Partnering to foster innovation

In the fast-paced world of fintechs and investment, it’s unrealistic to expect banks to have all the answers when it comes to the surge of innovation and disruption redefining financial services.

Click image to zoom Tap image to zoom

There is a growing awareness banks and other large companies must work with external innovation partners to bring new thinking and concepts to help navigate the rapidly changing digital world, according to Antony Strong, ANZ’s Group Executive of Strategy.

“Our innovation team plays a really important role in helping to bring different ideas, different propositions to our customers.” – Antony Strong, Group Executive of Strategy, ANZ

“We recognise that we don't have all of the answers, we don't have all of the capabilities in-house,” Strong says.

ANZ’s external innovation partner 1835i was originally housed within the bank and was dubbed ANZi. But in 2021 it was spun out of the bank and has developed into what he labels a “partnership connector” which connects the bank to start-ups.

Strong and 1835i Chief Executive Officer Justin Greenstein recently sat down with bluenotes to talk innovation and how 1835i fits into ANZ’s larger strategy.

“Our innovation team plays a really important role in helping to bring different ideas, different propositions to our customers,” Strong said. “That will help engage them and help improve their financial wellbeing in particular.”

By any measure, 1835i has been an active investor across a number of sectors – everything from foreign exchange technology to digital receipt management to property market disruption and retail cash back platforms.

What customers want

While the portfolio companies may seem disparate, Greenstein says the approach is well-honed and targeted. It all starts with a picture of who the ANZ customer is and what their needs are now – and into the future.

“We really look deep into the strategy of ANZ. We look at our home owners segments, small business owner segments and institutional segments,” Greenstein said. “How do we want to partner and what do we want to achieve?”

The ultimate goal is to help ANZ attract new customers across all segments, but also build loyalty from existing ones.

Greenstein said technological innovation could help build products and capabilities to achieve this. These changes could also achieve better regulatory outcomes and more cost efficiencies.

He pointed to the investment in the Cashrewards cash back platform as an of example of providing greater value for ANZ customers. The company gives shoppers cash back on their day-to-day purchases at a host of retailers and is busy integrating its product into ANZ’ss banking services.

“Through partnerships with ANZ … we're going to give ANZ customers a much more frictionless experience in terms of getting cash back and helping their financial wellbeing,” Greenstein said.

Success structure

The innovation at 1835i is not only focussed on investing and developing new products and technology – it brings a more nimble operational model that is lean and quick to adapt.

Strong said because 1835i is not a bank – it is closely aligned with ANZ’s creation last year of a Non-Operated Holding Company structure to house what it describes as “non-bank assets”.

“There's a really good reason banks are heavily regulated, but there are times when that regulation is inappropriate for the types of business we're trying to achieve,” Strong said. “Cashrewards, for example. It doesn't make sense for Cashrewards to be regulated as a bank.”

So the non-bank has been a critical enabler of innovation at ANZ and 1835i plays multiple roles in that non-bank, Strong said.

“The non-bank provides an opportunity to partner more effectively with non-banking entities in an environment that was, for want of a better term, policy-lite,” Strong said. “Still well-governed, but with different policies. We can do things faster, with more agility and try different things you might not otherwise be able to achieve within a bank.”

1835i either invests in new fintech start-ups or builds new technologies itself within its Lab division. The Lab feeds technology and products back to ANZ to improve the offering for customers.

“Through 1835i we run pilots and look to build things for ANZ through the Lab,” Strong said. “Equally 1835i plays a really important role in helping us to govern appropriately all of the assets that we have inside the non-bank as well.”

Greenstein said 1835i is helping to transform the culture of innovation at ANZ.

“Ultimately 1835i sitting next door to the bank and having slightly less onerous policies that are more suitable for companies that are not ADI (Australian Deposit Taking institution) regulated enables us to form a culture where there is natural ability to experiment and test new concepts.”

Future trends

When the path towards the future is moving so fast, how do you pick which innovations to pursue?

According to Greenstein, the starting point is how to “improve” banking services today. One example is processing home loans more quickly. 1835i conducted a global search for a technology solution but failed to find one.

So 1835i helped develop its own solution dubbed “Q” which is now being used to process home loans within ANZ.

“It is significantly helping home loan processing, which is both helping customers because home loan applications are quicker. But also helping bankers because they're not having to do as much rework as they were in the past,” Greenstein said.

Another innovation category is focused on “growth”, which are services adjacent to traditional banking, like environmental sustainability. One example is ANZ’s investment in Pollination, a global climate change investment and advisory firm.

The final theme is “disruption” in areas such as “embedded finance”. But with so many irons in the fire how do ANZ and 1835i measure success of their ventures?

There are two dimensions, according to Strong. The first is: is the business healthy? Has it got reasonable financial metrics? Is it growing, is it improving in value?

The more important aspect is how embedded the products are within ANZ services and is it benefitting customers?

“Ultimately what we want to be able to demonstrate is that we have more customers, who are more engaged, who are more financially healthy and who have higher lifetime value for the bank,” Strong said.

Brett Foley is Managing Editor of bluenotes 

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

editor's picks

21 Aug 2023

A new view on the property market

Brett Foley | Managing Editor, bluenotes

Technology is disrupting every aspect of business, including the property market. View Media Group wants to harness that innovation to change the way consumers buy and sell property – and more.

31 Aug 2023

As the cost of living soars, every dollar counts

Brett Foley | Managing Editor, bluenotes

Households are looking for ways to save as bills rise. Cashrewards allows customers to cash back on their purchases.