Today's banks are complex. Over the years they have grown from small retail operations into sprawling financial institutions, along the way acquiring other businesses, inheriting product lines and processes.
Though this means they can offer a broad array of sophisticated services to a wide range of customers, it leaves them with inefficiencies and high overheads. ANZ Bank wanted to turn that model on its head; to make things simple again. It quickly discovered there's no off-the-shelf recipe for that kind of transformation.
Almost 10 years after acquiring the National Bank, it was time to combine the two under a single banner.
The visible part of the conversion meant rebranding National Bank branches creating one branch network.
Like icebergs, the dangerous part was hidden from sight. Behind the scenes two complex, sprawling systems needed to be integrated.
That programme reached its climax one Sunday morning late last October. ANZ Bank chief operating officer Craig Sims sat poised to give the green light to the biggest information technology integration project seen in New Zealand. It was a heart-stopping moment. Sims says: "Once I pushed the button, there was no going back". Sims' button push would trigger moving 2.6 million customer records, 80 million transactions and NZ$46 billion in funds to a new banking system.
The story starts in 2003 when ANZ bought the National Bank of New Zealand. Sims says conditions were different at the time: banking was a high-growth market. He says: "The two brands were positioned differently. They were complementary." ANZ is part of a 32-country business with a reach across Asia-Pacific. National Bank was a strong aspirational local bank. At the time, it made sense to run the two banks as separate brands. They serviced different markets and provided distinct customer experiences.
Then there was the global financial crisis. By 2010 market conditions had changed. One lesson from the upheaval was that strong, well-capitalised banks were able to succeed. Instead of running two brands, with two philosophies, two management teams along with two sets of systems and processes, ANZ decided to retire the National Bank brand.
Combining two banks meant simplifying the business, however once ANZ embarked on that path, it was clear simplification could go much further. Sims says at first it became the business focus, then it became the corporation's driving philosophy. The bank came to the counter-intuitive decision that a simpler business would be better for customers and better for the bank.
There was plenty of scope for simplification. New Zealand businesses don't get much more complex than the ANZ Bank. Sims says: "With 9000 staff, 300 branches and around 2 million customers, we have a relationship with about one-in-two New Zealanders. As you get bigger, you get more complex."
Simplification has immediate benefits. There are operational and technology cost savings. Sims says it also means the bank can focus more on delivering the key products customers need, and work to create better quality products. At the same time it means bank staff have less to focus on - this means instead of taking a scattergun approach to selling bank products they have time to dig deeper into each remaining product. He says: "When you have 300 things to know, it's hard to have an in-depth discussion."
Sims says this paid off with the bank's home loans business. When the bank started on its simplification programme, the ANZ was winning 25 per cent of the new mortgage business, now it is getting more than 30 per cent.
Although ANZ is part of a multinational group, local management choose to stick with FIS Systematics, the core banking technology used by National Bank after the integration. As the National Bank enjoyed a better service reputation, its system was the natural choice. Sims says there was an option to go with either existing system or choose something new. He says managers rejected moving to a new system because one of the overriding principles guiding the integration was to minimise risk.
Risk minimisation also explains why the project missed its original target date of late 2011. Sims says testing took longer than anticipated: "As we got further in to it we realised we need more testing." He says: "We also needed to make sure our staff were ready for the change. We wanted to get it right - and take the extra time to do it." He says it was worth it, the conversion was smooth.
Normal banking practice sees management balance the books each night. Sims says on the first balance after the conversion: "We balanced to the cent."
And how did that simplification go? When ANZ started on the integration project it had more than 300 individual product lines. By the time of conversion that was down to 100 products. Sims says the next stage will see that number fall to just 50, but compared with the big switchover, that's just a question of fine tuning.