Banking in the sandbox

There’s fun to be had in the sandbox.

It’s often hard to innovate in banking - with barriers around regulatory considerations, technical limitations and cost constraints, while high levels of competition mean new ideas don’t stay new for long.

Many banks are looking to partnerships for a solution, although strict risk processes mean implementation can require drawn-out procedures, even if the change - and value proposition - is minor.

But there is a growing approach delivering new and interesting solutions in the transaction banking space – and it’s providing companies a safe, fast method to test-and-learn their way to success.

‘Sandboxes’ are virtual environments, isolated from broader systems, designed for testing ideas, developments or programs without impacting the platforms on which they operate. Ideas can be quickly built, expanded on or discarded - like a child playing in a sandbox.

A critical tool in cybersecurity, sandboxes have valuable application for businesses, allowing companies to experiment and explore potential solutions in a low-risk, highly efficient way. Their use is growing in popularity among institutions like banks, fintechs and customers that benefit from taking a crack at cutting-edge financial solutions.

When used cooperatively, sandbox platforms can help large institutions quickly engage with fintechs and other third-party providers to co-create new value propositions more easily, without having to integrate with a core technology stack.

The result is lowered risk of technical issues, faster and newer solutions to market, a quicker route to strategic partnerships with participating entities, and a shortcut to comprehensive due diligence if any party wishes to make an investment decision based on the testing.

Now, ANZ are stepping into the sandbox space with our new ANZ BlueSpace – and it’s already showing some promising signs for participants.

Gamechanger

At ANZ, we think sandboxing is a gamechanger not only in transaction banking, but the entire financial services sphere.

The cooperative model is the key. For fintechs, working with larger institutions can provide a sandbox environment and technology at a scale they could otherwise not access.

Banks benefit from working with innovative third-party providers without having to build that capability internally, and can assess potential long-term partners rapidly without having to go through an expensive, three-to-six-month onboarding process that defeats the purpose of innovating.

And the bank’s institutional customers benefit from quickly succeeding, or failing, on their ideas, allowing them to move on from or quickly implement the tailored solutions they investigate.

For all parties, data security and integrity is critical, and sandboxing provides unique benefits to alternative development methods.

BlueSpace, for instance, plans to use synthetic ‘dummy’ information and fields that mirror real-life transaction data, ensuring results are as close to production grade as possible, and reducing the risk of privacy or regulatory breaches to almost zero. In many cases, no actual customer data is required.

Technical barriers are also lower than what may be initially expected. BlueSpace comes complete with a suite of application programming interface (API) plugins that can simulate certain software environments and end results, enabling ANZ to quickly solve specific problems in a short, specified time.

Progress

Banks around the world have made steady progress in the space as demand for innovation from customers grows. For its own effort, ANZ has linked with Virtusa Corp, a longtime technology partner of ANZ, to deliver BlueSapce. The sandbox is hosted on an external, non-ANZ managed cloud and accessible to third-party solution providers.

ANZ also hopes to use BlueSpace to host hackathons on specific themes to crowdsource solutions from a variety of parties within very short timeframes. It plans to use this to explore new partnership opportunities with industry players, universities, and micro startups.

The bank has already identified multiple opportunities to engage fintechs from across the globe to start testing their solutions. One standout example surrounds supply-chain visibility, a critical compliance issue for all companies in the modern trading environment.

In this use case, a conversation with a large customer has led to ANZ linking up with a fintech to look for new and innovative solutions to help map supply chains deep into multiple tiers. Such capability currently does not exist at ANZ.

The focus of the testing surrounds some interesting AI-driven capabilities, including natural language processing, in an attempt to provide more visibility into supply chains. Application of a successful solution would help ANZ customers deal with increasing demands around responsible lending rules and shifting sustainability expectations.

If it is successful, the large customer, and other ANZ customers, will benefit from this innovation. But the beauty of the sandbox is if the solution is almost, but not quite right for a company, all parties can dive into the sandbox and keep iterating, saving time and money when compared to traditional redevelopment projects.

Many of ANZ’s existing institutional customers have expressed a desire to co-create with us, and BlueSpace delivers on that. ANZ is keen to engage new tech companies that can come and work with us in the sandbox.

ANZ is excited about the art of the possible and looking forward to further establishing itself as one of the leading innovators in the banking industry.

Hari Janakiraman is Head of Industry and Innovation, Transaction Banking at ANZ