Why Heritage Bank headed externally to prep for the New Payments Platform

Australia's New Payments Platform (NPP) went live in February last year; the platform allows for the transfer of money from one person to another in near real-time, using an email address or phone number rather than the traditional BSB or account number process.

The NPP infrastructure was built by the Reserve Bank of Australia (RBA), in consultation with the Commonwealth Bank of Australia (CBA), the National Australia Bank (NAB), the Australia and New Zealand Banking Group (ANZ), and Westpac, which hold around 95% market share of the entire Australian finance industry between them.

Read more: What is Australia's New Payments Platform?

The new platform was in the works for years; the RBA had originally announced its plans as far back as 2012, inviting input from industry to determine the most effective way of delivering on its plan to make real-time payments happen, among other objectives.

But while the larger banks have IT depth and breadth, and in theory the skills in-house to deliver such big scale tech initiatives, for Heritage Bank, a mutual bank based in Toowoomba, Queensland, prepping for the NPP wasn't something it could tackle on its own.

Although the RBA had been working on the initiative for a number of years, Heritage chief information officer Wayne Marchant told ZDNet the Reserve Bank offered very little assistance or advice on how to prep for the mandate.

So Heritage had to turn to the market.

Heritage had previously partnered with open source giant Red Hat for help with transforming the organisation into one that was more agile and could approach technology projects with a refreshed culture and methodology.  

"We needed to draw a significant cultural change across our IT team. We had a bunch of people who didn't know anything about agile, didn't know anything about open source, and really we needed to change the way that we delivered services to our business," Marchant told media during Red Hat Forum 2019 in Melbourne.

This happened through using Red Hat's Innovation Labs.

It's touted as an immersive experience where organisations spend six or 12 weeks working through a business problem. In six weeks, an outcome is delivered; and if stretched to 12, the result is a plan to actually deliver a working outcome.

"So the purpose is to really show the teams how they can deliver at speed and end with a high level of quality in a short period of time," Marchant explained. "For us that changed the way that we deliver services and it changed the way that we go about things."

See also: IBM's big deal for Red Hat gives it a chance to reshape open source (TechRepublic)

After a successful round one, Heritage took its NPP problem to the IBM-owned company for round two.

Heritage delivered inbound payments for the NPP in 12 months; and in 18 months, Marchant said inbound and outbound payments were delivered.

"Something that we would have taken probably five years to deliver in the previous way, and probably would have been almost impossible for us to deliver, because the integration cuts so much of the complexity of the bank out," he said. "The old part of the bank -- all of the legacy -- is the hardest part for us to be able to integrate into."

According to Heritage head of strategy and architecture Ashley Lourey, the success of the NPP was driven out of the initial Innovation Labs engagement, with the frame of a mandated regime "kicking it into overdrive" to see if the organisation could really push its limits.

"The second time round, we were like, 'Oh, let's really challenge the guys now' and looked at an industry-driven regime that had mandated dates," he said.

"We'd had a couple of false starts. We spent a significant amount of time building up a requirements document that was counterintuitive to the process we were actually going to be going down -- and that really put the pressure on the team to really operate as a unit, and I think it really put pressure on Red Hat as well because it was an on premise environment, we had to connect to a number of critical systems."

He said with the NPP project, the expectations of Heritage's executive team were "changing goalposts" at times, but it was also a positive, in that it placed a spotlight on IT, as well as the bank's culture.

"For us, that was a big win," he said.

"It was interesting in the early days because when we were talking around what the scope of the New Payments Platform was going to be, there were some worried and concerned looks around the room saying, 'How are we going to look at delivering anything like this within a 12 week lab?' And to the testament of both our guys, and the Red Hat guys, they gave it a pretty good crack."

While Marchant said that in the space Red Hat operates there are a number of vendors, Heritage made its decision to go with them due to the necessity of linking all of its systems together.

"We know we've got legacy systems, we're going to have new systems coming in, and we had to be able to integrate them together, and that integration is really the core task of the IT team moving forward," he said.

"Open source tools in the open source environment gave us an opportunity to try a lot of things to see whether they fit our environment, which in banking you really need to do because you're going to try, test, work with security, see if they work properly, and are secure, and then you can pay for the model -- open source is a perfect environment in which to do that."

Touching on future propositions, such as Open Banking, Lourey told ZDNet that fundamentally, the biggest challenge Heritage had was the ability to integrate its core systems.

"From a technology point of view, that was where Red Hat met our needs ...  we're really far better positioned to take on these regimes that are all about integration now. So as we're building up, as we're creating more and more services -- or reusable services -- we're kind of slowly chipping away at it," Lourey said.

"We're talking to them about open banking, about the options," Marchant added. "You know, there's lots of stuff being done overseas, but it'd be nice to be able to think that we could pick and shift something from overseas, but we're certainly talking to Red Hat about what the options are and what's happened in Europe and what we can do."

Asha Barbaschow travelled to Red Hat Forum as a guest of Red Hat.  

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