October 2018

A technology revolution and modernisation of the payments infrastructure have made Australia the boilerplate for a real-time, cashless society. flow’s Janet Du Chenne speaks to NAB’s Rachel Slade about the bank’s own transformation as part of a payments landscape overhaul, both domestically and cross-border, and how this is creating new services for both consumers and institutions

When Australia’s four dominant banks came together to orchestrate the transformation
of the payments industry the feat was nothing short of extraordinary. However, such an event would not be possible without its main protagonists. Among them is National Australia Bank’s Rachel Slade, whose career ambitions to make payments faster and more efficient for Australians were fulfilled this year with the launch of the New Payments Platform.

These ambitions were fuelled by several experiences throughout her career. Starting with one of her first client engagements at Andersen Consulting, now Accenture, she found her vocation to help transform payments in Australia.

Seconded to a bank to develop a request-for-proposal for a trade finance platform, she saw that transaction services were ripe for transformation and she wanted to be part of it. “I spent months in the back office – where they housed both trade and payments – drowning in paper,” she recalls. “This was in the late 1990s, but still I was so overwhelmed by the waste and inefficiency and ultimately the substandard customer experience.”

It is said that people with a passion for learning how things work and then trying to make them work better often make the best bankers. In an industry that is no stranger to process, Slade is a force to be reckoned with.

With an engineer’s mindset, she exudes a step-by-step approach to process efficiency and a desire to make things more efficient for customers. Since her first client engagements, she has become focused on giving customers an experience that is on a par with or better than what they are used to in the other parts of their lives.

It was during these engagements that Slade started to “appreciate the truly profound role banks play in helping people, individuals and businesses to fulfil their ambitions, while underpinning the functioning of the economy and its growth.” This appreciation led her to develop strategies that drive business transformation in banks as a consultant, and subsequently led her to Westpac Bank as Head of Transaction Services and then to National Australia Bank (NAB), where she leads the Deposits and Transaction Services division.

While at Westpac, one of these strategies involved simplifying the on-boarding and activation process for corporate customers who had a large number of card holders.

The implementation teams and the customers here were also drowning in paper. She did not realise how bad the situation was until two colleagues joined a leadership team meeting with boxes and stacks of paper and piled them on the table in front of her. Sitting at a table, this stack of documents almost reached eye level. “I had to stretch to peer over it,” remembers Slade. “This was everything we sent to and received from a single customer. I was astounded”. Slade and her team agreed to take a “how can we?” approach with the risk, legal, product and compliance teams to cut the amount of information down into six pages, to fit in an envelope, and make things better for the customer. That was the first step. In the second step, the information was digitised.

CV: Rachel Slade (Australia)

 

2018: September: Promoted to Chief Customer Experience Officer to lead the bank’s Customer Experience, Marketing, Digital, Products, NAB Labs and NAB Ventures divisions

2017: January: Became Executive General Manager, Deposits & Transaction Services, NAB. Represents the bank on the Australian Payments Council and on the boards of NPP Australia and Digital Wallet (Beem It)

2015:  Joined board of Flourish Australia, an organisation that works with people with mental health issues to fully participate in the community

2014–2016:  Took up role of General Manager, Global Transaction Services, Westpac Institutional Bank (WIB)

2010: Graduated from Harvard Business School Women’s Leadership Program

2008: Graduated from Australian Institute of Company Directors

1999: Joined Westpac in July 1999, and held various roles including General Manager, Transformation and Delivery, Head of Group Strategy, General Manager Mergers & Acquisition, Head of International Trade and Payments, Group Head of Diversity and Flexibility

1995: Joined Andersen Consulting as a financial services strategy consultant

1994: Bachelor of Economics (Hons) from Macquarie University

In developing these business transformation strategies, both at Westpac and at NAB, she has always been in front of clients, engaging with them first hand to understand what they are trying to get done in their business as well as where they are currently seeing pain and friction with the bank. At NAB she engages with retail all the way through to corporate and institutional customers.

“My favourite solutions are the ones that I’ve co-designed with customers,” she says. “I often say to my teams that transactional banking is never about the product. It’s about really understanding what the customer is trying to get done and what the challenges are in their business. Our job is then to work with them to unlock value in their business and for their customers.”

