21 Apr 2021
It’s a quarter of a century since the American Bankers’ Roundtable commissioned a report on the bank of future which concluded “banking is essential to a modern economy. Banks are not”. It was a line used by Bill Gates when he was running Microsoft and it is one which still resonates today. Not least because we are still fixated on the “bank of the future”.
The crucial insight is banking is a verb – not a noun. It is about providing services not being a particular institution. And it forces us to recognise a bank doesn’t have to – and shouldn’t – try and do everything itself.
"“For ANZ, that foundation is a robust enterprise that meets the needs of its customers and maintains their trust.”
For ANZ, we need to understand what is essential for us to create wealth for our customers and what are simply things we have done for a while but actually other organisations can do better.
We need to understand the foundation of the business. For ANZ, that foundation is a robust enterprise that meets the needs of its customers and maintains their trust. It’s not the bank of the past - but nor is it that line we hear a lot today that “banks are now tech companies”.
What is our foundation?
We can think of four elements:
Just a few years ago we would talk about the divide between digital natives and digital immigrants. Well that divide has pretty much disappeared and that’s why it’s wrong to talk about a traditional bank and digital bank. Technology is banking, it underpins everything today. It underpins our management – ANZ has three people on our Executive Committee with technology backgrounds. Our chairman has a technology background.
Meanwhile, these last 12 months have seen the acceleration of some pronounced trends. That five year, 10 year strategic plan? It’s happening now. Across this last year - and this is across all demographics, not just a particular age group - people have become more comfortable with technology, whether that's keeping in touch with families, online shopping or financial services.
When we look across our mobile banking application, last year we saw about 450,000 people sign up and start using the app for the first time - on top of the millions who already had. That was in a period when we were in lockdown. From a usage point of view, we saw around a 20 to 23 per cent increase in activity on the app. That means every day, three million times a day, people are interacting with their application - about a billion interactions a year.
So when we think about the bank of the future, we need to be clear about what is already happening today.
That became acidly clear on March 13 2020 when we were forced to shift 95 per cent of our people to working from home indefinitely. If we'd said, a year or so before, we've got this project going to get everybody to work from home, let's think about the tech, let's think about the legal components, let’s think it through, it would have been such a monumental project it would never have been undertaken.
But we managed to do it. In a very short period of time. And the bank continued to operate. We were surprised how well we operated through this time and that reinforced this need for an adaptive culture, preparedness to learn quickly, preparedness to try things. Yes, you're going to fail. Things will go wrong but learn quickly, adapt again, move on. That is the culture of the bank of the future we have been building. It is rapidly adaptable.
After the last 12 months, we now believe we can move much faster than we thought. That means when you're doing your strategic planning, instead of looking at three year, four year horizons, you can set much more ambitious targets. We will be able to get to where we want to get to faster. And we realise we can't do it on our own. So through the last 12 months, we've seen what we can do, the challenge is to “bottle” that, to institutionalise that speed and adaptability.
Nurturing grassroots talent
It is important to recognise this accelerated evolution of the last 12 months is significant for our staff too and for how we think about running our bank and attracting talent. It’s not just on the Executive Committee and the board where broader skill sets are needed. Whether you're a banker or you're in retail or telecommunications or in health care, just like our customers who rapidly went through a learning curve last year, the same happened to staff.
Employee expectations are significantly different. We've seen that with the use of Microsoft Teams or whatever collaboration suite you're using. As a modern banker today, you expect to be able to interact and collaborate both internally and externally, using the technology. And you must have data. You want to be able to access the information you need, not just about the customer, but also about the market, about competitors, and you want to be able to do that in a flexible way - because we know, as far as going to the office to work, that's changing as well.
So how do we make sure I can access that information? As a regulated entity, ANZ needs to manage privacy. We need to make sure that from a compliance point of view, we are using pieces of technology from partners such as Salesforce where we've gone to the trouble of making sure that their components meet the requirements of our regulators. Our customers want to know they can trust the services they use and that means that we've got to use technology that complies with the very highest standards.
Meanwhile, we know Australia wants to compete on the world stage when it comes to technology and there is a technology talent shortage. So how do we go about growing our own talent at home? That too comes back again to the balance between what we buy and what we build. ANZ hired 200 tech graduates in 2020, compared with 80 in 2019. Those numbers speak to ANZ’s commitment to nurturing grassroots talent.
There is an enormous opportunity within the industry to build technical skills and capability and we’re excited about working in creative ways to build talent for the future of ANZ. Our Spectrum Program, which enables people on the autism spectrum to work with ANZ to grow their unique talent, is a fantastic example of this. Of course we look externally to hire great people when needed but assembling teams with varied talent and backgrounds remains key to our strategy of building a more adaptable and resilient bank.
Our philosophy is no one is going to be able to navigate these challenges on their own – no one can do it all and do it well. We will partner with major systems providers such as Infosys, with bigtech such as Amazon and Microsoft, with specialists such as payments giant Worldline, and with fintechs.
A lot of the early commentary around emerging fintechs was focused on calling the death knell of the traditional banking establishment. That narrative has shifted now to one that recognises the value of partnerships for both parties. As with a lot of technology endeavours, it’s very difficult to just buy something and put it into an organisation and suddenly change. This is why we continue to look towards solid partnerships with companies such as Atlassian, Google and Microsoft and other financial organisations.
A key belief we have is the approach to architecture has to be modular. Not just for financial services but, specifically when it comes to banking, the idea of a monolithic stack from a single supplier simply won't work going forward. So that means we are looking for major partners who provide a significant component - maybe around customer relationship management, core ledger, mobile banking component, maybe even some key workflow areas. But what I expect to see increasingly, and certainly the approach that we're taking within ANZ, is a modular environment with five or six significant components.
Other elements might come from a niche partner; some we might choose to build ourselves because we think it's a point of difference. But that all means there's a technology ecosystem there, with large established partners as well as the smaller players, as well as the ANZ tech teams. And they've all got to be able to work together to solve some pretty significant problems and do that at an incredible pace.
We have ANZi looking at venture capital opportunities, partnership opportunities. We have our Business Lab area where we're helping incubate some pretty interesting ideas, Those efforts enable us to work very closely with some really, really smart people who are doing some incredible things that help small businesses get started, help streamline things like expense management, continue to take the friction out of the home ownership process. They're all things that we get exposed to through partnerships and that complements those core products we have in the market.
Adapting for a better bank
Our customers’ needs are changing at such a rate we don't have the luxury of spending three years building a massive project and then unveiling it - because the world will have shifted. We have to be that adaptable organisation in order for us to be able to work in a way that quickly picks up on signals from the market, from our customers or competitors, where we just learn something and respond or innovate in advance. You never quite know from where the next bit of stimulus will come.
Even before 2020, we knew innovation and transformation must remain fluid. A set and forget five-year strategy doesn’t allow for the adaptability needed to transform an organisation. But if you have the right systems in place, if you have the right teams in place, if you have the right partnerships with forward-thinking organisations externally, you can build an environment that is adaptable and constantly changing to meet the challenges of the future.
And that essentially is the bank of the future – it’s not a noun but a verb.
Gerard Florian is Group Executive – Technology at ANZ
21 Apr 2021
23 Jun 2020