Can ANZ’s $2.5 billion tech bet close the gap on rivals?

More than two years ago and with much fanfare but minimal functionality, ANZ Bank launched a new banking platform.

It was aimed at protecting the bank from the rise of big tech disruptors, improving its dwindling profit margins in the retail division, bringing the smallest of the big four banks into the 21st century and ultimately giving customers more control of their money.

ANZ Bank’s group executive in charge of Australian retail, Maile Carnegie.Credit: Stephen Kiprillis

But ANZ Plus, which – along with the institutional platform Transactive – has cost $2.5 billion to date, has so far underwhelmed investors and analysts, who are asking whether the blue bank is merely playing catch-up with its rivals – and wonder if it’s too many years too late.

ANZ retail group executive Maile Carnegie acknowledges those concerns but says she is confident the strategy will help the bank differentiate itself, while stressing the magnitude of the task ahead that she vows to see through.

“You need to both completely rebuild the underlying foundations of that business – so that is all of that legacy technology component, it’s getting everything automated, it’s fixing the security, you name it,” Carnegie said this week.

“And you also then need to rebuild on top of that – all of the customer experiences. And the approach that we have taken is to first focus on building that underlying foundation, which again is a very distinct and differentiated choice versus what we could have done. But we decided to kind of put our effort into building that underlying foundation first because what that allowed us to do is de-risk the program, but also it enabled us to get the best return on investment from that investment in the foundation because we could make sure the build was very coherent and interconnected.”

As consumers ditch cash and do the vast bulk of their banking online, technology has become a critical battleground for the big four, and ANZ has previously admitted to being something of a tech laggard. ANZ Plus is an attempt to address this.

The platform allows customers to open accounts in minutes and provides detailed insights on customers’ finances. It is 35 per cent cheaper to run and offers digital home loans, effectively becoming a digital bank run by one of the big four. Since launching, it has attracted $16 billion in deposits and 880,000 customers, in part by offering higher interest rates than rivals.

ANZ will roll over its 5 million retail customers plus another 1 million from Suncorp by the end of 2028, with the promise of reducing cost headwinds and passing on those savings to customers.

One in five active retail customers is on the new platform, and from 2027, new customers will be allowed to open only an ANZ Plus account, chief executive Shayne Elliott told analysts last week.

It’s a mammoth undertaking.

Bank watchers are commending Carnegie, a former managing director of Google Australia who is seen as a possible leadership contender for when Elliott steps down, for shepherding the project as well as overseeing the retail arm in what is considered an institutional bank. But they are itching for those shareholder returns.

It may be too soon to expect a financial pay-off for ANZ Plus. After all, Commonwealth Bank of Australia, which is the leader in the technology space, started its big tech investment almost two decades ago and updated its core platforms a decade ago.

Therein lies the problem for ANZ, a laggard in tech spending as well as in its retail division, which reported a net interest margin of 1.91 per cent in the 2024 financial year. Like all the other majors, ANZ’s retail profits are being squeezed by the intense mortgage competition.

MST Financial senior research analyst Brian Johnson says that when banks undergo big tech transformations, they are always going to turn out to be more complex and cumbersome than expected.

“Inevitably, they’re going to cost more, and it takes a lot longer than you think,” Johnson says. “You can make everything look good at the front end, but running the duplicated system at the back end is where the problem is. Porting from one system to the other is more difficult than you think. And it’s hard to think CommBank just won’t dial forward.”

ANZ’s group executive for Australian retail banking Maile Carnegie with chief executive Shayne Elliott at the launch of ANZ Plus in March 2022. Credit: Louise Kennerley

By the time Plus is fully functional in four years’ time, CBA is likely to be miles ahead, while NAB – and to a lesser degree Westpac – should also have leapt forward.

Carnegie has to ensure that migrating existing customers onto the platform, while also retaining the new Suncorp customers, will be seamless, and the new platform will be comparable – even better than – what the other banks are doing. The retail boss is confident she can deliver.

“We’ve gone around the world and looked at what are some of the biggest customer pain points associated with a migration, and we are making a choice to engineer as many of those pain points out as possible,” Carnegie says.

“No one wants to have to rebuild their debit [accounts]. No one wants to have to go back to their employer and give them new details about bank accounts they put their salary into. So we’ve got a list of those customer pain points, and we are choosing to engineer them out, so customers do not need to do them as they are migrating over.”

Alphinity principal Andrew Martin, who attended the launch more than two years ago, describes the project as ambitious and bold but necessary if ANZ wants its retail arm to survive.

“ANZ’s view is: We can sit here and be inefficient in an operating cost sense, or we can try something different and try to take the lead from an efficiency point of view,” Martin says. “They’re trying to differentiate themselves from other big banks in the way they’re going on about it.”

In a note to investors, Morgan Stanley analysts describe the period ahead for ANZ as “pivotal”. They say management was very upbeat about the potential benefits of ANZ Plus. “We believe migration and integration costs will be higher in the near term and meaningful financial benefits won’t emerge before FY27,” they wrote.

But as banks wrestle with their dual identities as tech companies and financial institutions, and as they compete for a market of 25 million Australians, ANZ has no choice but to put its eggs into the Plus basket.

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