Is buying start-ups the only way big companies can innovate?

" We won’t exist if we don’t remain toward the front of the innovation queue. But I don’t think we need to be at the bleeding edge of it."
Mark Hand, ANZ Managing Director, Corporate & Commercial Banking

Outside the AFR Banking and Wealth Summit in April, BlueNotes sat down with MoneyBrilliant cofounder Jemma Enright and ANZ Managing Director, Corporate & Commercial Banking Mark Hand to chat about the state of innovation in the financial services sector. We started by asking them if it’s possible for large, old-world companies to innovate at all.

Enright: My view is innovation is a spectrum. On one end you’ve got really disruptive solutions and technologies and I think start-ups have built a place exploring some of those right now, because they don’t feel the regulatory clasps as much as the bigger end of town.

Look, there are some disruptive technologies banks will never touch. Because they just don’t want to go there. That space I think is best served by the start-up sector. But there’s a whole raft of innovation, great innovation happening in big organisations.

From what I’ve seen, there are ponds of innovation there ranging from not much in the core IT and digital divisions unfortunately because they are too wedded to their legacy systems.

Then there are fabulous innovation teams with awesome talent creating great ideas within bigger corporations - but then these very customer-centric ideas have to be delivered through the organisation, legal and marketing etc and end up shadows of their former selves. 

Finally, there’s a third pond of innovation which we’re starting to see in partnerships between start-ups and incumbents, like we have seen between AMP and MoneyBrilliant.

Externalising innovation, letting these teams run their processes and business incredibly independently really works. With this dynamic, these innovations can be more successful and cutting edge, unencumbered by big corporate shackles. It’s a bad idea to interfere with that.

Hand: I definitely think it’s an adapt-or-die prospect for banks. Some banks will adapt and some won’t. Whenever there’s a big change to any industry, inevitably at the end there’s some form of consolidation and those who did it well take over those who did not.

For ANZ, if it’s not fintech players stealing our thunder and our revenue, it will be CBA, Westpac or NAB that do.

As a big bank, we won’t exist if we don’t remain toward the front of the innovation queue. But I don’t think we need to be at the bleeding edge of it.

Enright: There’s an interesting distinction between sustaining technologies and disruptive technologies. 

Sustaining technologies are things like MoneyBrilliant. We’re the perfect partner for a bank as an investment or acquisition as we actually provide a piece of technology incumbents don’t have which can create value for many parts of a larger business.

Whereas when you look at lending fintechs – the Prospers and the Stopcaps of the world – they’re really disrupting the lending space and have the ability to go it alone and create this new kind of marketplace for lending to small business.

So I think there’s no reason why we can’t see a big export from Australia in the fintech space.

Hand: At ANZ we do a lot with Australians. I’d like to go to Israel and see what they’re doing over there. There’s parts of the world that are really good at this. At ANZ, at a lot of big banks, we tend to mostly hire people that look and sound like us. So we think a certain way. We need people who think nothing like us and challenge everything we say if we want a different outcome.

I talk to young people who are interesting and smart and they say “Why would I want to go to a bank for? It’s boring.” So we’ve got a wall up in front of us because we’re not seen as an exciting way forward. We need to change the way people view financial services so they start to enter into a conversation with us.

Enright:  I was pulled into the financial services sector by my good friend and MoneyBrilliant founder Peter Lord. Had he not done so I probably wouldn’t be here. So I think men have a big role to play in encouraging talented women to consider innovative roles in fintech.

Personally, my experience of being a woman in fintech has been nothing but positive. There is an incredible willingness, desire amongst men in the sector to see more women flow through this space.

The issue is we’re just not getting enough in. The reason for that I think is women are more risk-averse than the blokes. Men tend to take a bit of a gamble and back themselves a little bit more.

Hand: I think fintechs are smart enough to know half of their customers are female. I think about every purchase made in my household in the past 10 years – I would have made about 10 per cent of them. As a man I’m not the decision maker on most things we buy. So if you’re building a company you’d be crazy not to develop something that connects with women.

I also see why some industries are seen as male dominated. If you think about flexible working practices going forward, this is an industry, by and large, you can work anywhere, any time. I’m staggered more women don’t see this as an opportunity.

Enright: That’s right. And look there are programs coming through, Stone & Chalk is getting behind a big women in fintech program. They’ll be tapping lots of different parts of the industry on the shoulder to get behind it, support it and make it happen.

And there’ll be a bunch of innovations come out of that on how we actually solve this problem – which is how do you encourage more women into fintech? Because the focus on getting young girls into STEM is great but that’s not going to solve the problem any time soon.

So there’s a mid-term tactic required just to get more women into the start-up world. How do you encourage women and men in your organisation to start innovating from the inside out? Unshackled by the organisation around them?

Jemma Enright is the founder of MoneyBrilliant & Mark Hand is Managing Director, Corporate & Commercial Bankingat ANZ