In Australia, despite the failings illuminated by the Royal Commission, banks remain trusted by consumers to protect their money and data. Many of the resulting reforms (and the shift towards Open Banking) mean that banks are well aware of their obligations as data custodians from a security and privacy perspective. The question is whether they can shift from being just a ‘custodian’ to also being a trusted and effective ‘broker’ that helps customers use their data to access new services, and optimise and protect their digital lives far beyond banking. This is often described as an ecosystem strategy.
Data, machine learning and advanced algorithms, powered by quantum computing, will provide a constantly updated information stream about a person’s financial position, generating insights and advice. The Commonwealth Bank’s Customer Engagement Engine is one example, running more than 400 machine learning models across 157 billion data points in real-time to automate what notifications are most valuable to send. This goes beyond traditional ‘sales and service’ messages, for example during the COVID crisis, the status of loan requests, or saving a portion of a tax refund. It includes coordinating access to a broader range of CommBank’s digital banking features like Benefits finder, which aggregates hundreds of government benefits in one place, CommBank Rewards offering customers cashback on relevant offers, and Bill Sense, which uses historical data to manage and predict upcoming bills and payments.
So the big question for 2030 is whether banks can innovate at the pace and breadth required to build out a compelling ‘ecosystem’ of new services – whether built by the bank, or from a marketplace of partners and affiliates.
Part of CommBank’s approach to this ecosystem strategy was to launch x15ventures – to help build, invest in or acquire ventures, and then scale them through the reach and assets of the bank. What’s a bit different about the approach we’ve taken in x15, is that each venture is allowed to operate with the agility of a standalone business, but has ‘pre-baked’ technology connections back into CBA, so that new ventures can become part of CBA’s broader customer ecosystem.
Since Feb 2020, x15 has launched or acquired five ventures, all of which are relevant to a customer within the context of their bank relationship. For example, CommBank customers who are pre-approved for a mortgage now receive an introduction to Home-in – a fully digital conveyancing solution. With their consent, customers can transfer necessary data to Home-in to sign up and start the process of settling on a contract of sale straight away. Operating independently from the bank allows Home-in to iterate its product and business development rapidly. To illustrate this point, in the eight months of pilot, the Home-in net promoter score has grown – through continuous iterations in product and customer service design – from ~10 to >50 today.
The ecosystem between ventures and a bank can also operate in the other direction – for example, we recently launched a ‘business in a box’ service called Backr (backr.com.au), which we believe is the first service an aspiring new small business owner or entrepreneur should consider – and from there, we provide links and APIs into a range of jobs to be done and services to be consumed, including setting up a business account through CommBank.
To succeed, this ecosystem model requires sustained investment from banks: in the core infrastructure to capture and handle new data safely; in new ventures, affiliates and partners to utilise that data in creative ways; in controls to ensure customers are informed and benefit from the use of their data; and ultimately, in reconsidering long term measurements of strategic success. For example, digital leaders in banks will increasingly think less like shopfronts (i.e. measuring # of visitors and bank products or basket size) and more like platforms – measuring customer engagement, time on site, conversion rates and customer success outcomes (including for affiliates in their network).
It’s odd not to talk about technology when future-casting but while we’re already experimenting with smart contracting, digital ledger services, quantum computing, artificial intelligence, real-time decisionmaking and biometrics – to my mind, these are all really enablers of an underlying product, process or ‘promise’ innovation.
This article was first published in KMPG’s latest report, 30 Voices on 2030 – The New Reality of Financial Services.
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