Mark Gay grabbed the No. 1 position in this year’s CIO50 list and with good reason. Since joining ME in January 2015, he has steered the online bank through a complete overhaul and redesign of its technology architecture from the ground up. The five-year, $90 million program was completed in FY16.
This transformation project involved the integration of seven new software systems, 700 personnel, 25 vendors, and one million lines of code. It’s part of a long-term business strategy to triple the mobile and online bank’s customer base by 2020 from 365,306 to one million customers.
Gay describes the transformation as a “now or never” opportunity to replace legacy technology that was limited and created risk for the bank.
“Not many other banks have completely rebuilt their banking infrastructure from the ground up,” he says. “Our technological overhaul has provided the bank with capabilities that other organisations would envy.”
Unlike the Big Four, ME is in the fortunate position of being relatively young and agile. A few years ago, the bank removed its small physical branch network to focus on digital channels only rather than fight against banks with large bricks and mortar retail presences.
“We launched a mobile banking app in 16 weeks – the big banks would still be talking about it in PowerPoint at that point,” Gay says. “We were able to go from idea to inception in about four or five months, which is incredible. It’s a true digital ecosystem – we’ve got a core banking layer, a multi-tiered technology stack, and we are able to plug and play a lot simpler.”
More than 60,000 customers have downloaded the app since launch.
ME is heading down a path where it is creating an ‘ecosystem of micro apps’ where possible. According to Gay, most of the competitive activity in the banking sector these days happens in the customer experience space and this can all be fulfilled through a digital ecosystem and a host of micro apps without touching the heavy core banking layer.
“We don’t have the scale of the big banks. We have to be able to move quicker and cheaper and take opportunities, whereas the big banks, to get these things done, it takes them a lot longer and costs them more money, but they have the scale to sustain that – we don’t,” he says.
Transformation delivers big results
ME’s move from a paper-based to a digital business had a big impact on the speed by which the bank can process applications and execute transactions while enabling staff to process higher volumes and the same people power.
ME’s ‘cost-to-income’ ratio has dropped, application times on deposits have fallen from five days to five minutes, and creation of letters of offer have fallen from 45 minutes to zero minutes. Half of the bank’s home loan applications are getting ‘on the spot’ conditional approval; and efficiency, volume capacity and customer experienced have improved.
“We can also build new products and take them to market faster,” says Gay. “For example, where it once took 18 months to roll out new products, it now takes about three months. This allows us to capitalise on new opportunities quicker.”
Meanwhile, ME’s new core banking system, T24, has allowed the bank to offer home loans products for the first time in eight years and implement a more sophisticated home loan pricing structure. The ‘Pegasystems’ management platform enables the bank to handle the large volume of applications it is constantly receiving without compromising the customer experience.
ME’s transformation affected the entire organisation of around 800 people. One of the cultural impacts of this project was resistance to change, says Gay.
“We overcame this by selling the benefits that ‘transformation’ would bring early on in the project,” he says. “From a project perspective, increased involvement of the end users at such a critical stage meant that pragmatic, business-owned decisions were readily available.
“Cross-functional business prioritisation sessions, facilitated by business general managers, were held twice daily at some points – ensuring decisive outcomes and strong ownership.”
The final stage of ME’s transformation program in 2015 also involved the deployment of new home loans products and a new approach to selling them. This involved company-wide retraining to help staff familiarise themselves with the basics of the new system.
Gay overcame these impacts by using a change management methodology to ensure the benefits were realised in the most seamless way possible. Faced with budgetary and time constraints, Gay used the Scaled Agile Framework to fundamentally change the way the project was delivered.
“I was responsible for chairing a mobilisation working group made up of different departments to ensure we are all working towards a common goal,” Gay says.
Gay also facilitated a cross-functional team known as ‘help at hand’, which consisted of business analysts, IT support teams, the learning and development team, and change champions who provided a first line of defence and support to each impacted business area leading up to and after the launch date.
Unique challenges in banking
Every CIO in banking and financial services will tell you that regulation is a constant challenge, says Gay.
“Regulation is there for a bloody good reason – so you have to accept that and work with it. But what regulation means is that we have a really good excuse to ignore innovation.
“We say that we are too busy being regulated to innovate. The reality is that you have to accept that regulation is important to keep the sector safe and you have to work out ways to innovate around that,” he says.
This is a particular challenge for an organisation of ME’s size because it doesn’t “have the deep pockets that the Big Four have,” but still has all the costs of adhering to the same regulations.
“So we have to be very creative – leveraging hackathon kind of activities, and making sure that we are empowering the organisation to come up with different ways of doing things is really important,” he says.
ME is trying hard to think like a startup, says Gay, and many of its innovations came out of ‘Ignite ME’, an internal hackathon that involved 63 innovators from 20 teams. This provided a huge morale boost and helped the bank think like a startup, he says.
“I have also been instrumental in getting the bank to collaborate with universities and emergent Australian technological startups around our key strategy areas of analytics and cyber security,” he says.
Gay says that hackathons have been extremely successful for the bank and the startup way of thinking has permeated through the whole culture.
“What’s been exciting for me as a CIO is we’ve had IT guys that sit in a corner and sometimes don’t say a lot, coming up with really unique solutions to business problems. So that challenge with hackathons in banking is, ‘How do you ‘industrialise the outcome?’ How do you take that really cute idea and make it robust, secure and compliant for the customer?'”
The right to influence
At ME, Gay is responsible for building and growing the IT function by playing the dual role of coach and digital evangelist. Within the leadership team, he encourages measured risk taking and urges executives to be more comfortable with small failures. This is critical to the creation of an agile business environment, he says.
“We also have a technology sub-committee of the board and , every two months, I meet with three of the external directors and a couple of execs to talk all things technology,” says Gay.
“The key thing for me is to understand that I can’t succeed without them; they can’t succeed without me so we create an honest dialogue about where we are but where we want to be.
“Often where we want to be gets forgotten about and people focus on the right now and we talk about the issue. But I think it’s really important to say, ‘What do we want to be when we grow up?
What’s the roadmap from where we are today and how do we get there? And create an honest dialogue about how we are tracking towards that. I think that’s important because it keeps everyone focused on the big picture.”