Two unrelated executive appointments on opposite sides of the globe announced in the past 24 hours tell you a lot about the changes in the world’s biggest businesses.
Last night Anshu Jain, Deutsche Bank’s former co-CEO, joined American financial technology startup SoFi – notionally a peer-to-peer lending disruptor, albeit with a $US4 billion valuation.
But perhaps the most surprising news was that Maile Carnegie, the head of Google Australia, had quit to work at ANZ, one of Australia’s largest banks.
Bank executives joining tech companies; tech leaders joining banks: this is the way of things now and for years into the future.
Banks around the world have been racing to position themselves as technology companies.
And they already are, to a large extent. Goldman Sachs, for example, had some 9000 programmers and engineers in one recent count, accounting for around a quarter of its workforce. For comparison, in December 2014, Facebook had a total of 9,199 workers and that includes all the non-technical sales and operational staff.
Paul Walker, Goldman’s global co-head of technology, openly admits the bank is “competing for talent with startups and tech companies”.
But the emergence in recent years of disruptive, fast-moving Financial Technology (FinTech, for short) companies has triggered a new sense of urgency for technological innovation and leadership within the banking sector.
At ANZ as Group Executive Digital Banking, Carnegie will develop consumer-facing and internal digital platforms but also share accountability for the group’s financial results. As she explained today to ANZ’s BlueNotes website: “My assumption is that ANZ is a tech company. In today’s world, if you aren’t a tech company or if you’re not rapidly becoming one, then you’re going to be in big trouble.”
She went on: “If you look at all of these magical tools and applications that everyone’s enjoying, whether it’s things like peer-to-peer lending or anything else, they’re fundamentally being driven by a handful of significant innovations, disruptions that are happening in some of the underlying, core parts of technology. Whether that’s networking and computing, or 3D printing, robotics, machine learning, synthetic biology… there is just a handful of underlying technologies that everything from driverless cars through to [payments technology] blockchain are springing up from.
“The other thing that is absolutely applicable from a company like Google is the understanding of some of those foundational technologies, and how you think about the extension of them to help you understand where this might be going.”
Technology leadership is at the top of the agenda for all of the big Australian banks. The Commonwealth Bank, for example, has poured tens of millions into experimental technology, investing in blockchain as a payment platform, building and launched its own mobile payments device for small businesses, Albert, and running its Innovation Lab in Sydney which the company uses to explore technological innovations for itself but also to liaise with the wider entrepreneurial and development community.
And Westpac chairman Lindsay Maxsted said last year that one of the reasons Brian Hartzer was chosen to succeed Gail Kelly as the bank’s CEO was that Hartzer understood the threat from digital disruption in the finance sector.
“He understands the threat; he understands how the Westpac brand is perceived by customers and that there will be significantly different customer interactions as technology changes,” Maxsted said. He helpfully threw out a performance indicator for the CEO, adding that Hartzer has “a great opportunity to put his stamp on this issue.”
The intensity of focus is no surprise when you consider the stakes.
Take foreign exchange. The market in 2013 was estimated at $5.3 trillion dollars every day. A company with a platform that can service a portion of that market and take a tiny clip along the way – conventionally the banking sector – is positioned to make huge amounts of money.
Banks are well aware that technology provides a platform to upend entire industries before they even realise it’s happening, as has happened in retail, hotels, and the taxi industry.
As Atlassian co-founder Mike Cannon-Brookes told Business Insider in an interview last year, the question of how banks tackle the disruptive threat is a painful question for the sector.
Do you break and try and disrupt yourself with technology which traditionally large companies are not very good at or do you go to regulation and regulators to try and suppress that innovation or do the innovators take over the kingdom? It’s probably some combination of all of the above. Obviously in finance the regulations are very necessary because of the impact to people’s lives. If you lost your savings because of some app you were using on your phone went rogue, that’s not cool. Those are important but then again, as a country, we’ve got to make sure we have the right regime to allow that innovation to flourish. It’s about appropriate risks.
Banks raiding the leadership ranks of technology companies to “buy in” expertise in the sector is exactly what you might call an appropriate risk.