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Market opportunity

This page covers the commercial context for Track 2 — the SaaS licensing strategy targeting building societies, mutual banks, and regional banks. For the direct bank context see overview.md.

The core thesis

The target institutions for Track 2 are not mid-sized banks looking for a digital transformation programme. They are small, trust-rich, community-anchored financial institutions that have everything a bank needs — a regulatory foothold, a loyal customer base, an existing balance sheet — except modern technology.

The platform proposition is abstraction, not innovation. The institution does not need to change what it is. It needs to change what it runs on. The legal entity, the brand, the customer relationships, the balance sheet — all stay exactly where they are. The core system, the channels, and the decisioning layer are replaced underneath, invisibly to the customer and manageably to the regulator.

"We make existing regulated institutions behave like a next-generation banking group."

Target institution profile

The institutions most suited to Track 2 are those where all of the following are true:

  • Mutual or community-owned structure (no external shareholder demanding short-term returns)
  • Sub-scale balance sheet — cannot justify a $30–100M core transformation programme
  • Legacy core system creating active operational pain
  • Limited internal technology capability
  • Board and management aware they are falling behind but uncertain how to move
  • Strong local trust and brand that a merger would erode

The ambition is not to win any single institution. It is to build a federated alliance: multiple small institutions sharing one platform, retaining their individual identities, but collectively behaving with the capability of a much larger bank. The network effect is the moat — each additional institution lowers the per-tenant cost and strengthens the platform's regulatory credibility.

NZ market

NZ is the pilot market: small, well-understood regulatory environment (RBNZ/FMA), and the institutions most closely analogous to the target profile.

The important distinction: SBS Bank, The Co-operative Bank, and TSB Bank are too large and too capable for Track 2 entry. They are referenced below because their histories illustrate the trajectory — building societies that grew, gained bank licences, and now operate at a scale beyond the initial target. The real targets are the handful of true building societies that remain.

Remaining NZ building societies

Institution Est. Location Character
Nelson Building Society 1862 Nelson / Tasman One of the last true building societies. Mortgage and deposit focus. Single-region footprint. Very small balance sheet.
Heretaunga Building Society — Hawke's Bay Small regional mutual. Very limited product range.
Wairarapa Building Society — Wairarapa (Greytown / Masterton) Hyper-local. Residential lending and deposits only. Likely one of the smallest deposit-takers in NZ.

These institutions have deep community trust built over generations — exactly the asset that cannot be manufactured. What they lack is digital capability, product breadth, and the economics to invest in either.

Context: the conversion trajectory

Institution Origin Now
SBS Bank Building society (1869) Full mutual bank, national presence
The Co-operative Bank Building society (1928) Mutual bank, ~100,000 members

These conversions show the pressure: building societies that wanted to grow had to acquire bank licences and national scale. The remaining building societies have not taken that path. They remain small, regional, and constrained — but still operating and still trusted.

NZ non-bank deposit takers

~15 registered non-bank deposit takers operate in NZ. Some may be suitable for Track 2 depending on their product set and regulatory position. Nelson and Wairarapa are the clearest initial candidates.

AU market

Australia is a richer and more scalable market. The "building society" category has largely converted to mutual banks or credit unions, but the equivalent institutions exist in number.

Metric Figure Source
COBA member institutions 51 COBA 2024
Combined assets $179B COBA 2024
Combined membership 4.6 million COBA 2024
Customer satisfaction 89.5% vs 75.4% (Big 4) COBA 2024
Share of all ADIs that are customer-owned ~two-thirds APRA data

Target tiers

Tier 1 — Initial targets (most likely to move first)

Institution Why
Hume Bank Regional (NSW/VIC). Modernisation-aware. Strong community brand. Big enough to matter, small enough to need help.
G&C Mutual Bank Smaller footprint. Traditional product set. Limited internal tech depth. Classic "good bank, weak platform".
Gateway Bank Niche customer base. Limited scale. Constrained product set. Strong candidate for SaaS-led expansion.

