way first, which is Board composition, CEO, chairman and then executive structure. So, we didn't wait on that.
“We said this is how it's going to be, and this is how the structure looks.”
Lock knew the merged workforce didn’t want to fret that “the world was about to change once the ink was dry on the deal.”
There was also a happy coincidence that meant a CEO succession plan could also be announced straight away, with Lock taking the reins initially and then handing over to Laidlaw on 1 July 2024, before retiring on 31 August 2024.
For Lock, this planned succession brings down the curtain on a career that spanned two stints at National Australia Bank, a time in insurance, working for the Commonwealth Bank – including business banking, agribusiness and corporate banking – St George Bank, Westpac and Bank of Melbourne.
Reasons to grow
For Lock, “scale” is a watchword for the upsized business. Growth is achievable but it must be measured, sensible and introduced with a high respect for technology.
With ambitions for the merged mutual bank to potentially grow fourfold from its current $25 billion asset base, Lock notes that “scale is driven around simplicity, and it's driven around cost.”
“And we believe that scale and efficiency to compete in the market needs to be driven by technology. So, you're going to have to have the best technology stacks to be able to compete.”
Depending on your point of view, either there’s never a good time or it’s always a good time to be updating your technology. Bringing together the best technology is difficult, time-consuming, skills intensive and expensive. “And inevitably, it costs the CEO their job, because these things rarely come in on time or on budget. So, there's a natural reluctance to do them.”
A business merger forces the issue, however.
“We know that the key to success is contemporary technology, and we were prepared to make the investment and the hard decisions to move to one set of systems for the new bank,” says Lock.
Lock was inspired to do it a lot better and smarter than many of his big bank rivals, comparing People First Bank’s spend of $180 million to Westpac’s $3.4 billion.
“We have made the decisions around one single set of systems including a new core banking platform. Importantly, the smart thing that we've done with technology is we've chosen worldwide players, we’ve chosen cloud-based platforms that are evergreen, and that are scalable.
“So that means the bank will always have the most up-to-date, contemporary and secure systems that continue to evolve and be quickly adapted to changes in market and consumer demand.”
AI needs to be more than the shiny new toy
Any discussion of technology these days must include artificial intelligence. AI is inspiring strategy, budgeting, product development and probably whatever AI itself can think of next.
“Firstly, it's exciting and it's game-changing,” says Lock, adding that different industries are at different stages of the AI journey.
“AI is real. It is value-adding, and it is going to revolutionise a lot of the aspects of banking.”
In the meantime, caveats apply. “You've got to be careful that you don't get distracted by the shiny new toy. AI works on data and that data has to be accurate.”
“So, if you introduce AI without having good foundations around your processes and your data, you are going to get some really weird outcomes.”
For that reason, People First Bank is sandboxing AI technology and just in the most prospective areas.
“We don't want to be left behind in this, but we don't want to be at the leading edge of this either.”
“We know where it’s got a really good application. And some of the great areas, for example, would be in anti-money laundering and counter terrorism finance, and detecting fraud.”
So-called “knowledge management” is looming as another key area for the bank, where AI will be able to instantly help staff to both retrieve the right forms or documents and be able to suggest how to handle customers in delicate situations.
“But if you go in and say I want to put in AI everywhere, then we see that that could come unstuck.
“That’s another advantage of partnering with the best tech platforms – they will bring the best of AI to us – tried and tested. This makes a lot more sense than spinning your own wheels”.