She also spends a lot of time with start-ups, as an investment committee member of NAB Ventures, the bank’s venture fund, to see how the bank can get services into the hands of their customers faster. “One of the mantras I have developed a bit of a reputation for is ‘hurry up’,” she says proudly. “It’s really about a mindset that puts us in a frame where we are ready to compete with fintech, with big tech and with our traditional competitors.” She explains that customers’ expectations are continuing to ramp up as they experience relevant, personalised, data-driven offers and outcomes in the other parts of their lives. “We need to continually innovate to match this in their financial services experiences – they need to be easy, personal and supportive.”

She says the most amazing thing she has seen in her career is how technology has evolved to the point where everything is possible. “The challenge now is one of ‘just because you can, doesn’t mean you should’ – not everything is a hammer looking for a nail,” she cautions.

This better understanding of the customer experience using the right mix of technology is central to NAB’s digital transformation.And it is for this reason that Slade was promoted to her latest role of Chief Customer Experience Officer at the bank. It began a few years ago with an approach called ‘customer journeys’. This involves “putting together true cross-functional teams that are focused on understanding the current experience of our customers, of our bankers and of our underlying process,” explains Slade. “They see where the pain and friction is, and systematically go about addressing it through change – the change could be policy-, process- or technology-enabled. At the same time, they are reimagining the whole experience and designing a ‘preferred reality’.”

Two of NAB’s most mature journeys are focused on everyday transaction banking,1 where the bank has made it easier to open a business account, and everyday business transaction banking,2 where it has introduced improvements to international payment fees. “We’ve delivered dozens of changes that mean we can now welcome a new customer and have them active in minutes, not days. And our customers are rewarding us with an average NPS uplift of +25 points,” says Slade.

With accountability for all payments, Slade talks with pride about what NAB has done to reposition its cross-border payments offering to respond to feedback from customers and the fact that they were moving to new competitors in this space. The bank recognised that new market players were eroding its market share in the retail and SME sector. However, seeing how customers hate not knowing where their money is, not knowing how much of it is going to arrive and fees that they don’t understand, NAB came up with a solution to address this.

The bank now charges a single upfront fee for retail customers, thus simplifying its offering. For business customers, it gives them the option of a single upfront fee or deducting this fee from the beneficiary. In both cases, it provides certainty of fees to these clients and greater visibility of when a payment will arrive.

Given what NAB has accomplished in its customer journeys, as part of an even bigger ideal, it became one of the banks to drive the transformation of the payments industry in Australia.  

The country’s highly competitive market is dominated by four main banks (see Figure 1) – Commonwealth Bank of Australia, Westpac, Australia New Zealand Banking Group and NAB – which have provided the majority of external finance to companies and governments. The Banker’s Top 1,000 World Banks lists them in positions ranging from 45 through to 50 in terms of Tier 1 capital – with no other Australian bank anywhere near them.

Following the adoption by the government in 1990 of a ‘four pillars policy’, which blocks any prospective merger between these banks, each of the four has sought to differentiate themselves in financing Australian business. Together with a fintech community approaching 600 companies and a customer base defined by super-fast adopters, this alone provides a fertile environment for innovation.

But the real catalyst was a review of the payments system by the Reserve Bank of Australia (RBA)3 in 2012, which concluded that increased innovation was required. RBA challenged the market to deliver near real-time payments and richer, ISO 20022-enabled remittance data flowing with the payment to enable straight through processing and simpler payments addressing. 

Australia’s self-regulated community of banks, fintechs and the clearing house responded with significant modernisation of the payments market infrastructure for low- and high-value payments. In February 2018, the market launched the New Payments Platform (NPP)4 for faster, data-rich payments between individuals, businesses and governments, with simpler addressing – using a unique ‘layered’ architecture and central bank settlement (see box-out).

Structure of NPP Australia

 

  • Basic infrastructure: A 24/7, 365 days of the year network connecting the participants, a switch to move messages between them on the network, and an addressing service that enables transaction accounts to be identified by a simpler payment address such as an email address, phone number or Australian business number.
  • Fast settlement service: Provided by the Reserve Bank of Australia, this makes it possible for every payment, regardless of size, to be settled in real time in central bank funds across each financial institution’s exchange settlement account before crediting the payee’s bank account
  • Overlay service: This is the payments-related product or service that can leverage the benefits of the basic infrastructure. Lovney says, “This is where the New Payments Platform breathes life into innovation and competition.” BPAY, Australia’s bills payment organisation, was the first overlay service to go live.

 

Source:
Adrian Lovney, CEO NPP, in an interview with the European Payments Council5

Banks invested A$1bn into the new platform, which Slade believes is justified by the ability to provide “a convenient and easy to use service, with funds transferred between participating banks in less than a minute, 24/7 in most cases”. Slade has been involved with the NPP since 2014 and has been a member of the NPP board twice, once for Westpac and now again for NAB.