Tier 2 — Second-wave targets

Institution Why
Regional Australia Bank Regional focus and growth ambition but likely already investing in technology. Better as a second-wave tenant than first.
Newcastle Greater Mutual Group Heritage building society brand but recently merged (Newcastle Permanent + Greater Bank). Currently internally focused. Revisit in 12–18 months.

Avoid initially

Teachers Mutual Bank and Bank Australia have strong internal capability and clear technology roadmaps. They are not the profile of institutions that need this platform at launch.

The five pain points (entry wedges)

Track 2 is not sold as a platform replacement. It is sold as a solution to one of five specific operational problems. Each is a natural entry wedge that expands into broader platform adoption.

Pain point Symptom Entry offer
Lending systems Fragmented loan origination. Manual credit workflows. Spreadsheet-driven decisions. New products take months. Modern lending + decisioning layer. Personal lending first, then mortgages.
Digital onboarding High abandonment. Manual KYC fallback. Slow account opening. Drop-in onboarding + identity platform. Mobile-first. Real-time verification.
Core rigidity Pricing changes are painful. Fees hardcoded. No real-time balances. Product + pricing engine. Config-driven. No code changes for new products.
Compliance cost AML monitoring manual. Regulatory reporting assembled by hand. Audit prep takes weeks. Compliance-as-a-feature. Built-in reporting. Shared regulatory updates across tenants.
Data fragmentation Core system siloed from reporting. Manual reconciliations. No single customer view. Unified data and reporting layer. Audit-friendly. Real-time ledger feeds analytics.

Entry model

The platform enters as a sidecar — running alongside the existing core, not replacing it. This eliminates the "big bang" migration risk that kills most transformation conversations with small institution boards.

  1. Sidecar — new platform runs in parallel. New customers onboarded onto new platform. Zero disruption to existing customers.
  2. Digital front door — new customer-facing channels and products launched. Existing customers migrate at their own pace.
  3. Book migration — deposit book migrated first, then lending. Done product by product, not all at once.
  4. Core switch-off — legacy system retired when the platform holds the full book.

Stages 1–2 can be delivered without the institution's board ever having to approve a "core replacement". By the time stage 3 is on the table, the platform has already proven itself.

The federated alliance model

The platform's long-term value is not as a technology vendor. It is as the infrastructure layer for a federated alliance of community financial institutions — each retaining its own identity, licence, and balance sheet, but collectively operating with the capability of a much larger bank.

Three layers:

Layer What it is What it retains / shares
Entity layer Each bank or building society as a separate legal entity Retains: customer contracts, regulatory licence, capital, governance
Alliance layer Coordination and standards body across institutions Defines: common operating model, shared vendor standards, mutual procurement, product templates
Platform layer Shared SaaS infrastructure Provides: ledger, KYC, payments, lending, analytics, compliance, digital channels

The alliance layer changes the commercial story from "another vendor pitch" to: "Individually we are small. Together we can operate with the capability of a much larger bank."

This model also creates network effects that pure SaaS does not: shared AI models improve faster with more tenants. Shared compliance updates spread the cost of regulatory change across the network. Shared product templates reduce time-to-market for every institution.

Global TAM

Region Estimated relevant institutions Notes
New Zealand 15–25 Pilot market. Few institutions but low-risk entry.
Australia 50–70 Best developed-market scale play. Fragmented but large enough.
UK & Ireland ~50 42 building societies + credit unions. High quality, harder to win early.
Canada 50–150 ~200+ credit unions, provincially fragmented. Some shared tech already.
United States 1,000–2,000 ~4,500 community banks + ~4,500 credit unions. Massive market, vendor-heavy.
Europe 2,000–3,000 ~700 German cooperative banks; large French/Dutch mutual groups; Nordic savings banks. Often already federated.
Asia (ex AU/NZ) 1,500–2,000 Primarily India (urban cooperative banks). Varying regulatory quality.
Latin America 500–1,000 Strong cooperative banking in Brazil (Sicredi/Sicoob). Rapid digitisation.
Africa 200–1,000 SACCOs and mutual banks. Many not yet bank-grade institutions.

