Elliott: rebuilding our capability and capacity

Just on five years ago, in fact just after Maile Carnegie joined ANZ as our Head of Digital, we set up a small team to think deeply about what the future of banking looked like and what we needed to do to prepare.

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Pic: ANZ CEO Shayne Elliott with ANZ Plus coaches Source: Arsineh Houspian

This was before the Royal Commission, before simplification became so ubiquitous - and well before anybody had heard of COVID-19.

“We embraced the idea that, in a world of constant change, the spoils go to the nimble and productive. That’s why unlocking pace and agility has been at the heart of our strategy.”

NeoBanks were just an idea and FinTechs were only just emerging as a serious proposition. The idea of BigTech taking over banking was a background rumble.

In Australia, the major banks continued to hold around 80 per cent market share with returns on shareholder investment in the mid-teens.

That all sounds pretty rosy today but the seeds of change and disruption were being sown.

In fact, we could already see massive forces fundamentally changing banking forever – forces that would effectively lead to intense competition, less revenue and reduced profitability for the sector.

Our customers now want far more for less: more self-service, more digital, more accessibility - but lower fees and charges.

Customers were also being “trained”, particularly by the tech industry, not to accept the status quo and to expect constant innovation and improvement.

With the harsh spotlight of the Royal Commission in Australia, the community and regulators quite rightly wanted better: better behaviour, better products and services and greater accountability when things go wrong.

Finally, but not least, after years of traditional competition, the floodgates were being opened to that array of new competitive threats: BigTech, Fintech, Neobanks, New Payment systems, Crypto and Buy Now, Pay Later to name just a few.

Embracing pace and agility

It was clear the future was going to be very different. It was also very clear ANZ was not in the best position to succeed. For example:

  1. We were sub-scale in Australian retail but over exposed in Institutional, a lower margin and more capital-intensive business.
  2. We had other businesses scattered through the region not producing adequate returns but taking up valuable capital and resources.
  3. We were also not as productive as we needed to be and our technology was built for a different time.

That all sounds pretty grim - and I can assure you it was – so we set about massively simplifying and reshaping our portfolio.

We embraced the idea that, in a world of constant change, the spoils go to the nimble and productive. That’s why unlocking pace and agility has been at the heart of our strategy.

Since then:

  • We’ve sold almost 30 non-core businesses. And many of these were great businesses but we were not the best owner.
  • We shrank and refocused Institutional to set it up for long term success. It’s now one of the best Institutional banking businesses in the world - just as tailwinds are emerging for that sector.
  • And we took out $A1 billion dollars in run-the-bank costs while also introducing agile ways of working.

These actions released around $A15 billion dollars of capital which was partly re-invested to build a better bank - most notably in our Australia Retail business.

And that is the work we are now launching, the work we are doing to completely rebuild our capability and capacity.

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Better value

Now I need to be clear here. This is not a traditional ‘core-banking’ replacement. Nor is it a capital T transformation where we spend billions with one of the big consulting firms to patch aging technology.

What we have done instead is design a new retail bank without the constraints of existing technology. A retail bank focused on improving the financial wellbeing of our customers.

We did this not only because it is the right thing to do but also because we know, for ANZ to be successful, we are going to need to get better lifetime value per customer than our competitors.

So what does that mean? It means Australians will join us because we are competitive and convenient. And they will stay longer and give us more of their banking because we continue to innovate and they will know we will give them insights to help them be better off financially with ANZ.

We didn’t start this process with what technology to use, rather we identified the core principles that drive financial wellbeing.

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These may sound a little hokey - and some are very obvious - but we all know how difficult it is to know exactly where your money goes. 

So we worked with the best software companies in the world - Salesforce, Atlassian, Twilio to name a few - to build a platform for the future, a platform for a bank that is agile, open and, above all, helps us improve the financial standing of our customers.

It’s a platform that doesn’t lock us into one ‘core system’.

Like the best banks in the world, particularly in Europe, we’ve taken a modular approach where we will be able to flex and change as the environment changes - quickly, safely and at low cost.

And while the work so far has mostly been unseen, I’m proud of the progress the team has made. We are in a materially better position than just a few years ago.

We’ve gone from a tech stack that was inflexible, slow and costly to maintain to one that is nimble, adaptable and cheaper to run. We’ve improved the quality of our data and we’ve simplified our products – not just with ANZ Plus but more broadly across the bank. 

Speeding up

To better paint the picture, the simpler ANZ Plus service has already eliminated 58 service activities currently performed manually by our people. This means we will be 30 per cent more efficient in back office and the work should lead to a 45 per cent reduction in complaints volume.

We’ve also reduced the time it takes to onboard a new customer from 3 to 5 business days to minutes.

And the platform also allows us to release a range of new features each month, safely and at low cost.

In March we are releasing 94 new features, in April 87 and May 73 – features like joining the bank with a foreign passport or enabling customers to see real time expense predictions or allowing customers to check which merchants, like Netflix or the local gym for example, have their card on file.

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Previously we would struggle to launch one new feature per month. We will still have a long way to go and what you are seeing today is just the beginning. The team is working hard on a home loan proposition on ANZ Plus to be followed by credit cards as well as banking services for small-to-medium enterprises

At our most recent results presentation I used the analogy it is a bit like building a skyscraper – all the hard work is beneath the ground but once the building emerges, if well engineered, it will grow quickly and be loved by those who use it.

Shayne Elliott is CEO of ANZ

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