The ISO 20022 messaging standard also gives the platform more capability in terms of openness of data among banks. “Most of the correspondent banks use the standard as it gives them the option of direct entry into the local clearing system,” explains Slade.

Having those very high-level objectives from the RBA and then translating them to the payments industry was ideal, recalls Brad Pragnell, who worked on the NPP with the Australian Payments Clearing Association (APCA) and was subsequently hired by Payments Canada to advise on a similar project. “What was important in our thinking was that the new system would be a platform for innovation and competition. This meant that financial institutions saw the new system less as a compliance obligation and more as a commercial opportunity.”

"We can now welcome a new customer and have them active in minutes, not days"

Rachel Slade, Chief Customer Experience Officer, National Australia Bank

Bigger, better, faster, more

Broadly, NPP consists of a domestic messaging channel supported by SWIFT’s network partners in Australia, an addressing database to provide proxy identifiers for Authorised Deposit-Taking Institutions’ (ADI) customers (to facilitate simpler and more efficient addressing of payments, by linking short names (aliases), email addresses, mobile phone numbers and other identifiers with the account numbers of ADI customers) and a common software interface that will manage the communication flows between participants, the addressing database and overlay service providers which use the NPP payment infrastructure.

SWIFT provides the ‘backbone’ for the secure and reliable movement of messages between ADI participants and initiates the settlement instructions with the RBA, which connects to the basic infrastructure (see Figure 2). A user of the system will no longer need to know the bank state branch (BSB) and account number of the payee. A checking service reduces the chance of payments accidentally being made into a wrong account, and lets payment service users know immediately in any instances it believes an incorrect payment has been made, explains Slade.

NPP is for consumers, corporates and public institutions, touching practically every part of the economy, as SWIFT notes in a press release.6 The core features of the system enable the fast transfer of value between accounts serviced by the participating ADIs. These transfers are cleared, settled on a ‘line-by-line’ basis (so that there is no settlement risk between participating ADIs) and posted to the recipient’s account in seconds.

All change

Aside from the basic infrastructure of NPP, it’s the overlay services that are really making the difference. These portals, apps and other tools allow mobile and web-based payments with more detailed information and let people request money from others. For example, the settlement of a restaurant bill among a group of diners can happen over a mobile, or the payment of a plumber can happen immediately with a direct transfer of funds into their account before they leave the customer’s house. For businesses, identifying standards for end-to-end integrated invoicing and payment reconciliation is now also a reality.

Banks such as NAB have also invested in their back office infrastructure to support the development of these value-added services which enable employees, customers and SMEs to self-service. “I think we went from 0-80% of payments in the consumer-to-business space being contactless within 18 months,” Slade recalls. “It’s in the high 80s now.”

In peer-to-peer finance, Australia saw the launch of Beem It, a digital wallet provider which allows anyone with a scheme debit card to make a low-value real-time payment to one another. Funded by three of the major banks (and further illustrating their determination to stay close to the end user) – NAB, Westpac and Commonwealth Bank of Australia – Beem It is available to any customer.

In the consumer-to-business space, NAB has launched a business called HICAPS Go which provides a digital healthcare experience – with customers able to use their mobile phone all the way from making a health practitioner’s appointment and checking how much their health fund is going to pay, to making an insurance claim. “It’s solving problems for consumers, practitioners and health insurers,” Slade explains.

In B2B there are some interesting things happening too. Slade talks animatedly about NAB’s partnership and integration with Xero – the market-leading cloud-based accounting provider. For some time, the technology partnership has allowed customers to easily upload their banking data to Xero, with NAB using cash flow data from Xero to inform lending decisions.

The next step, says Slade, is to enable customers to make payments directly out of Xero, truly providing a seamless experience. NAB is also developing a multi-authenticated capability where customers can create multiple payments from within the Xero platform and authorise them in bulk from the NAB mobile banking app.

80%+
Payments in the C2B contactless space in Australia that are contactless
(NAB)

Change is costly, but is it worth it?

While she admits the bank will never recover the investment in NPP in a traditional business case sense, it was worthwhile. “The market absolutely needed to do it,” she asserts. “Real-time, convenient, data-rich, easily addressable payments are a must to meet customer expectations. This is the service they are getting in their other experiences such as travel, shopping and entertainment.”

