27 Jan 2021
There has been commentary for years around the so-called battle between fintechs and traditional banks – but the reality is many banks globally are actually partnering with smaller, innovative businesses to deliver better outcomes for their customers.
The interaction between banking and technology and banking and other industries is constant and what we see today is no different: there is a myriad of new companies and ideas, successes and failures, mergers, partnerships, transformations – a healthy sign of an economy working.
"The idea was to have an integrated function that would bring the venture portfolio model to innovation for corporates.” – Ron Spector
At ANZ, we aim to harness this energy to invigorate our company and better support our customers. The team central to this strategy is known simply as “ANZi” – the “i” stands for innovation and investment. I recently sat down with ANZi’s Managing Director, Ron Spector via video chat to discuss why the team exists and what sorts of businesses and technologies they are focusing on.
Ron says he likes to think about fintech as consisting of two main categories: financial services technologies and new disruptive companies. The former, he explains, have been around for a long time.
“[That sector] creates the technology that banks and other financial institutions consume and utilise to develop products and services they can pass through to their customers or enablement capabilities,” he says. “New disruptive companies are trying to innovate products and services to compete with banks and other financial services companies.”
The approach for ANZi is slightly different based on Ron’s experience working in and setting up other innovative investment functions.
“The idea was to have an integrated function that would bring the venture portfolio model to innovation for corporates - investing in and partnering with leading emerging companies that have products or services we could benefit from by providing it to our customers or bankers,” he says.
“We can invest and partner [with a company] or we can just partner. In some cases, we can even acquire companies. But by taking a portfolio approach, we hope to have a lot of these initiatives in market and, over time, build up a portfolio that will start generating significant value back to ANZ, shareholders and customers.”
In competitive sailing, when making decisions they often ask: “but will it make the boat go faster?”. For ANZ, when thinking about partnering, investing, owning or building tech, we ask: “but will it make the experience of our customers or people better?”.
Although he can’t talk specifically about all of the companies in ANZi’s portfolio due to market sensitivities, Ron says the team uses a very strict “thesis-based” investment strategy. This means ANZi will only invest in a company which is involved in trade and capital flows, home ownership or open data – the strategic focus of ANZ’s business.
“We are interested in all enabling technologies,” Ron explains. “Some help with data, help with security, help business efficiencies… We try to look for emerging growth companies that have products or services deliverable now or with whom we can develop products and services and launch down the track - preferably both.”
“If we get the chemistry right - if we get the best of what we bring and the best of what they bring - you end up with magic. That's what we're trying to do with some of the joint ventures we're partnering with our portfolio companies on.
“We're investing in people who get up every day and are trying to do one thing better than everybody else in the world… So how do we tap into the innovation, passion and culture and bring some of that magic back into the bank and help us do better?” he says.
So given the size and scale of ANZ as a business – with a market value of around $A60 billion and more than 40,000 employees – I asked Ron how long it would take for our people and customers to notice the benefits from a relatively small team?
He explains it takes time to build the infrastructure, relationships and scale of a successful innovations department and that no single proposition will ever move the needle for a business.
“Successful functions take three to five years to build and get to scale,” according to Ron. “You start seeing the benefit generally around year three and four but the benefits start becoming tangible in years five, six and seven.”
I’m excited to feature some of our latest ventures and portfolio companies and our tech strategy here on bluenotes so keep an eye out for future articles in this series.
Shayne Elliott is CEO at ANZ
27 Jan 2021
28 Jan 2021