Westpac is cutting its technology stack in size by two-thirds under its latest strategic plan to “radically simplify the bank” as it aims to fast-track ambitions to simplify its processes and technology.
In its 2023 full-year results, Westpac said it intends to continue simplification by slimming its technology stack, with the expectation this will lead to streamlined customer service, origination channels and products.
To achieve this, part of Westpac’s approximate $2 billion investment spend across the past four years will cover its technology simplification plans.
Westpac CEO Peter King told investors on Monday its refreshed strategy, outlined in the half earlier this year, follows “four strategic pillars of customer, easy, expert and advocate”.
“The organisational restructure mentioned earlier is critical to support our strategic refresh and to sharpen the focus on target markets,” King said.
“The strategy is all about the customer. They’re at the heart of what we do.
“We value the whole-of-customer relationship and work hard to anticipate their needs including through delivering personalised experiences, offers and insights.”
He said Westpac continues to “make banking easier, more intuitive and digital.”
To support this its “next phase is about radically simplifying the bank,” King said.
“For this to be successful, it’s fundamental that we accelerate the simplification of processes and technology”, with work already “underway to reduce the size of our technology stack by two-thirds”.
“Over the past three years, we’ve progressed the foundational elements and …. more than 70 percent of our infrastructure is now evergreen, meaning it’s current and available to be built on.
“The task at hand is laid out here: our technology isn’t older or less capable than peers, we just have too much of it.
“Cutting our technology components from around 180 down to around 60 will improve our speed to market make us more efficient on costs and reduce operational risk.”
He said as this is a “big agenda” for the business over the next four years, “a period of sustained investment is required to support this strategy”.
Westpac intends to achieve this via “a relatively modest increase in the investment envelope to approximately $2 billion per annum.”
“To put this into context, in the five years to FY19, we invested approximately $1.3 billion per annum, the increase to around $1.9 billion in the last four years, with almost two-thirds allocated to risk and regulation.”
He said the bank’s intention “is to redirect from risk and regulation spend to growth and productivity”, with King saying that “execution will be the key”.
“The simplification will be jointly led by both the business and technology [teams],” he said.
“Our approach will be modular, where we address components within layers and this will add flexibility, allowing the individual workstreams to be scaled up or down as required.”
He added Westpac is outcomes-focused with key measures of success “being improving return on tangible equity and growing the business in line with the market.”
King said the bank is “focused on technology simplification and is well positioned to grow and to help customers navigate the environment”.
Over the year, the bank decommissioned 200 applications and automated around 500,000 customer interactions.
It reduced its data centres from four to two and consolidated its contact centre platforms from 12 to one.
It also said its backup systems and processes were consolidated from 16 to four and saw around $100 million in expense savings.
During the talk, King did state that despite its work so far, “there’s more work to improve performance and the efficiency of this bank”.
“With the foundations in place, we have even more capacity to focus on the future,” he added.
This has kicked off, with the separation of Westpac’s consumer and business segments and establishing a standalone function to focus on technology.
He said the bank is continuing to “invest in a digital capability for both consumer and business customers”, noting that its banking app reaching the number one spot in Australia, according to a comparison by analyst firm Forrester.
“Technology underpins the customer offer,” King said. “The consolidation of infrastructure has resulted in significant improvement in system stability and resilience.”
Promontory Australia report
Westpac said its Customer Outcomes and Risk Excellence (CORE) program is now two-and-a-half years into its work, with 19 workstreams, 83 deliverables with 354 activities on the go.
In the results, Westpac released both the 10h and 11th independent reviews for the quarters ended in June 2023 and September 2023.
Completed by Promontory Australia, the report offers an update on Westpac’s Integrated Plan designed to address and improve risk culture, governance and accountability across the bank, implemented via the CORE program.
The bank said it submitted 324 activities to Promontory with 310 assessed as “complete and effective”.
The report found “Westpac continues to work through some of the most complex and challenging activities that form part of its transformation” as it enters the final phase.
“How deeply the changes delivered through CORE are embedded across Westpac through these activities will say much about how the five root causes underpinning the program and the program’s target states are being addressed.
“With multiple uplifts underway and the targeted ‘end date’ for the Integrated Plan on the horizon, vigilant focus is required to stay the course and to quickly identify and respond to issues and risks,” the report stated.
The next update is due in May 2024.
Westpac posted a net profit of $7.195 billion, a 26 percent jump from the same time last year.
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