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Westpac prepares to launch ‘banking as a service’ platform

Westpac prepares to launch ‘banking as a service’ platform

Bank to leverage 10x’s SuperCore platform

Westpac CEO Brian Hartzer.

Westpac CEO Brian Hartzer.

Credit: Westpac

Westpac plans to launch a standalone cloud-based digital ‘banking as a service’ platform that will allow third parties, such as Westpac’s institutional clients and fintechs, to offer the bank’s products to their customers.

Westpac today revealed details of a partnership with UK cloud banking technology company 10x Future Technologies to build a “standalone” digital platform. Westpac said the platform would allow businesses that don’t have a banking licence to leverage its licence and product set via APIs.

Westpac intends to purchase a minority stake in 10x, which was founded in 2016 by a former group CEO of Barclays, Antony Jenkins.

“We’re preparing for our digital future by investing in a new digital-only banking platform that will complement our existing banking businesses,” Westpac CEO Brian Hartzer said in a statement.

“This will initially operate a ‘bank-as-a-service’ model and we intend to bring new digital products and services to market through fintech and institutional partners. This will allow Westpac to reach a new group of customers as well as create value for our partners by enhancing the service offering to their own customers.”

“A modern core banking stack allows you to support customer needs with new data and AI applications, while also significantly lowering the cost-to-serve,” the CEO said in an interview with Westpac’s in-house news service. “And that’s what 10x is. While it’s still young technology, we see this as a way for Westpac to test and explore new capabilities that might become directly relevant to Westpac’s core business in the future.”

“In the long term, if the platform proves up the way we think it may, it's potentially something we can fold back into our own core operating environment and thereby help us drive our own costs and flexibility in a better direction,” the CEO said.

The new platform is expected to be running before the end of 2020.

Announcing Westpac’s full year results today, Hartzer said he was “particularly pleased” with the bank’s digital progress. He said that the bank was prepared for the February 2020 launch of Australia’s open banking regime.

The bank’s Customer Service Hub has been rolled out for Westpac first party mortgages, the CEO said.

“The Customer Service Hub gives us the rails to automate all of our consumer origination and servicing capability. Next year we’ll migrate other mortgage products and channels onto the platform, and then begin to convert our other consumer products.

“Eighty per cent of mortgages are now settled electronically. And earlier this year, we rolled out a new enterprise workflow system that allows us to automate our paper-intensive processes.”

“Digital usage is up and digital channels are now 40 per cent of all sales,” the CEO said. “Late last year, we rolled out a fully digital mortgage for our St George and regional brands. This means a customer can get their mortgage through a mobile phone with a fully digital experience. Bankers use the same technology and it's now represents more than 30% of [applications] in those channels.”

A new AI chatbot dubbed ‘Red’ has so far responded to more than a million queries and solved 70 per cent of them on the spot, the Hartzer said.

The bank today announced a statutory net profit of $6.78 billion for the 12 months to 30 September, down 16 per cent. Cash earnings were $6.85 billion, down 15 per cent.

“2019 has been a disappointing year,” Hartzer said in a statement. “Financial results are down significantly in a challenging, low-growth, low interest rate environment.

“Our result was impacted by customer remediation costs and the reset of our Wealth business. Excluding these notable items, cash earnings were down 4% on FY18, which was mainly due to a reduction in wealth and insurance income from the exit of our financial planning business, higher insurance claims, and the impact of regulatory changes on revenue.”

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