Competition is real - ANZ

UK headquartered global payments platform Wise, which has 12.8 million customers globally moving $65 billion every quarter, and Revolut, a global neo-bank and fintech, also British based, are aiming to become successful players in New Zealand’s financial markets. 

Revolut, which recently became Europe's most valuable private tech company, has applied to become a registered New Zealand bank. If it is successful, Revolut will become the first global digital bank in the New Zealand market.

Speaking to Shared Lunch, ANZ Chief executive Shayne Elliott says the competition is real. “We need to be more agile. We have historically run the business on big computer systems, big branch networks that are fixed and efficient, but are slow and hard to change.”

It is not good enough to do just what has been done in the past. He says the challenge for the big banks is how to have a big stable diverse banking systems and innovative fast clever propositions.

“We have re-platformed the ANZ business to one for retail and small businesses and the other for the big end institutional customers. We are building a whole new banking system that is fast, reliable and low cost.”

The result is ANZ Plus launched two years ago in Australia only, despite criticism. Costing millions of dollars to develop, it has resulted in ANZ being able service customers 35% cheaper through the online platform than the traditional bank. A year ago, it was a 20% cheaper.

About 850,000 customers are using the new platform and six million existing customers will be moved across over the next two years. 

Elliott says ANZ Plus had to be low cost as banking is a commoditised industry. It also had to be fast to launch new features and functions to stay ahead and satisfy customers’ needs.

The future, he says is about how to embrace technology and using open banking. In ANZ Plus customers can import and view their transactions from 110 other banks in Australia.

New Zealand banks – the main four owned by Australian banks – have been slow to adopt open banking and have just turned on the tap, although only slightly.

Next in banking revolution will be regenerative AI, Elliott says. Banks, he says, will start using the co-pilots embedded in every single tech tool to make them more efficient.  The benefits won’t differentiate banks, they will get competed away for the benefit of customers

“The real opportunity is taking the AI tools and intelligent automation that comes with advanced analytics and embed them in propositions.”

He says it could mean, for example, a virtual personal banker online, and accessible through any device, who could answer questions such as could you afford to go on holiday this year, where your money went last month, or are you saving enough for retirement.

Some who have the right tech will be able to build better propositions.

Competition

He disagrees with the Commerce Commission’s assertion banking is not competitive in New Zealand. As an ANZ New Zealand board member, Elliott says he wakes up every morning paranoid that somebody is going to come along and steal the bank’s business and customers or there is a better mouse trap somewhere. “ANZ is on the front foot in investing heavily to retain customers.”

Safety vs looser lending

The biggest cost to borrowers Elliott says has been the safety society wants around lending. Years ago, a borrower could talk to a bank manager who would make an assessment on a person’s character, initiative and integrity as well as the numbers.

Now rules and speed bumps are in place and perfectly decent, hardworking and honest people can’t get a loan because other well-meaning buffers are also built in to protect banks. The average New Zealander and Australian cannot afford the average home.

As the regulations have become more onerous to protect borrowers, Elliott says banks rely more heavily on complicated spreadsheets, credit ratings and track records to ensure nobody ever gets hurt but consequently loans are harder to get.

“The regulations weren’t originally designed to do this. They were well intentioned but that is what has happened. People who would have had a chance to borrow in the past now miss out.”

Elliott says he is not just theorising. “Looking at somebody who has a home loan and their level of income relative to the average person, the data shows they have always had higher incomes.

“How much higher than average has exploded over the past 10-15 years. It used to be 10% higher than the average, now it is 40%.

“It’s because all these safety factors have been built in to protect borrowers. Part of it is also because house prices are higher, but the real issue is banks have made it harder to get a home loan. Even getting a credit card in New Zealand or Australia is harder than anywhere else in the world.”

As a community we decided to vote for safety and that is fine, but it comes at a cost. The cost is the person in the middle who we would have given a home loan or credit card to 10 years ago isn’t getting it today. That is a cost to aspiration, growth and dynamism in the economy”

While it makes the bank safer, is this what we signed up for as a community?”