Digital economies: the view from Australia

Mark Evans, managing director, transaction banking at ANZ, talks to Club@Sibos about the role banks can play in digital economies.

By Heather McKenzie

Club@Sibos: Governments around the world, including in Australia, are launching or investigating digital economy strategies. What do you believe are the main benefits of a digital economy?

Mark Evans: The benefits – such as connectivity, speed, convenience – are numerous and the potential of digital technologies, and the implications for the economy, have not been fully realised yet.

When the phrase ‘digital economy’ was first coined, most people were thinking in terms of the information technology sector and the actual technologies that were being developed. Now we’re seeing a convergence of the digital and the non-digital economies. It’s similar to the evolution that first happened with the introduction of the computer, or the internet; at first the discussions and impact were limited to the tech sectors, but eventually they became mainstream to the point where now no one can imagine going about their business without a computer or the internet.

It’s the same for the digital economy. If you take typical Australian sectors like agribusiness or resources and energy, they are physical and tangible industries, but they are also undergoing a digital transformation. They have had to adapt and predict how digital technologies will shape the economy of the future. We are already seeing how our customers in these sectors are using the internet of things, smart data, distributed ledger technology, artificial intelligence and more to improve efficiencies in their supply chain, improve safety, and make smarter decisions about their business.

Some of our customers, in our home markets of Australia and New Zealand and across our international footprint, are doing business in remote areas. Digital technologies are enabling financial inclusion, by transforming how people connect and do business, and connecting new groups of people into the economy. For example, it’s now easier to set up an ecommerce venture, to connect to payment systems, and to access finance.

What role do you think banks can, or should, play in the development of digital economies?

Banks are also going through the same digital transformation their customers are, and they need to anticipate what their customers’ needs will be in the future. It’s easy to get distracted with the latest digital technologies and start experimenting with them for their own sake. At ANZ, we’re mindful that we need to solve real-world problems of our customers, and with our distributed ledger trials, for example, we made sure we were testing something that is useful before we develop it further.

Banks also need to decide what role they want to play: do they want to specialise in a particular digital offering? Do they want to offer an open platform for other providers’ services? Do they want to be the regulated entity that fintechs use for their own financial services?

At ANZ we have been through a cultural transformation as well as a digital one. Our CEO, Shayne Elliott, has been transforming the organisation so that we are agile and can adapt easily to the future, whatever that may hold.

There has been a lot of attention on our people having the right mindset, of being open and agile, and the right values, so that we can adapt to and learn about the new economy of the future.

The future isn’t just about digital technologies – it’s also about people. Even with artificial intelligence or machine learning, the development starts with humans; from the outset you have to have the right people with the right intent asking the right questions.

What barriers exist in creating digital economies? How do you think these can be overcome?

I would say it’s the mindset, and people not being open to possibilities. We’re also witnessing change at an extraordinary pace and it can be easy for people to be left behind or to take shortcuts which expose individuals and the economy to risk. That’s why we’re focused on being adaptable and agile so we can respond quickly to the new environment as it takes shape but not rushing so fast that we overlook the important role banks playing in controlling risk and supporting a secure financial system.

What steps should transaction banks take to prepare for a digital economy?

I’d like to paraphrase ANZ’s CEO, Shayne Elliott, who has said that the transformation has to start with ourselves. This includes bringing a shift in thinking and the mindset of our people.

Also, as a transaction bank, we recognise that we cannot do everything ourselves to keep pace with our customers’ expectations. Banks have a choice of embracing a digital future, or shying away from it. At ANZ, we’re being very open, and are keen to partner with others where it makes sense.

For example, in September we announced that we are working with Google in Australia to use their data and analytics tools to bring insights to our customers, which has already been used to great effect in transaction banking.

Which technologies do you think are the most promising for the future role of banks in a digital economy? What is ANZ’s experience of such technologies?

The example of Google is an exciting one, and has shown lots of promise for the future. However, to come back to the point about being agile, we do not know what the future holds. When the iPhone was first introduced to consumers in 2007, no one could anticipate all the ways that smart devices are used today. That’s why we need to be able to quickly identify the potential when new opportunities present themselves.

Even though we’re already witnessing the potential of distributed ledger technology – and how it can remove intermediaries from all kinds of business models – we are still keeping an open mind; it doesn’t have to be blockchain that accomplishes these goals.

There are some interesting infrastructure modernisation projects in Australia such as the New Payments Platform. What impact do you think these projects will have on financial services in Australia and on ANZ Group itself?

We’re excited to be able to connect our customers to the New Payments Platform [NPP] and real-time payments in Australia. The platform has been designed from the outset with international standards in mind, and the option of overlay services means that users will be able to develop all sorts of solutions that make use of the data that accompanies a transaction.

NPP isn’t just a retail customer proposition – our institutional customers are also seeing the benefits of being connected to the real-time platform. At ANZ we have also been successful in winning a number of agency mandates so that other financial institutions can connect to the platform through us.

Real-time payments speed everything up – people can pay and receive money quicker, and the velocity of money in the economy also picks up. The project brings Australia up to the speed of other markets that already have real-time payments, and I don’t imagine it’ll be long before we see cross-border real-time connectivity between national payments platforms.