Heartland's digital focus gaining traction among small businesses

"We're really trying to offer them the same product they can get elsewhere, but we can do it quicker."

Heartland Bank's recent efforts to expand its digital offering is winning over small business owners, who have been keen on the lender's fast turnaround for small loans.

The Auckland-based lender embarked on a new digital strategy last year where it planned to invest more heavily in data analysis to better target potential customers and deliver more services online, which has a wider reach than a physical branch network. That's seen it roll out the 'Open for You', 'Open for Business', and 'Open for Livestock' websites where customers can access finance online.

Chief executive Jeff Greenslade says that's an important way for Heartland to differentiate itself and is attracting more interest from potential borrowers than a traditional branch did. The lender's old site on Auckland's High Street "would be lucky if we got 20 people a month going into that branch", whereas its 'Open for Business' site, which can approve small business loans of about $30,000 in under three minutes, gets 500 or 600 people visiting it a day, he said.

"We're really trying to offer them the same product they can get elsewhere, but we can do it quicker," Greenslade said. "For people who are time poor, we think that is an increasingly positive point of differentiation."

The bank's business lending division boosted earnings 13 percent to $34.5 million in the 12 months ended June 30 on a 9.5 percent increase in operating income to $47.1 million as its assets grew 10 percent to $999.9 million. Of that some $44.6 million of loans were originated through the 'Open for Business' platform, almost half of the bank's business lending in the year.

Heartland's attraction to digital channels follows its investments in peer-to-peer lender Harmoney, online small and medium-sized business lenders Fuelled and Spotcap Australia.

The bank implemented Oracle's Flexcube as a new core banking system in May, which will act as the backbone for the lender's online services and allows for automation and workflow capabilities. The Flexcube project cost Heartland about $22 million, which it said will be amortised over 10 years. As at June 30, the cost of Heartland's computer software was $31.5 million, with a net value of $26.1 million after accumulated amortisation, a "significant portion" of which related to the Flexcube system.

Greenslade says Heartland could get about 80 percent of its business being initiated online, which will cut costs and expand the availability of its services.

"The great thing about going online is as soon as customer tells us that they want something we consider high value then we know about it straight away and we can make sure that they get looked after very quickly," he said. "We're still going to have people involved in the processes - it's a question of making sure they get positioned at the right time and the right place."

Heartland's wage bill crept up to $40.8 million in the 12 months ended June 30 from $39.1 million a year earlier, and while operating costs increased 2.6 percent to $71.7 million, the cost to income ratio shrank to 42 percent from 44 percent a year earlier.


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