How digital changes everything

I’ve been Chief Executive of ASB for more than five years now, and over the course of that time the financial services industry has been undergoing one of the most fundamental periods of change in its history.

So with this in mind, my topic today is ‘digital changes everything’. But, what is ‘digital’ exactly?

35 years ago when I started as a computer programmer, the word ‘digital’ referred to the way we generated, stored and processed data. As technology adoption has become more advanced and our dependency on it has increased, the use of the word has come to represent many different things. For some, it’s just about the technology. For others, digital is a new way of engaging with customers. And for others still, it represents an entirely new way of doing business.

Business models are changing or even disappearing within short timeframes, and new models are appearing just as quickly to address unmet consumer needs.

We all now know you can run a taxi conglomerate without owning a car, or an accommodation conglomerate without owning a hotel. You can sell clothes without owning a store, book travel without being a travel agent, and make a payment without being a bank.

And of course, you can do all this on your mobile phone. Predictions are that 90% of New Zealanders will own a smartphone by 2018 as the barrier to entry decreases with cheaper price points.

I read a quote in a Deloitte report recently that sums up this trend nicely: “The smartphone is the most personal of consumer electronics devices: the most constant companion, the most personal of choices, the most customised and reflective of the owners, the least likely to be shared with other users and the most frequently looked at.”

Digital tools are invading the business environment, provoking significant changes in the way we work, communicate, and sell. In banking, the digital revolution is rapidly transforming the way customers access financial products and services. Banks are facing a situation where FinTech start-ups are playing an increasingly large role in providing innovative products and services to our customers.

The disruption that FinTech is causing is something that’s very much at the top of my mind as a bank CEO.

PwC estimates that the funding of FinTech start-ups more than doubled in 2015, reaching $12.2b, up from $5.6b a year previously.

And when it comes to FinTech companies, it’s clear that simplification and personalisation, two things that legacy bank systems struggle with, are their most powerful weapons.

I read a sobering PwC survey of global banking leaders recently that revealed they see consumer banking and payments as the sectors most likely to be disrupted over the next five years – these are core markets for banks like ASB.

In consumer lending for example, the emergence of peer-to-peer lending allows businesses and individuals to lend and borrow between each other, all without ever involving a traditional bank.

Blockchain – the technology that underpins the bitcoin digital currency – could potentially cause a massive disruption in the payments ecosystem.

It’s emerging as a way to let individuals and companies make and verify transactions between each other on a highly encrypted and secure network instantaneously, without a central authority.

This means that payments which used to go from bank to bank don’t need the bank anymore.  Today, the process is clunky and expensive, and can take days to settle a transaction.  The benefit of blockchain is that it allows instant cross-border payments without the need for a middleman (or middlewoman in my case).  It removes the friction, the frustration, and the cost structures.

At present though, it remains in the experimental phase and with only a few tested use cases.  Experts and analysts remain cautious and while the technology shows promise, several barriers to adoption remain – at least for now.

So whether it’s blockchain, nimble FinTech start-ups or new payments technologies, banks are facing an uphill battle to remain ahead of the game.

There’s an external perception I often pick up that banks are solid, conservative, unchanging and perhaps even a little boring.

I can assure you that on the inside the reality feels quite different; we have some of the most talented, innovative and creative people in the market working for us. These are people who live and breathe innovation and who are driving our strategy to win with our customers and stay ahead of our competitors.

The key point for us is that despite all the change happening around us, our customers remain at the heart of our strategy. Increasingly they ask more of us as the world becomes faster paced, more complex and progressively digital. And so our overarching goal is to meet our customers’ needs by being today’s bank, with tomorrow’s capability.

To get it right we’re broadening our digital focus to include end-to-end customer experiences. In a practical sense, we are talking to our customers directly to help determine where their pain points lie, to streamline processes and decide how we can develop products and services to fulfil their needs.

One of the innovations that have come out of this is Card Control – a function in our app which lets you manage your card and do things like instantly put a hold on it if you lose it.

As of today, nearly 140,000 ASB cards have had a lock manually applied and we have saved plenty in potential fraudulent transactions. 

Another thing that’s turned into a bit of a pain is paying your kids pocket money when you don’t carry much cash anymore.  And we think teaching kids about is important. So, we set about inventing a new generation moneybox – Clever Kash.

Clever Kash was designed to solve a problem for parents who have been struggling to teach their kids the saving and spending habits and knowledge that we once used cash to impart.

Clever Kash is an exciting development, but definitely not our first customer-focused innovation and it won’t be the last.

ASB has a history of innovative firsts and an even deeper history of solving customer problems using technology. From the adoption of real-time banking back in the 60s and 70s, to phone and internet banking in the 80s and 90s, to social and mobile banking today – we have had to keep changing as an organisation in order to be where our customers want us to be.

The key thing is to make sure you’ve got the right procedures in place to identify and deal with any threats right from the start.

A great analogy that I heard recently is that cyber security is like a car’s brakes. While some see a car’s brakes as a tool to slow the car down, they’re actually a tool to enable the car to go faster, but safely.

Digital is not just changing the way in which organisations interact with their customers – it’s also fundamentally changing the way organisations engage, manage and communicate with their people.

One thing at ASB we’ve always been extremely proud of is our culture and the way in which we work across the business to support each other towards a common goal and vision. 

With strong, authentic communication the key to any culture, one of the most powerful assets we’ve developed is our corporate intranet.

We’ve gone from having a top-down, primarily one-way broadcast communication model to a truly open and conversational communication framework. It’s a framework that allows people from across the bank to interact and engage with each other in ways that were unheard of only a few years ago.

People across the business can post a comment or question on the intranet to be seen by anyone; I personally publish a weekly blog which usually generates an enormous amount of engagement; my leadership team hosts regular online chat sessions where people can ask us anything that’s on their mind.

All this is now very familiar and natural to our people, and it has been a great way to encourage open and honest dialog and for us as a leadership team to take the pulse of the organisation.

Digital really is changing everything, and businesses require courage, vision and commitment to stay ahead of the game.

For ASB, we don’t pretend to have all the answers but we believe our focus on the customer experience and on simplifying end-to-end processes to make banking easier and faster, will give us a competitive edge in a changing market.

At the heart of everything we do, is the belief that financial institutions have a unique and privileged position in the way in which we protect our customers’ finances, data and privacy.  And this is even more important today with the number and sophistication of cyber threats on the increase. The fundamental recipe of the relationship we have with our customers is trust.

As with many disrupted industries, ASB’s response has been to reposition ourselves more as a tech company supported by a physical network than a physical company supported by a tech network.

While the ‘what’ of being a bank hasn’t changed, the ‘how’ we deliver services won’t stop changing. And while every day we deal with continual change and dramatically increasing complexity, at the end of every day our commitment to our customers holds true.