Slade also believes there are use cases that create real value for businesses in terms of speed, data, real-time authentication of the payment, and removal of paper. “The value equation here stacks up,” says Slade. “And, as the market scales up and new services become available, this value increases. Customers making a repeated number of direct debit payments or cheques can see these cleared several times a day with RTGS.”

Additional value has also been created. One of the collateral benefits of implementing NPP is that whole sections of the banks’ infrastructure have had to be uplifted from a batch to a real-time world, including fraud and payment operations. Slade shares that, with NPP, “internally, banks had to move to more sophisticated tools for things like fraud detection, which drive bank-wide benefits.”

While NAB customers continue to embrace the NPP, Slade expects all banks should be at full scale by October 2018. “It’s the biggest market change in 20 years and has seen collaboration even among competitors. Everyone around the table has come together and we’ve opened our minds to show connectivity and where data has opened up banking to a broader set of solutions,” she adds.

"My favourite solutions are the ones that I’ve co-designed with customers"

Rachel Slade, Chief Customer Experience Officer, National Australia Bank

What’s next?

NAB is looking to emulate what has been achieved in its home market with NPP in a cross-border context. To do this, it has joined Deutsche Bank, with whom it has a correspondent banking clearing relationship, as one of the early adopters of the SWIFT gpi initiative to make its systems open to third party providers. “gpi is very interesting as it’s solving a problem,” notes Slade. “It addresses the need to know when a payment will arrive, as well as issues around timeliness and transparency. By using NPP domestically and gpi cross-border, we can see the payment travel from Singapore to the beneficiary’s account in Australia in a minute. We do this by collaborating with the industry, driven by the customer demand.”

Moving swiftly with APIs for international payments tracking, NAB connected to the SWIFT gpi cross-border payments tracker in September 2017 to provide greater transparency to customers, and certainty of the status of their payment. The API links the SWIFT gpi Tracker database with the bank’s systems, and subsequently integrates the tracking information into their client portals and applications. It’s with this tracking that NAB has been able to transform its customer offerings for business and retail customers, as described above. “To get this into market we had to work with partners all over the world to change the way we did business with each other. I think we were a bit ahead of the curve, and not everyone is there yet, but they will be!” asserts Slade.

The next step will be for NAB to be able to provide gpi’s tracking capabilities direct to customers. NAB has joined a SWIFT gpi for Corporates pilot programme, which focuses on giving corporate customers access to gpi through MT101 messages.

The vision, Slade explains, is to further understand the blocks of capability, customer pains and the sophistication of connectivity with API. “Then you can do anything,” she maintains. The Australian government aims to phase in open banking with all major banks, with data on credit and debit card, deposit and transaction accounts by July 2019.

With these initiatives and now that NPP is live, and growing rapidly, the Australian payments industry has some emerging challenges about how to deal with legacy infrastructure that will ultimately become redundant. Some of that important work is being done by the Australian Payments Council,7 where Slade is a representative.

However, she believes those challenges are outnumbered by the opportunities for further change. “At NAB, we can see a future where our customers can take full advantage of real-time, data-rich, highly available, easily addressable payments to power their businesses, domestically and cross-border,” she concludes. “This is where payments coming from offshore can enter the domestic clearing system in real time. Where invoicing, payroll, property settlement and corporate actions are seamless and paper-free. And this future is right in front of us.”

The Deutsche Bank view

 

In today’s near real-time payments landscape, correspondent banking is evolving to deliver the same level of experience customers have come to expect in many other parts of their lives. To deliver this service in a cross-border context, Deutsche Bank partners with correspondent banks such as National Australia Bank, to fully exploit the benefits of the SWIFT global payments innovation initiative. As more institutions and corporates open up their platforms and adopt the initiative, this gives their customers certainty of payments and the transparency as well as the ability to track the time it takes for a payment to be made from a bank in one location to another bank on the other side of the world – often just a few minutes end to end.

Christian Westerhaus
Head of Clearing Products, Cash Management, at Deutsche Bank

_________________________
Sources

1 See https://nab.co/2MviWam at news.nab.com.au
2
See https://nab.co/2OJidQa at news.nab.com.au
3 See https://bit.ly/2Bl4e1g at rba.gov.au
4
See nppa.com.au

See https://bit.ly/2MdbSvx at europeanpaymentscouncil.eu

6 See https://bit.ly/2MPXKZo at swift.com
7
See australianpaymentscouncil.com.au

 

Christian Westerhaus

Global Head of Clearing Products | Cash Management | Deutsche Bank

Christian Westerhaus

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