The former boss of Google in Australia, Maile Carnegie, says there is no reason ANZ Banking Group cannot become as innovative as the internet pioneer and she will need to help it move quickly to fend off growing competition from fintech disrupters and global technology giants.
Speaking to The Australian Financial Review ahead of an appearance at the AFR Innovation Summit on Thursday, Carnegie predicts a new competitive landscape for the financial services industry where banks will both compete and collaborate with other companies whether they be start-ups or giants like Apple.
Carnegie says her surprise hire to be ANZ's group executive of digital banking in March was part of recognition by chief executive Shayne Elliott that a number of tech-led forces will change the face of the banking industry forever.
She began her new role three weeks ago and has already taken the chance to dive into company-wide strategic planning sessions about areas as varied as the adoption of artificial intelligence, blockchain technology, the growing influence of data, and how the bank should better collaborate with fintech start-ups while remaining competitive.
Despite the switch from Google's brightly coloured nerd nirvana to a big four bank, Carnegie says the respective cultures "aren't as far apart as you would think".
"The bank takes an extraordinary amount of risk and is incredibly comfortable failing … It risks and fails with about $2 billion a year in its credit," she says, pointing to the rough amount of provisions ANZ makes each year for loans that go bad.
"If you go back and think how that credit risk is managed, it actually is quite consistent with how Google is managing its innovation."
Carnegie says Google's innovation culture has been built by a combination of both giving staff extensive freedom, while also closely and rigorously managing their performance, something that can be recreated in a banking environment.
At ANZ, she is in charge of its digital business at a time when more customers are engaging with banks purely electronically. She has also picked up responsibility for group marketing. She believes lessons learned in her three years at Google and before that 20 years at Proctor & Gamble, will stand the bank in good stead.
Sleeping with the enemy
She says that, like Google, ANZ will need to learn that future success will be achieved by companies that can collaborate with their competitors.
"Google works and competes with big media companies and Apple but is very comfortable living in that very ambiguous world, where you are competing one day and cooperating the next," she says.
"We absolutely have to get there."
One recent example of ANZ walking this talk was its decision to break ranks with the other big banks and offer Apple Pay and Android Pay to its customers, while their rivals banded together to compete.
"There is no doubt in my mind that the companies that are going to succeed going forward master the art of external collaboration and external competition – often with the same companies," Carnegie says.
In a recent report on the impact of fintech disruption on big banks, UBS analyst Jonathan Mott said ANZ was the most likely to be disrupted because more of its customers were willing to try fintech alternatives.
Like its competitors, ANZ has already been trying to get on the front foot in the face of the start-up onslaught. It has a partnership with co-working space the York Butter Factory in Melbourne, and earlier this year it announced a deal with Honcho, a Sydney-based start-up that sets up new businesses, and said more collaboration with tech companies is in the pipeline.
"Fintech could disrupt banking and cracks are already appearing – the extent to which the threat can be repelled will depend on the work done in the next two years," Carnegie says.
"There is some really interesting stuff going on [in fintech] and there are already cracks in the mortar where fintech can start wiggling in. A lot of people have been worried about disintermediation with our customers and, in the long run, we will go down one of two paths. If we get our innovation engine going, then it will be a huge enabler; if we don't, it will be massive trouble for us."
Fostering innovative culture
Carnegie says it became apparent during her time at Google that more needs to be done to foster cultures within companies whereby innovation and adaptation can happen more quickly.
She says she has seen numerous examples where companies have ignored impending disruption and put off changes until it is too late.
"Generally what I see more often than not in Australian companies is they don't get the will to change until they no longer have the means to make the change," she says.
"As soon as you have had any kind of success, your mind starts going towards less about imagining the future and more towards how do I protect what I have. ANZ is going to have to start to accelerate innovation or face trouble from start-ups and other places."
Carnegie says she wasn't looking to leave Google when Elliott initially came calling with an offer to join ANZ. She already had a strong relationship with the bank and with Elliott, having exchanged several books and ideas with him, members of the board and senior executives.
This came after ANZ sought advice from Google about how to become more nimble, and Carnegie accompanied ANZ chairman David Gonski and the board of directors to a trip to Silicon Valley back in June 2015.
Cultural change is "a Herculean task" that will only be successful if the CEO and senior executives "are absolutely committed and also have the character to see it through", she says.
"I would not have joined the ANZ if I did not see in Shayne the commitment. Also I did quite a lot of homework to check whether it was going to be a fleeting commitment, or whether he was the type of leader who was going to stay with it when the going gets tough. And the going will get tough; it is going to be difficult. And that is fundamentally the bet that I have made."
Key issues
Three big technology issues seem set re-define banking over the coming decade: the use of, and access to, big data; artificial intelligence; and blockchain, or distributed ledger technology, which refers to networks of synchronised computer databases.
With a Productivity Commission review into the use data currently underway, Carnegie says in principle, ANZ "should be an organisation fostering innovation; we should be helping the broader ecosystem as much as is practical and pragmatic".
But before working out what data might be opened up to outsiders, ANZ will need to ensure that its customers are fully protected and all necessary permissions are provided. She says ANZ will also need to deeply understand where its competitive advantage in data lies, and develop clear rules of engagement about what it is willing to share with others.
Again this is an area where ANZ will now be able to look to the wisdom of Google.
"Google understands this clearly. They don't share the core of what they believe is their competitive advantage and they share everything else," Carnegie says.
Meanwhile with AI, ANZ has been experimenting with "robot process automation" for the past couple of years to determine how it can be deployed in payroll administration, helpdesk support and customer service.
Carnegie says Google's initial application of AI has been for cost savings in server farms, and believes there are huge applications for reducing costs and figuring out how you provide service better internally at ANZ. She thinks similarly about the biggest initial impact of distributed ledgers.
"My assumption about where we will get the fastest and most exciting short term application is in the back and middle office to reduce cost and simplify stuff. That's not do say it won't hit prime time with consumers, but my guess it won't start there," she says.
Government agenda
With Innovation Minister Greg Hunt addressing the Financial Review Innovation Summit on Thursday, Carnegie says the government is not getting credit for work underway to drive national innovation culture.
Pointing to The Prince by Machiavelli, she says the hardest message to sell is one of change and innovation, because people today will be losing their power on a hope about the future. But nobody wants to trade off certainty of power for maybe getting some down the track.
"When I look at what the government said it was going to do and the progress it is making I am actually quite excited about it. I feel they are not getting the credit they deserve for the progress they are making," she says.
Rather, her frustration is with the quality of the national conversation, which she feels has not matured in its understanding of innovative change.
"As a nation we are still wallowing around pretending like we don't understand what the formula is to drive innovation. We know what the formula is. The issue is we aren't doing it – so let's talk about why we aren't doing it," she says.