In this series, we sit down with leaders of banks across the globe that leverage AI to improve services and better serve customers. Founded in Australia more than 200 years ago, Westpac has become a go-to bank for consumers and businesses by offering a wide range of services. McKinsey's Keerthi Iyengar spoke to David Walker, group chief technology officer at Westpac, to learn how the organization has evolved over the years to provide better, more secure services to its customers. The following transcript has been edited for clarity. Keerthi Iyengar: Would you describe Westpac as an AI bank? David Walker: It is and isn't an AI bank. On one hand, it's not, because Westpac is very much a human-centered bank—and has been throughout its more than 200-year history. Artificial intelligence can seem faceless, and Westpac focuses on the community it serves.
On the other hand, it is an AI bank because of how it is equipped to run and serve its customers and employees: from how we work to how we operate to the technologies we use, including the products and services we develop and how we use data to help our customers and support our employees.
Keerthi Iyengar: What's different about Westpac's AI approach?
David Walker: We go out of our way to work with the best AI companies and people around the world. One example would be our partnership with a New York–based company that is one of the world's best in terms of conversational AI. We are also leaders in responsible, or ethical, AI. We're very conscious of our customers' data. In every department, we have artificial intelligence experts making sure we're setting a good standard when it
comes to responsible AI.
Keerthi Iyengar: What areas of investment is Westpac doubling down on technology-wise?
David Walker: We're a full-service bank, so we invest across a spectrum of areas. Broadly speaking, one goal is to try to simplify the bank. Any organization that's more than ten years old has a legacy, and our 200-year-old bank has [one]. For this reason, we're trying to eliminate any redundancies we might have—we're a multibrand organization, but we don't want to be a multibank organization. We're also trying to modernize the bank. We have an acronym, BEAD, we use to drive us forward. It stands for 'built for change, evergreen, automation, and digital-to-the-core.' These principles guide everything that we do from the ground up. And all that innovation and investment are centered on the customer and our employees.
Keerthi Iyengar: What are some of Westpac's most successful innovations? David Walker: We were one of the first banks globally to do banking-as-a-service well. We use state-of-the-art technology, in the cloud with cloud-native characteristics. We were able to stand up the base platform in just nine months. We've got three external customers using our banking-as-a-service platform, and we're currently bringing in our own GTS [global transactional service] business as a fourth tenant. This means we are creating a brand-new bank for our institutional customers on this platform.
Second is our conversational AI. We wanted our conversational AI to answer any question for any customer—and be helpful at the same time. That's complicated in the chatbot business, so we co-built this state-of-the-art 'brain' to be able to do that. With the help of our partner Kasisto, we were the first in the world to build this capability.
Our dynamic CVCs (card verification codes) are third. These three numbers can be found on the back of any credit or debit card. We want to stop fraud from happening if you give this information away. Customers can access their digital card via their mobile banking app by using a dynamic CVC capability. It refreshes every 24hrs and reduces fraud by up to 88% for those who use.
Along those lines, we also launched a tap-to-pay capability for small businesses. They can download the mobile app and use that as a way for people to pay, rather than having to have a usual merchant terminal.
The fourth innovation, while not AI-enabled, is our new data analytics offering—Westpac DataX—designed for our largest institutional, corporate, and government customers. It draws on the Group's internal de-identified data assets and other third-party data to create actionable insights across key business use cases such as market share benchmarking, store network planning, marketing effectiveness and optimization, and broader economic conditions.
Brick-and-mortar shops are still important, even with the rise in e-commerce. We can help clients who want to expand or are trying to figure out where their next location should go.
Data and recommendations to help network planning decision-making. All data is fully de-identified. This is just one example of the way we use data to help customers.
Keerthi Iyengar: How is leading a company in Australia and Asia different than elsewhere? What unique skills or traits are needed?
David Walker: At the end of the day, people are people. After being away from Australia and coming back to it, I've recognized that you absolutely need to earn people's respect. In some other cultures, your title will give that to you automatically. I've started to understand those nuances as I move between different environments, and it's important for me to know what they are and where to find them. Regardless, people are motivated by similar things, and it's important to tap into that.
Keerthi Iyengar: Westpac has been public about its intention to rebuild its internal software engineering capability. Can you elaborate on the reasons why?
David Walker: Engineering is obviously important to software companies, and, in many ways, banks are by and large software companies. Most of the products and services that we provide to customers and our employees are software. Because software is recognized as a core tenet of what we do, we need to build those capabilities up. That doesn't mean we're going to walk away from partners and go 100 percent into software development or engineering work ourselves. But we want to strike a balance between working with our partners and doing what we can do well in-house. At Westpac, we're building a compelling proposition for technology engineers. We recognize that we're competing with the tech companies and start-ups of the world, so we're moving from the traditional ways of attracting and valuing engineers.
Keerthi Iyengar: What suggestions do you have for other peer banks and innovators that are investing or leading in innovation?
David Walker: Two things. First, innovation isn't a department—it's not the responsibility of one person or a small group. Instead, it's a mindset. It's a culture. That's the first thing to get right in any organization. If you're going to be innovative, you need everyone to be innovative, from the tellers to the CEO. Innovation needs to be fostered. If you think of it as a mindset, a core competency, or a culture, you're thinking about the behaviors that enable it and support it, while encouraging people and teaching them how to innovate themselves.
Second, people tend to conflate innovation and R&D, but they are two important, separate things. R&D is the function or unit in the bank that supports innovation. Like innovation, you want to decentralize
access to the R&D. So the R&D team needs to facilitate across the group, making sure that the right resources are in place to make the investment happen. It's important to have the right people assessing the potential in fintechs and start-ups, too. If you take large corporate thinking into that space, you could be burning away those opportunities.
Keerthi Iyengar - What do you consider a successful approach to leadership?
David Walker: To be great at leading, particularly through transformation, you first need a compelling vision. All great leaders have that. People get tired of working on a burning platform or within a fear-based culture. So it's important to use your vision to create a mission-based or purpose-based environment.
It's also important to create the environment to change. That requires many elements: your leadership style, the psychological safety of employees to work in a changing environment, clear incentives, and the right remuneration. Then you have to make sure the company has an 'engine room' for change—the mechanisms and processes that make the change happen. These things fundamentally change an organization, whether that's how teams interact with customers or how they run meetings. While this change is occurring, however, you want to make sure that you have a sustainable leadership. If you adjust your team or your leadership too frequently, you lose momentum. So having a steadfast leadership approach helps get through long-lasting transformations.