Sibos 23: CBDCs & the innovation journey

The language around collaboration can often become cliché. Many hands make for light work. Success has many fathers. It’s corny but when it comes down to it, often true.

At ANZ, we’re always innovating with a diverse range of experts and partners, looking to complement our capabilities and resources as a bank with the skills and nimbleness only found with smaller external parties. We’re constantly reminded there’s something you create when two groups work in tandem that you just can’t replicate elsewhere.

Across several months in 2023, ANZ participated in a pilot project run by the Reserve Bank of Australia and Digital Finance Cooperative Research Centre, which focussed on the innovative potential of central bank digital currencies, or CBDCs. It’s thought these CBDCs – reserve bank-issued and operated versions of the digital currencies and commercial bank-issued stablecoins are growing in use around the world, including ANZ’s owned A$DC -  could have a transformative impact of the financial services sector if applied correctly.

The pilot project aimed to figure out exactly where, and how – and ANZ was an eager participant. We were directly involved in three of the tests - or ‘use cases’ – and served as a distributor on an additional one. Each case involved one or more partners.

For ANZ, the outcomes of the pilot were valuable, and the insights fascinating. We’ll treasure what we learned about CBDCs, which will be incredibly useful in the future. But what might be more valuable is what we learned about ourselves, our partners, and how we worked together.

Maybe, if you’ll allow me another cliché, the real treasure was the friends we made along the way.

Process

One of ANZ’s cases involved superannuation payments, and how CBDC might be used to speed up the process of superfund members receiving money in their accounts. The faster they receive that money, the more return they get long term. Digital assets could offer instant settlement – if ANZ and its partners could get it to work.

The problem we were looking to solve was a real one, and while we don’t have a clear solution yet, we were able to demonstrate that it could be done. It’s caught a lot of attention in the super industry, and we’re excited about what it means for the future.

For ANZ, the added benefit was how the partners responded to us working with them – that is to say, they liked it, and appreciated our innovative ideas. The outcome of the pilot aside, they were really happy with the approach.

There was a similar outcome to another one of the use cases, around offline payments in the event of natural disasters.

The feedback from the partners on that project was clear: they liked the engagement, they appreciated the way the bank worked with them, and the way the bank enabled them to work the way they wanted to through the innovation process.

In the case of the superannuation use case, one of the customers we worked with has indicated interest in themselves banking with ANZ, having enjoyed the way the bank was able to demonstrate how it can think outside the box.

The partner got a ‘peek under the hood’ at the authentic ANZ - perhaps a different perspective than many get of ‘big banks’ - and wants to see more of it.

Indeed, the pilot has led to a lot of inquiries from businesses wanting to speak with us, and not necessarily just about super or offline payments. The just want to talk about technology, opening people’s minds and approaching problems in new and innovative ways.

It seems for the partners ANZ worked alongside, a lot of what was gained was found on the journey as well.

Scale & scope

It’s not hard to figure out what attracts partners to the process. Unlike some ‘traditional’ interactions with banks, the conversation is not just ‘here is a product or service we have designed, let us know if you like it’. Instead, it’s a conversation between equals – ‘we both see a problem, can we put our best minds together to solve for it?’.

At ANZ, a lot of our work is increasingly about bringing our customers on the journey. And as bank, if we’re working with a customer to design a solution, they’re more likely to use that solution as a customer – and use it to engage their customers.

ANZ learned so much from the CBDC pilot. But the cold truth is any real CBDC is years away - although that doesn’t mean we wasted our time. Far from it.

That’s because innovation is a process, not an outcome. You may not end up making the market-changing solution you were anticipating, but you might, as they say, make other treasured things on the journey.

Hari Janakiraman is Head of Industry and Innovation, Transaction Banking at ANZ