Cuscal debates its future

Ian Rogers

A Cuscal confab of industry CEOs underway at Green Island Resort this morning has the sector muttering, amid new questions over the longevity of its principal rival, Australian Settlements.

A specialist payments provider with deep roots in the credit union and mutual banking sector, Cuscal has summoned more than a dozen CEOs for the first in-person forum of its Customer Advisory Group.

This high-powered elite is being asked to workshop a slender official agenda over two days, making some wonder what this gathering might really be about.

‘The Future of Payments Strategy’ is one topic and surely the main one, along with the ‘Cuscal Agile Transformation’ and the payments outfit’s ‘View and Approach to Digital Currency’ (one for the eccentrics).

Cuscal has been an under-appreciated stand-out in Australian banking in recent years, deftly converting its daring investment in the 86 400 neobank start-up into a timely and shareholder value creating exit (via a sale to NAB) in early 2021.

Some of the proceeds from that capital gain have been returned to shareholders via a special dividend and more than A$50 million has been allocated to an upgrade of core banking systems and interfaces with clients and a refresh of its switch.

The Cuscal coffers may be sufficiently flush for a strategic acquisition or acquisitions with a payments theme – not that the Customer Advisory Group is likely to be a fruitful forum to debate matters that are the remit of the board (and a board which no longer includes any sector CEOs as directors, a distinct break from past practice).

Still, a perennial for the board must be when and whether to roll up three into two or even into one.

That is, what might be the value be, for Cuscal, in one or both of its niche near payments rivals:

•    Australian Settlements Ltd, which has origins in serving the once prominent building society movement, and 
•    Indue, also with a credit union history, and best known these days for its government work – most of all its much maligned task as processor and issuer for the cashless welfare card.

With net assets of only $15 million, Australian Settlements Ltd is an obvious target, if only because the sustainability of the ASL enterprise looks ever more doubtful.

Following a tender, Regional Australia Bank is transitioning its business away from ASL to Cuscal.

And ASL is being kept waiting to learn whether it will retain the Heritage Bank business, given its upcoming merger with People’s Choice Credit Union in 2023.

A spokesman for both Heritage and People’s Choice told Banking Day yesterday no decision had been made selecting a payments and settlements provider. But given due diligence is complete, it’s hard not to think there’s a warm favourite, whatever the historic allegiances on each side.