CIO100 2017 #31-100: Deane Johns, Co-op Money NZ
Co-op Money NZ is a cooperative owned by 11 credit unions. It provides a range of banking, payments and insurance products and services to its member/owners, the credit unions, as well as mutual building societies and more recently, banks and other non-bank deposit takers both in New Zealand and the Pacific Islands.
“Strong engagement with our credit union owners to understand their business strategies and priorities ensure that we remain in sync with their needs,” says its CIO Deane Johns.
“Through working together, Co-op Money NZ is able to deliver a high quality technology solutions to its owners and customers that individually they could not access,” he adds.
Over the past year, Deane Johns has led a major technology and business transformation project with the replacement of Co-op Money NZ’s core banking system for the credit unions.
“This transformation will underpin the digital strategy of our members moving forward enabling them to respond in the dynamic and competitive banking industry in New Zealand,” says Johns.
The shift, he says, is also in response to the increasing competition from fintechs and other new players in the payments space.
“It is critical that we are able to position ourselves to be able to rapidly embrace emerging trends and compete or collaborate with new types of entities,” he adds.
The core banking system, FACTS, was bought from an organisation called Ultra Data but over the last 25 years has been significantly modified in-house to the extent that it is now essentially a bespoke system managed entirely by the IT team in-house, he explains.
The system runs on a legacy pic universe programming language, lacks customer centricity and operates with a “green screen” interface that was not user friendly or intuitive.
The banking industry is highly competitive, he adds.
Significant investment is being made in digital strategies and more recently in the core systems that underpin these organisations. Banks, however, have historically been reluctant to modernise their core systems due to the inherent complexity of these systems and high risk associated with their replacement, he states.
In 2015, the organisation, working with its credit union owners, decided to replace the shared (multi-tenanted) core banking system with the tier one core banking system, Oracle Flexcube.
The new system will be a step change improvement bringing customer centricity, and importantly a more open system to allow the deployment of a digital strategy with over 3,000 APIs to interface with new and existing channels and third party providers, says Johns.
The project was named “Project Gear3” to reflect the transformational nature of the implementation that would touch Co-op Money NZ, our credit union owners and their members, he says.
Deployment to the new system began in December 2015, with credit unions to be migrated over 2017 and 2018.
Co-op Money NZ had very limited budget and resources for this transformation project, especially compared to the substantially larger banks that have similarly undergone core banking replacements, he says.
Key to the success of the project has been scope management to ensure the costs did not escalate, and to deliver to schedule.
The replacement core banking system was a fundamental change project to underpin our digital strategy moving forward.
With new fintech companies entering the market almost daily, the ability to create an agile platform to respond to market change was crucial, says Johns.
With Oracle Flexcube’s 3000 APIs, we will be able to improve our responsiveness and time to market, says Johns.
These APIs are also key to reducing the cost of collaboration with new players in the market.
“With this new platform in place we can now leverage this investment to build the next stages of digitalisation including online card management and pinning, improved online loan origination and better mobile services.”
While implementing the core system replacement, the ICT team at Co-op Money NZ also started re-engineering its connection to the New Zealand banking system.
Currently, the credit union owners connect to the New Zealand banking system via Co-op Money NZ which in turn connects via an agency bank.
“We wanted to improve our ability to innovate, save costs and to derisk our reliance on a competitor,” he explains.
In 2016, Co-op Money NZ completed a project to build a direct connection for scheme transactions to Mastercard. This project has allowed us to greatly improve our time to market and win new business for card services, says Johns.
The “Mastercard Direct” project was a multi-stakeholder implementation and involved coordination with teams based in the US, Singapore, Australia and New Zealand.
“With a hard switch over from our agency bank to Mastercard, this project had no margin of error for implementation as failure would result in 140,000 EFTPOS and scheme debit cards in the market ceasing to work for customers.
“The project was ultimately delivered on time with no customer disruption, and has improved our operational efficiency by 20 per cent.”
The next stage is to link directly into the payments system for transactional banking which will bring intraday settlement and allow us to respond to the market in ways that were difficult and/or very expensive when working through a third party supplier, says Johns.
Johns regularly works with the Chief Operating Officer to meet with potential customers. “This provides a rich source of knowledge around gaps in the market that as a nimble payments provider we could be in a position to exploit,” says Johns.
At an industry conference, for instance, he heard one of the speakers from a bank in the Pacific Island about their need for a scheme debit card. Their very small size meant that they were not able to secure services from the traditional large bank providers.
This led led to our implementation of a card service for them which was rolled out in May 2016, and also opens the possibility of significantly more technology / payment collaboration in future, says Johns.
“This particular case highlights our competitive advantage of being able to deliver critical payments services and infrastructure at an affordable pricing to small players,” he says.
To capitalise on this opportunity beyond Bank of the Cook Islands, Johns says he challenged his team to design a new interface for their postilion payments switch to allow a more cost efficient process for onboarding small new customers.
The team developed an innovative solutions to allow additional connections to the switch through a common interface, he says.
“This innovation has removed 70 per cent of our external cost for onboarding new customers, and has significantly improved our competitiveness.”