The banking industry in Australia is dominated by four banks; Commonwealth Bank of Australia (CBA), National Bank of Australia (NAB), Australia and New Zealand Bank (ANZ), and Westpac. Ellie Chambers talks to the Aussie banks about their digital strategy and how they plan on staying ahead of the game
All four of Australia’s biggest banks rank among world’s top 15 in terms of market capitalisation according to data published in May. Between them, in September 2013, the banks had a 78.8% market share of total deposits across all Australia’s banks, representing growth of 2.3% on the previous September.
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CBA alone held nearly a quarter of the nation’s deposits, with 24.2%, a rise of 1.9% on the previous year.
The four big banks have a similarly massive market share in loans and advances, holding 81.8% between them. Again, CBA takes the biggest portion, with 24.8%, followed by Westpac with 22% and NAB with 18.8%. CBA’s share represents a 3.5% on last year, but apart from that, market shares changed very little, with Westpac’s loss of 0.4% the next biggest change.
Similarly, market shares in deposits changed little, with CBA gaining 1.9%, ANZ gaining 0.2%, NAB gaining 0.1% and Westpac’s market share growing by less than 0.1%.
From this, we might get the idea that the Australian banking industry is very stable – boring even. Yet new innovations are coming that look set to shake up even the stability of the Aussie banking scene.
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By GlobalDataDigital disruption
Digital disruption is a term that is being bandied about worldwide across the banking industry and Australia is no exception.
Australians have been quick to embrace new channels. 75% of bank customers were using basic online banking features last year, according to PwC and all of the big four’s websites ranked in the nation’s top 25 most visited sites.
Pam Rebecca, general manager of ANZ Digital, says: "The digital and mobile landscape is moving at a rapid pace.
"Similarly, our customers’ needs and banking preferences are changing and the way they want to interact with us today is vastly different from 10 – or even five – years ago."
In February, statistics were released by the Marketing Intelligence Strategy Centre suggesting that 26% of Australians use mobile banking, compared to 22% of mobile phone users in the US. From its launch to 6m users, mobile banking took only 13 quarters in Australia, compared to 15 quarters for online banking.
Rebecca says: "Australians have always been early adopters of technology and in this case I think it’s because the technology made their lives easier.
"Since we launched our mobile banking app ANZ goMoney, we’ve seen huge increases in customer logins, where we now have more than 1.1m active users and we’re processing around AU$150m (US$137m) every day. In fact, mobile logins now exceed internet banking logins.
"Customers like to know what’s happening with their finances and are increasingly looking for answers ‘on the go’. Mobile technology and banking apps allow this to happen."
Mobile payments
Mobile payment is also a channel that the banks are exploiting. In October, CBA unveiled a "Pay Tag", allowing NFC payments from smartphones that don’t already have the capability built in.
The "Pay Tag", manufactured by MasterCard, works by being applied to the back of a phone. When in place it enables NFC payments by combining CBA’s Kaching and Commbank apps.
When the feature was released, CBA was keen to play up the advantage of being independent of phone manufacturers for NFC.
However, the big four do not always go it alone to develop mobile payment solutions. Rebecca stresses the importance of ANZ’s relationship with telcos in the development of mobile payment capabilities.
She says: "The ‘big 4’ banks have always worked closely with the telcos – not just for NFC but more broadly.
"We’re currently running a NFC pilot and have been working with the telcos to deliver this."
While CBA chose to bypass the phone manufacturers with its "Pay Tag", avoiding problems like Apple’s notorious reluctance to take on NFC, Rebecca says it is not always possible to act so independently.
She says: "Digital is growing at such a rapid pace that it’s impossible for any organisation to deliver every component in the value chain on its own.
"It’s important to work closely with all the partners in the ecosystem, whether it be an application store platform provider, hardware manufacturer, telco, cloud provider, social media platform, augmented reality specialist or even wearable technologists.
"We have strong relationships with many partners in the ecosystem to offer faster delivery processes and a competitive advantage for ANZ."
Wearable tech
Along with their mobile channels, Westpac and its subsidiary St George are developing on smartwatch banking apps, the latest device innovation to burst onto the banking scene.
