Sibos 2021: a steady outlook of change

It’s a little bit scary. It’s a little bit exciting. But disruption continues to be a constant for the financial services sector - particularly in cash management and transaction banking, according to ANZ CEO Shayne Elliott.

“There's lots of disruption,” he told a recent ANZ customer call. “And [the pandemic], in a funny way, just accelerated some of those things and gave opportunities to some new entrants.”

The call was held ahead of the Sibos financial services conference, and featured Mark Whelan, Group Executive, Institutional; Lisa Vasic, Managing Director Transaction Banking; and Simon Ireland, Global Head, Financial Institutions Group at ANZ Institutional..

You can listen to an edited version of the conversation below.

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Elliott said the growth of digital usage ANZ had observed through the pandemic – across its retail and institutional businesses – had taken the bank by surprise.

“I thought here in Australia we may have, pre-COVID, reached sort of a peak in mobile app usage in terms of downloads,” he said. “We thought anybody who was going to download the app had already done it.”

“[Yet 2020] was one of our strongest ever years of new app downloads. And I think, again, it just kind of pushed another segment of the community into the digital future.”

This shift in consumer behaviour has significant implications for transaction banking, Elliott said. This includes “the further decline of the use of cash in our markets, which looks pretty set now”.

This created a market ripe for further disruptors, he said. It’s a common theme seen throughout banking – and even corporate – history.  

“At times of crisis, new business models and new companies really emerge and do well,” Elliott said. “And that's what we saw here.”

“Suddenly consumers and customers have all these new problems to solve: ‘How do I work from home?’ ‘How do I shop from home?’ ‘How do I get stuff done digitally?’”

Adapting

For the most part, ANZ has seen its institutional customers tackle those questions head on, according Whelan. He said businesses have been adapting well “pretty much across the board”.

“Different industries adapted differently, but they adapted very quickly and very well,” he said.

This extends to financial performance, Whelan said, with ANZ seeing significantly lower non-performing loans than it had expected at the start of the pandemic.

 “The other thing we've seen is cash balances [in Australia]… grew substantially, and somewhere in the order of 20 per cent over the first half of 2020. And that's remained elevated since.”

As confidence returns to the market, the spike in merger and acquisition activity across all sectors is heating up, Whelan said – and the bank is confident that will continue. 

Pipeline

Amid this slow return to confidence, ANZ has invested heavily in its own infrastructure to ensure it can support the resulting growth. Vasic calls it “exciting”, and said there is “a lot more in the pipeline in terms of opportunities around our platform strategy”.

The bank has spoken openly about its role providing its settlement infrastructure – or ‘rails’ – as a service to partners in the financial services industry, an area it is actively growing.

Whelan said the investment was focussed “particularly around payments and cash management, but also in supporting AML (anti-money laundering), KYC (know-you-customer procedures), cyber protection, regulatory reporting, all the things that form part of offering a really good product”.

“It's an obvious extension for us to then make that available to our customers in the financial institutions space,” he said.

“And that [investment] will continue because we think that's part of doing business today for ourselves and therefore, by extension, our customers in the financial institutions space.”

The strategy has seen ANZ become “probably the largest provider of bank infrastructure to other banks in Australia and New Zealand,” Whelan said.

What’s now critical for the bank – and its customers – is ensuring those operations work and interact seamlessly with the operations of its users, Ireland said. And customers expect that.

“And the most the most compelling reason our customers want that is because of their clients,” he said.

“What we're actually doing is facilitating for other banks on behalf of their clients. And it's very important it goes through and they look good in front of their clients.”

Narrative

With that increasing volume of payments becomes an equally rich volume of data – which continues to be valuable to modern businesses, according to Elliott.

ANZ can use that data “ethically and responsibly, to provide better feedback to our customers,” he said – and no longer just in theory, but in practice.

“The cost curve on data, big tech, and processing has come down so fast, it's now reasonable we can do that, Elliott said.  “I think we are only at the beginning of that. And transaction banking is the foundation of that entire opportunity.”

And right now, the data is telling a more upbeat story than the rest of the economic world, according to the CEO.

“I can't recall a crisis where the narrative and… the data we're seeing was so disparate,” Elliott said. “What we're reading in the papers is small businesses are locked down, they’re closed, they must be struggling.”

“[Yet] on the other hand, insolvencies in Australia at all-time lows. The banks are all reporting really low levels of stress in our books.”

“The data becomes important, not just buying into a narrative because it sounds right.”

Shane White is Content Manager at ANZ Institutional