Behind the invisible force turning ANZ inside out

It’s come at a huge upfront cost, but ANZ boss Shayne Elliott says the sky is the limit for the potential savings that technology can offer.

ANZ CEO Shayne Elliott speaks in Melbourne earlier Tuesday. Picture: Arsineh Houspian

It might have a snappy name, but for Shayne Elliott there is a lot more is riding on the ANZ Plus smartphone app than a fresh new look for a bank pushing 190 years old.

For the ANZ chief executive, the new ANZ Plus platform represents the front line of a bigger revolution taking place inside the bank. It is all about leveraging as much technology as possible to drive an old-world concept of productivity.

Like sunlight, productivity is the invisible energy that Elliott wants to harness to take on the likes of the bigger rivals like Commonwealth Bank that use massive scale to their cost advantage. As the smallest of the big four banks ANZ, needs to be smarter in the race to the top.

And this is where ANZ Plus comes in. It’s an entire new digital retail bank Elliott has been building in the background. It has the promise of doing things for customers faster and smarter. Importantly for ANZ, everything ANZ Plus does, including processing mortgages online, will be at a significantly lower cost.

Chief risk officer Kevin Corbally and chief executive Shayne Elliott at ANZ’s headquarters in Melbourne. Picture: Arsineh Houspian.

But much like the renewables build out under way, all this comes with a very high upfront cost. For Elliott the risk is being able show tangible returns for the billions of dollars he has already spent on productivity programs across the bank.

Investors haven’t been swayed yet with the investment still running ahead of gains, but Elliott is convinced the moment is coming.

Since the productivity drive started four years ago, Elliott points to $1.5bn in cumulative savings across every area of the bank. The biggest jump came in the past six months.

Importantly the program is ongoing and could well pass “two or even three billion” in annualised savings, he says. This could all be a “virtuous circle”, he says. The more savings give him more capacity to invest back into the bank.

Working against Elliott is his decision to not put a marker in the ground of promising “X” worth of cost savings by a certain date. He compares programs like that to “fad diet” that don’t work. Bad habits slip back in once their over.

“There’s going to be no end in sight,” Elliott tells The Australian about his productivity agenda. “At the end of the day, the better we are at productivity, the better it means we can compete and offer literally everyday low prices to our customers.”

Building a new digital bank is one of several major programs under way at once, including designing an entire new technology stack, investing in a new payments platform across the institutional business, using data and analytics in a better way, rebuilding the commercial business and preparing for the planned integration of Suncorp.

Since being launched 18 months ago, ANZ Plus has generated more than $14bn of deposits and now has 700,000 customers on the platform. Many of these are new to the bank. The next big step will be to move 1.2 million Suncorp customers on to the platform, then the really big job of smoothly moving millions of ANZ customers across. Then he can switch off his high-cost old platform.

ANZ on Tuesday posted a 7 per cent drop in interim cash profit to $3.55bn. Picture: Getty Images

Elliott says there’s a real need for banks to be “always on” when it comes to finding better ways of shaving costs.

“I’ve only ever worked in banks, but banks are unusual in that we don’t have any pricing power”.

“When interest rates go up, the cost of money goes up (and) we can pass it on to borrowers. But when the cost of running the bank goes up, we don’t get to pass the rate on to our home-loan customers and say: ‘I’m sorry I’ve got all these new wage or compliance costs, you need to pay more on your home loan’.

“We have to pay more for software, we have to pay more for technology, we have to pay more to comply with regulation. Fair enough. But if we don’t drive productivity, we’ll be out of business.”

Used smartly, new tools like generative artificial intelligence could fundamentally change the back end of banking. Any incremental gains in savings have a big dollar impact when it comes to an annual cost base that exceeds $10bn.

Suncorp nears

Elliott is still some months from picking up the keys to his biggest acquisition to date.

It’s nearly two years since the big four bank signed off on the $4.9bn buyout of Brisbane-based lender Suncorp, but a long-running arm wrestle with the competition regulator threatened to put a spanner in the works.

ANZ appealed to the competition umpire, the Australian Competition Tribunal, and this year the bank was given the green light to push ahead again.

The deal is now in the final stages of approval, and the final say on the deal rests with federal Treasurer Jim Chalmers. This is expected around August.

ANZ expects to gain full ownership of Suncorp in coming months. Picture: Dan Peled

Even so, ANZ has already been using cutting-edge generative AI in the background to help it with the merger. This is possibly the first time the powerful technology has been unleashed on a big Australia corporate merger.

Elliott says a generative AI tool is being piloted to radically reduce the time to compare, contrast and harmonise thousands of terms conditions, procedures, policies and contracts of Suncorp bank and ANZ.

This is mind-numbingly detailed work. And the other side of it means teams of expensive lawyers and risk staff won’t be needed to go through thousands of pages of documents.

An exercise like this would ordinarily take months but is being worked through automatically and instantaneously. It is moves like this that have the potential to vastly accelerate the pace of multi-year integrations.

Elsewhere across ANZ, engineers are using generative AI tools to rewrite software in ways which speeds up processes for the bank.

The bank has also built an AI tool which monitors accounts of home loan and small business customers, which means the bank is identifying borrowers at risk of falling behind their loans months before the customer faces real stress.

They are small steps, but it’s an insight into how AI is starting to be used across the technology-heavy banks in Australia, and indeed what is to come for business.

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Originally published as Behind the invisible force turning ANZ inside out