Westpac is preparing for a digital future, announcing on Monday that it is investing in a new digital-only banking platform.
According to CEO Brian Hartzer, the new platform would complement Westpac's existing banking businesses.
"This will initially operate a 'bank-as-a-service' model and we intend to bring new digital products and services to market through fintech and institutional partners," he said, delivering the bank's 2019 financial results.
"This will allow Westpac to reach a new group of customers as well as create value for our partners by enhancing the service offering to their own customers."
The announcement was coupled with a minority equity investment in 10x Future Technologies, a UK-based cloud banking tech provider.
Hartzer said the bank's range of fintech partnerships would open up opportunities in an "increasingly digitised world".
"This initiative builds on the significant investment we have made -- and will continue to make -- in modernising our platforms, including the Customer Service Hub and Panorama," the CEO continued. "Together this will mean we have the right systems to meet changing customer needs now and in the future."
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For the 2019 financial year, Westpac's statutory net profit slipped 16% to just shy of AU$6.8 billion.
Operating expenses increased AU$540 million -- 6% -- compared to the same period a year prior. Westpac said the increase was mainly due to a AU$349 million increase in provisions for estimated customer refunds, payments, associated costs, and litigation; higher technology expenses of AU$174 million; a rise in regulatory compliance; and investment-related spend of AU$171 million.
During the year, Westpac implemented a new group-wide HR management system. It also said it reduced the complexity of core networks, migrated the group's data platform to the cloud, migrated over 350 applications to a hybrid cloud solution, and installed "more reliable" technology for front line employees.
Technology costs were also higher for FY19 due to enhancements to cybersecurity, Panorama, and the launch of its Customer Service Hub.
"In addition to cost savings, these changes have contributed to a much faster system environment for employees and improved technology stability, with no Severity 1 outages in over 560 days," the bank wrote.
Westpac also renegotiated a number of major contracts, which it expects will contribute savings in operating and project expenses.
Over the ditch, the bank's New Zealand operation expanded its use of agile management techniques in a bid to improve efficiency and accelerate change. Westpac expects lessons from New Zealand will be used to increase the use of agile in Australia.
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On the whole, Hartzer labelled 2019 "disappointing", pointing to customer remediation costs, the aftermath of the Banking Royal Commission, and the impact of regulatory changes on revenue, among other things.
In response to the Banking Royal Commission, Westpac established a remediation hub to speed up the process of refunding customers.
The red bank also let go of 1,700 staff this financial year.
In an attempt to make banking easier for customers, Westpac also delivered a virtual assistant chatbot Red, which Hartzer said has accrued almost 1 million interactions with customers and resolved more than 70% of queries without escalation to a banker since launch.
"With our mix of businesses that are number one or two in market share across all our major segments, we have a franchise that is in good shape." Hartzer told shareholders.
Also on Monday, Westpac announced it would be setting out to raise AU$2.5 billion in capital to "provide an increased buffer above APRA's unquestionably strong benchmark".
"The raising also creates flexibility for changes in capital rules and for potential litigation or regulatory action," the bank said. "The decision to reduce our second half dividend to 80 cents per share was not easy, as we know many of our shareholders rely on our dividends for income.
"However, we felt it was necessary to bring the dividend payout ratio to a more sustainable medium-term range given the capital raising and lower return on equity."
For the first half of the year, Westpac experienced a 24% slip in profit to AU$3.17 billion.