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Mutual Industry Under Pressure

23 July 2019 |Industry Updates
Jan Edwards, CEO, BDCU Alliance Bank.

Mutual Industry Under Pressure

23 July 2019 |Industry Updates
The mutual industry is under pressure from increasing compliance, regulation, the fast pace of technological change, an aging member base and market forces.
In today's challenging environment these questions are top of mind for mutual Boards and CEOs:

Is the burden of compliance limiting our ability to grow?

To what extent is the interest rate environment and pressure on fee income squeezing our bottom line?

Can we keep pace with technology to remain competitive and relevant?

How do we remain independent?

Can we invest in positive social outcomes for our members and communities?

Jan Edwards CEO of BDCU, part of the Alliance Bank group, gave us her take on these issues and how her new normal is so very different from that of her mutual industry colleagues.

The Alliance Bank model is a strategic partnership between Bendigo and Adelaide Bank (BEN) and mutual entities, where mutual companies leverage BEN’s balance sheet and ADI Licence which sees BEN take responsibly for loans and deposits and all the regulatory requirements associated with that responsibility. In return the mutual company, now an Alliance Bank Partner, retains its capital, ownership and independence but gains scale through access to BEN’s balance sheet and a competitive raft of products, services and technologies.

Q. What is the Alliance Bank solution and how is it different from merging?

A. ‘It’s vastly different. Put simply in a merger a mutual loses its identity, independence, member capital and local relevance.

Under the Alliance Bank model we retain all these things, and importantly, we have the opportunity and the space to re-imagine our business. The attributes of the model have enabled us to deliver sustainable growth, and to thrive in an increasingly competitive and regulated market.

More than that, member capital stays in the community in which it was earned, we retain our independence, our local relevance, our Board, staff and member relationships. We also have complete autonomy to determine our future strategy.

With compliance and regulatory reporting BEN’s responsibility, the Board and management team are free to focus on strategies to grow the business. As a social enterprise our profit is invested in shared value initiatives that benefit our members and communities. This means establishing strong community engagement and partnerships. This shift in the business has been embraced by our members and the community so we’re enjoying significant growth as a result.

The Alliance Bank solution is very much a collaborative partnership with a Strategic Advisory Board made up of Alliance Bank partners and BEN to ensure everyone has a voice at the table. We’re all working towards the same goals - efficiency, growth, relevance to our members and communities and shared value outcomes that deliver positive social impact.

Q. Why do you think Boards choose to merge?

A. ‘Given the down side: loss of member capital, loss of local relevance, loss of independence, Board and staff, it’s hard to say. Maybe some Boards are coming to the end of their tenure and don’t have the appetite for change or the energy to re-engineer their business.

Choosing to become an Alliance Bank takes energy. The Board and management need to shift focus from compliance and regulatory matters to growing the business, developing partnerships to drive shared value and so on. This is both a strategic and cultural shift, its challenging and it takes time and commitment.’

Q. What did your Board think about giving up its ADI Licence?

A. ‘Business models continually evolve: this is a time of disruption. Just because you don’t hold an ADI Licence doesn’t mean you can’t provide sophisticated and competitive financial services. Just look at the disruptive brands that are redefining what has traditionally gone before.

Naturally our Board carefully considered the implications. This is one of the reasons we chose to partner with BEN, their vision and integrity is closely aligned to ours. They are Australia’s fifth largest bank and Australia’s third most trust brand. In this partnership we leverage their strength and capability alongside our local focus and social commitment. This is a true shared value relationship where contractual obligations serve the interest of all parties, not just one.’

Q. Has your business grown since becoming an Alliance Bank?

A. ‘It certainly has. We now hold over $500M in loans and deposits which represents growth of 52%.

Our strategic focus is local business and as a result of our new capability, everyone has responded to our re-imagined service footprint to better service local business and the community. People appreciate local relevance and decision making – they support us because we support them.’

Q. Has pressure on fee income and interest rates impacted your profitability?

A. ‘Not to the same extent it would have if we were still an ADI. We are protected to a degree by BEN so the loss of income is less than half of what it would have been.’

Q. How do you afford to keep pace with changing technologies and the associated shift in how people are doing their banking?

A. ‘Access to capital has enabled us to invest in re-engineering our business for the future. While there is still a need for local presence, the role of the traditional branch footprint has changed. So, we’ve re-imagined our centres and now provide a hybrid of services for local businesses alongside community services under The ‘Collective’ banner. Collectives provide co-work spaces, office space, SME advice services, banking facilities and a community hub with a locally run gourmet eatery.

Technology innovation and delivery falls under BEN’s purview, as does most of the cost of IT and hosting. BEN’s central team manage most of the back of house functions along with technology support. This is part of the cost efficiencies that are realised under the model. People that were once in those roles that chose to come on the journey with us are upskilled to focus on members and growth strategies, examples of this are mobile bankers and outbound marketing both of which have proven very successful.’

The Alliance Bank model is a solution for mutuals that enables continued local relevance, independence, the opportunity to re-engineer your business to deliver sustainable growth and the ability to thrive in an increasingly competitive and regulated market.

To find out more about the benefits of the Alliance Bank solution call:

Carolyn Adams: Head of Alliance Bank – 0429 676687
Jan Edwards: BDCU Alliance Bank – 0417 230 666
Gavin McNab: Alliance Partner Development – 0478 435 345


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Bendigo and Adelaide Bank Limited, ABN 11 068 049 178 AFSL / Australian Credit Licence 237879. AWA Mutual Limited®, BDCU Limited®, CIRCLE Mutual Limited®, NOVA Mutual Limited® and SERVICE ONE Mutual Limited® (Alliance partners) are independent mutual entities that have formed an alliance with Bendigo and Adelaide Bank. AWA Alliance Bank®, BDCU Alliance Bank®, CIRCLE Alliance Bank®, NOVA Alliance Bank® and SERVICE ONE Alliance Bank® are trademarks of Bendigo and Adelaide Bank Limited.

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