The Westpac Banking Corp (ASX: WBC) share price is down more than 1.5% after the ASX bank share gave a technology simplification update.
Focused on simplification
Westpac said it’s ready to accelerate its simplification, but this will come at a cost.
It’s focused on banking in Australia and New Zealand, after exiting 10 businesses.
The idea is that the technology foundations of the business will be simple and modern. It wants to have the number one mobile banking app.
Westpac also pointed to EFTPOS Air for business customers and AI-powered Westpac SaferPay to stop scams as technology upgrades.
There are a number of benefits that Westpac is hoping for.
A better customer experience is expected, with simplified customer journeys, with end-to-end digital experiences and faster to market.
It can lead to an improved employee experience, allowing staff to have more time with customers, better insights and it will enable innovation.
Finally, Westpac is hoping for an increased shareholder return, with improved operating cost efficiency, a reduced cost of charge and “improved risk”. This could help boost the Westpac share price if profit rises.
What will it take to deliver this?
There are a variety of different elements to this plan.
It’s taking the amount of banker platforms to assist customers from six to three. The amount of customer onboarding systems are going to reduce from 11 to one. The ‘collection systems’ are going to reduce from seven to one.
Westpac is expecting some elements of this plan to take until 2028 to complete.
The total annual investment spend is expected to be $1.8 billion in FY24 and then around $2 billion annually from FY25 to FY28.
This ‘UNITE’ project is going to be around 30% of total spending between FY24 to FY28, which suggests $0.6 billion per year.
Westpac is hoping UNITE will be a major driver to close the cost-to-income ratio gap to peers.
Final thoughts on the Westpac share price
Westpac is doing the right thing by making these changes. Banks need to operate with the best infrastructure they can for customers and their own operations.
I don’t think the Westpac share price is a buy after its 20% plus rise over the six months, it’s facing rising arrears, challenged margins and limited credit growth.
I think other ASX dividend shares are better ideas for long-term income and potential capital growth from here.