Source: WOCCU 2024; APRA; Building Societies Association (UK); FDIC; COBA.

The global core banking software market was valued at US$16.79B in 2024 and is projected to reach US$64.96B by 2032 (18.6% CAGR). Community banking is the fastest-growing segment at 15.1% CAGR, driven by modernisation pressure from institutions whose incumbent vendors have priced them as afterthoughts.

Practical TAM for this platform:

Tier Regions Estimated institutions Rationale
Tier 1 (ideal SaaS) NZ, AU, UK, Canada 150–300 High regulatory quality. Strong economics. AU/NZ-compliant from day one.
Tier 2 (scale expansion) US, Europe 2,000–4,000 Larger market but competitive. Requires regulatory profile extension.
Tier 3 (long-term) India, LATAM, Africa 2,000–4,000 Large numbers but lower ARPU and higher operational complexity.

Competitive landscape

Vendor Positioning Weakness
FIS (Horizon, Modern Banking Platform) Enterprise; 70%+ US community bank share Legacy stack; expensive; slow to modernise
Fiserv (Finxact, DNA, Portico) Broad market; acquired modern core (Finxact) Integration complexity; pricing for scale
Jack Henry (SilverLake, Banno) Community bank focus; US-centric Limited AU/NZ presence; US regulatory model
Temenos Global mid-market; strong in EU Complex implementation; high licensing cost
Mambu Cloud-native SaaS; modern Enterprise pricing; not designed for AU/NZ compliance
Thought Machine (Vault Core) Cloud-native; contract-based ledger Very high cost; aimed at tier-2 banks upward
10x Banking Cloud-native; UK-origin Early stage; limited AU/NZ regulatory coverage

The gap: No vendor offers a modern, cloud-native, AU/NZ-compliant, modular SaaS platform priced for institutions with 5,000–50,000 customers that can be deployed without a $30M+ implementation programme.

Indicative pricing model

Per customer per month, modular tiers. No per-transaction fee at the platform layer (payment scheme fees pass through at cost).

Tier Modules included Indicative price
Core Ledger, accounts, transactions, basic reporting $4–6 / customer / month
Standard Core + payments, KYC/onboarding, notifications $7–10 / customer / month
Full Standard + credit decisioning, AML monitoring, analytics, risk $12–16 / customer / month

Illustrative economics — 20,000-customer institution on Standard tier at $8/customer/month:

Metric Figure
Monthly recurring revenue $160,000
Annual recurring revenue $1.92M
Comparable legacy vendor cost (est.) $10,000–$15,000/month + implementation
Saving vs legacy 30–50% reduction in total technology cost

These figures are indicative. Actual pricing depends on institution size, module selection, and jurisdiction. The model is designed to make the commercial case self-evident for any institution below $5B in assets.

Pilot sequencing

Phase Timeline Target
Phase 1 — NZ pilot Year 1 Nelson Building Society and/or Wairarapa Building Society. Prove the platform under live regulatory conditions with the smallest viable institution.
Phase 2 — AU expansion Year 2 Hume Bank, G&C Mutual, Gateway Bank. Leverage APRA compliance already built for Track 1 direct bank.
Phase 3 — AU scale Year 2–3 Expand to 5–10 COBA members. Alliance model takes effect — network lowers per-tenant cost.
Phase 4 — International Year 3+ UK building societies, Canadian credit unions. US community banks selectively.

The NZ pilot with the smallest institutions is not a concession to modesty — it is deliberate. A building society with 5,000 customers and a simple mortgage-and-deposit book is the cleanest possible proof of the platform. Every complexity that exists in a larger institution is absent. Once proven there, expansion to AU is a regulatory configuration exercise, not a rebuild.