ANZ boss Mike Smith just explained the huge problem banks face from tech disruption

ANZ CEO Mike Smith

Australian banks are competing hard for leadership in digital products.

Westpac chairman Lindsay Maxsted recently revealed one of the decisive factors in choosing Brian Hartzer to lead Australia’s second-biggest bank was that grasped the digital challenge.

“That is Brian’s home ground,” Maxsted said. “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. He has a great opportunity to put his stamp on this issue.”

ANZ chief executive Mike Smith spoke at Bloomberg’s Sydney offices today, and in the Q&A session he talked about the rapid transformation facing the banking sector and how the digital age is reshaping consumer expectations.

Smith explained the challenges come on two fronts: people are looking for customer service and digital products like they get from tech companies, and banks’ IT infrastructure is basically set up for accountancy and little else.

I have to look at what is Alibaba doing? What is Google Doing? What is Amazon doing? Because that customer experience they’re creating – people are going to ask, ‘Why can’t you do that as a bank?’ And the problem banks have got is that their IT systems are designed around an accounting system. Core banking is all about an accounting system. And we have to move to a customer-driven system, a behaviour driven system. We have all the information – it’s a question of making that transition, which is, I think, going to be the real challenge for banks. I think banks who get this right are really going to benefit enormously, because then you can access markets you couldn’t before.

Smith said one of his priorities as CEO would be to accelerate the digital transformation of the company.

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