The Commonwealth Bank of Australia’s half yearly results released today show growth in digital channels and a corresponding increase in IT costs as the country’s biggest bank pursues a $5 billion dollar bet on digital.
The bank has also fired bank against claims that its latest digital venture, a partnership with buy now pay later platform Klarna, gives it an unfair competitive advantage under Australia’s open banking regime.
- Read more: Digital Transformation Is Not Delivering, Say Skeptical Financial Services Investors
- Download: Which-50’s Simple Fast Easy magazine – Six great digital experience case studies
The results show nearly two thirds (64 per cent) of CBA’s transactions were digital in the last half of 2019, up from 60 per cent a year before. In 2015 the amount was just over 50 per cent. The bank attributes much of the growth to its mobile app, which has won Forrester’s top gong for mobile banking apps three years in a row.
5.9 million people now use the app, CBA says, which has been expanded to include more personalisation, a rewards program, alerts, and a feature to notify customers of potential unclaimed benefits; sometimes at a cost to the bank.
US IT vendor Pegasystems is responsible for the app’s underlying machine learning and AI, claiming its software crunches billions of data points each day to determine actions in the app.
IT costs rise
The bank has a strategic target to simplify its IT architecture and reduce the unit costs of technology but its overall IT spend is trending up. The bank spent nearly $1 billion on IT and notes it was a driver in its 2.6 per cent increase in operating expenses last half.
The $997 million spent on information technology services expenses in the six months to 31 December 2019 is a 9 per cent jump on the same period in 2018 and perhaps the first sign of CBA’s commitment to invest $1 billion dollars a year over the next five years in digital technology.
CBA CEO Matt Comyn outlined digital aspirations in his first major speech as CEO in May last year, pledging to make CBA “ the best digital provider in Australia bar none”.
Speaking on the latest results this week in a prerecorded video, Comyn said: “A big part of our strategy is, of course, delivering exceptional customer service, but also doing that with leading technology.”
Comyn said the bank was “very committed” to increasing the pace of innovation, noting CBA’s banking app, its latest partnership with buy now pay later provider Klarna and a new startup incubator, X15 Ventures.
“X15 is all about building the next generation of ventures in Australia. We’re committed to building 25 ventures over the next five years.”
Unlike some other startup incubators, CBA will retain ownership of all the X15 ventures, sparking fears from some that it will give Australia’s biggest bank an unfair competitive advantage when the consumer data right comes into effect this year.
Micro-investing fintech Raiz Invest made the claim when X15 was announced and has since made a similar complaint about CBA’s Klarna partnership, reportedly telling the current Senate inquiry into fintech and regtech that “Klarna will not have to get CBA customer consent to use CBA data and also will become automatically accredited under the [Consumer Data Right].”
ITNews reports that CBA fired back this week, in an attempt to quash Raiz’s claims about both data sharing with Klarna and X15.
“Raiz has asserted that Klarna, with which the Commonwealth Bank has entered into partnership, will become automatically accredited under the CDR. This is incorrect,” the bank said.
“Should Klarna wish to access data available under the CDR, it will also need to gain accreditation. This process will not be automatic, nor does the association of Klarna with CBA have any relevance to it. If Klarna becomes accredited, it will be subject to the same CDR privacy safeguards as other participants.”
X15 ventures will also need to seek accreditation to access CDR data, CBA said.