Westpac is working on software for the Galaxy Gear smartwatch. CIO Clive Wincup says: "We’re interested in how emerging consumer technologies, such as wearable computing, will influence the next generation of customer interaction for the bank.
"The primary difference between wearable and portable is that wearable is never off. It’s almost the equivalent of stream of consciousness; it’s that continuous exposure and connectivity.
"It will be fascinating to watch how customers adopt their behaviour to this type of technology. We have certainly seen behavioural shifts very clearly in our data in terms of how they use mobile devices like smartphones and tablets. How they use mobile and wearable technology is yet another paradigm shift."
Meanwhile St George is working on software for the Pebble smartwatch. CIO Dhiren Kulkarni explains that the bank was keen to be a trendsetter in terms of the smartwatch.
He says: "We’ve always been at the forefront of innovation and being first where it matters. St George was actually the first bank in Australia and the second in the world to launch internet banking in 1995.
"So rather than waiting for a new technology to become widespread, we think about how it can benefit our customers in the early stages.
The bank is also working on developing smartwatch payments. Kulkarni says: "We see smart watch payments as an add-on to mobile banking.
"It wasn’t a big investment for us to develop the technology, yet it provides another way for our customers to do their banking."
However, wearable tech has not yet stood the test of time, or the competitive environment of the mass market. Rebecca cautions that at the moment, technology like the smartwatch could be riding on a tide of novelty appeal.
She says: "Sometimes people can get caught up in the hype of bright and shiny new things.
"Wearable technology may one day have a place in banking; however from our customer research, we have no shortage of other exciting initiatives to focus on in the short term while the wearable technology market matures."
Social skills
Social media is also becoming increasingly important to Australia’s big banks. All four have Twitter followings in the tens of thousands, and CBA alone has over half a million ‘likes’ on Facebook.
A constant social media presence is becoming a must-have for banks the world over, with customers quick to frustration if they are not kept updated.
The UK’s Barclays has found this out to its cost. Only this November, a twitterstorm erupted over outages across the banks’ digital channels. Westpac is avoiding such problems by having a dedicated social media team.
Wincup says: "We have dedicated teams responsible for getting back to customers in a prompt fashion. We view social media as vitally important from two angles, as a communication channel to our customers and also as a mechanism for feedback.
"Today a customer might listen to expert advice about a new product or service – but they’re just as likely to ask their friends on Facebook what they think. Or, perhaps they’ll do both – comparing and contrasting expert opinion with social experience.
"It is not the only channel we have at our disposal but it is very effective at reaching a large number of people in a short space of time. By the same token, it is great to provide customers with a choice of how they want to make an enquiry or provide feedback."
Westpac’s approach seems to be working so far – when the bank’s online channels went down earlier in the year, the social media team were able to keep customers informed throughout the eight hours downtime.
There were still a great deal of complaints, but some customers defended the social media team, calling them ‘troopers’ and thanking them for their prompt responses.
ANZ is also cultivating a strong social media presence and this August CEO Mike Smith was the first Australian CEO to make LinkedIn’s list of 150 top Global Influencers.
Rebecca says: "Social media is very important to us because customers are increasingly turning to social media to research companies and products, and, in the case of a bad experience, are very quick to express this.
"Moving forward large companies will need strategies on social selling, leveraging network reach and rewarding high influencers who use social channels to grow brand advocates.
"ANZ has made good progress in developing our presence on social media however, as we look to 2014, there is a renewed focus on driving change more quickly.
"Social media is at a real tipping point and we take it very seriously at ANZ."
Innovation and competition
In the digital age, it seems that to differentiate themselves, the Aussie big four must look to their use of new technology and keep up with their customers’ ever-changing demands.
Customers are looking to see which banks have the best social media presence, the most up-to-date technology and capabilities. New devices like the smartwatch could be a big draw for customers at the banks that are exploiting the trend for wearable tech.
With smaller banks like St George manoeuvring with speed and agility to take advantage of new tech, the big banks will have to be quick on the uptake to maintain their grip on the industry.
So far, they seem to be keeping up well with digital trends and innovations, with all four having strong digital strategies and a clear idea of where they need to go next. But the pace of change is relentless and pausing for breath is not an option.
ANZ’s Rebecca says: "Digital disruption is happening and we can either embrace it or we can get left behind."
