Australia's Banking Giants Go to War – With Code

Australia’s Big Four banks have the capital and the scale to invest in digital projects and enough competition between them to make it competitive and incentivize innovation.

Many of the initiatives are laid out in a recent Twimbit report on the State of Australian Banks, which looks at the financial metrics of ANZ, CBA, NAB and Westpac but also at their digital operations and new initiatives taken over 2023.

In many cases, the banks have begun rolling out specialized applications for different market segments and niches, which have been developed by fintech startups that the banks have acquired.

They are bolting these services to core digital infrastructure as they seek to expand their business engagement in specific markets and to particular customer groups.

The report sets the scene by looking at some digital measures of success for each of the Big Four.

The largest bank, CBA, has USD53 billion in monthly transactions through the mobile app from 8.7 million active customers who each log on 38 times per month.

At NAB, which has 3.5 million active digital customers, 74% of everyday banking products are opened digitally. 61% of personal accounts were opened digitally.

Westpac has 5.8 million active digital customers who completed 395 million transactions over 12 months, while ANZ has 4 million users who completed 333 million transactions.   

Deep penetration

Each of the banks also achieved different digital milestones in 2023.

At ANZ, for example, 68% of deposit accounts were opened through digital channels. In comparison, Westpac processed 87% of household mortgages on digital platforms. Digital platforms accounted for 75% of the transaction value.

These figures show the deep penetration of digitalization into the everyday operations of the banks, but they also show that there is room for digital growth, and a key to this is a continued investment in customer experience.

CBA has traditionally been the market leader in home loans. As it defends that advantage, the bank has invested in several fintech startups, such as home loan concierge Home-in and digital property settlement solutions provider Pexa. Digital loan provider Unloan was created from an investment by the bank’s venture capital unit.

“These digital initiatives have helped the banks lower operating expenses, improve their margins and make customer engagement stickier."

Another CBA digital investment has been in payments, such as the Doshii payments solution for hospitality businesses, which was another fintech acquisition.

Still in payments, CBA has rolled out a real-time payments app called PayTo and is offering a solution called Payable in the local government space.

The bank is also innovating in the loyalty and customer reward space, sending offers to customers through the Yello program and launching a program called Kit aimed at children’s financial education to shore up CBA’s historic leadership in school banking.

In 2023, NAB enhanced the CX in several areas of its operations, such as upgrading the NAB mobile app so that customers could apply for new products directly and view and control bills and payments using real-time PayTo.

Internet banking offers added real-time chat and proactive scam and fraud notifications, while its NAB connect payments deliver faster payments and better self-service support.

Like the CBA, NAB has also used its venture capital business to invest in several fintech startups with innovative solutions the bank can also roll out.

These include Banked, a global cloud-based payments network and investments in the sustainability area, such as carbon credit settlement platform carbonplace and Greener, a digital platform that provides tailored recommendations for consumers and businesses aiming to reduce climate impact through their spending.

ANZ’s recent results, meanwhile, showed how the bank is winning new business in the home mortgage market, which has never been its strong point.

A rollout of ANZ Plus is vital to this new success, which allows customers to "automate their home loan journey without human intervention."

This journey spans application, credit assessment, loan management and property settlement.

Payments have been another area for ANZ, which onboarded merchants to its new point-of-sale platform in April last year, and its Worldline app was launched in September. This allows contactless payments with iPhones and has integrated with Alipay and WeChat Pay through a single terminal.

Westpac is also innovating in this market, focusing on micropayments from tradespeople and market stall holders who can now get paid seamlessly through both iOS and Android devices, the only such capability in Australia that includes both operating systems.

The report makes the point that these digital initiatives, particularly in the mortgage market, have helped the banks lower operating expenses, improve their margins, and make customer engagement stickier.

Instead of abandoning an application process because it all becomes too hard, customers find that the improved CX helps them through the application lodgement process.

For example, the CBA's Unloan process offers a 10-minute application process.

Decades-long competition

So, what are the overall takeaways from all of this?

Firstly, the Big Four banks are so well entrenched in the market that their digital innovations are likely to help them entrench their market dominance to the exclusion of new players.

They have the scale and the capital to invest in new capabilities, which, in many cases, build upon existing applications.

Those smaller companies may have some success at the edges of the market. But there is likely to be a continual process of good ideas acquired by the Big Four as they continue their decades-long competition.

That doesn't mean new fintechs won't thrive in Australia, but if they encroach on the banking space, they will become acquisition candidates.

Ultimately, that may not be a bad model for creating a digital ecosystem because founders can be rewarded, and their ideas can reach millions of users at scale.

Image credit: iStockphoto/Kamadie