Banking today is driven by customer experiences that are digital and seamless. It is not about what product or service a bank offers, but how it makes that offer and through which channels. The winners in today’s era of digital disruption will be the financial institutions that can become truly client-oriented and deliver the smooth, digital journeys customers now expect.
As Australia’s leading provider of integrated financial services, Commonwealth Bank is aware of the urgency for digitizing and improving customer engagement. Founded in 1911 and with close to 50,000 employees in 15 countries, CommBank understands that the way to resist disruption and continue to grow is through continuous innovation in customer service and operations.
The bank’s latest annual report summarized its mission as “Becoming a simpler, better bank”. To help CommBank achieve this and best position itself for the digital future, Silicon Valley Innovation Center (SVIC) designed a custom immersion program in Silicon Valley for over 20 Commonwealth Bank executives centered around three key concepts:
- Corporate innovation and startup engagement
- The transformation of payments infrastructure
- The future of banking and digital currencies
Our program offered CommBank’s executives the opportunity to immerse themselves in the global hub of innovation and connect with digital experts at Google, Token and SVIC.
Becoming Innovators for the Digital World
Silicon Valley is the global hub of innovation, where tech giants and early-stage companies are shaping the future. The immersive program for CommBank’s executives included company visits to Google and expert talks at SVIC to provide the executives with a deeper understanding of innovation culture and engagement with the startup space.
“You have to re-imagine how money can be managed and moved because there’s going to be more change in the next five years in financial services than in the past 30.”
Dan Schulman, CEO of PayPal
In its 2018 annual report, Commonwealth Bank highlighted the importance of having a culture that is customer-oriented, values risk management and supports an inclusive, diverse workforce. A company visit to Google aligned well with these aspirations. During a presentation by one of the tech giant’s engineering managers on “Secrets of Innovation”, the Australian executives were able to learn more about the culture of innovation that has helped Google develop the products and services used by millions of customers around the world every day.
This session also provided the perfect setting for CommBank’s executives to hear about the emerging trends that may lead future waves of disruption, such as self-driving vehicles, cloud computing, cyber-security and cyber-insurance.
Later, CommBank met with SVIC’s Innovation and Corporate Accelerator Director to hear about the future of business and engaging with the Silicon Valley ecosystem. The Australian group was very interested in collaborations between established companies and startups, and the talk shed light on the IPO process and investments in early-stage companies.
Key takeaways from Google and SVIC: the age of disruption is transforming the world at lightning speed and a company’s ability to innovate and adapt to change has become a key driver for success. Changing organizational culture and partnering with startups are pathways for established financial institutions to become innovators in their industry, resist disruption and prepare for the future.
Banking on the future of money
In recent years, the finance sector has seen fintechs rapidly capture market share. What explains their fast growth and the way they’ve earned users’ trust? In essence, these young companies have been able to satisfy the needs of consumers for convenient, accessible services through mobile-based business models and easy-to-use apps. For established financial institutions, it is now a priority to innovate around the entire customer lifecycle and leverage AI and machine-learning to offer simpler, faster operations.
“If banks can’t offer something more valuable than Amazon Prime, then we’re probably in the wrong business.”
Bradley Leimer, Former Head of Innovation/Fintech Strategy at Santander US
In the case of CommBank, an overview of its mobile and tech tools would indicate that they are ahead of the digital finance curve. The bank’s mobile app offers an integrated chatbot that understands 85,000 different ways of asking questions and helps customers complete 282 banking tasks. Still, companies today not only need to prepare for the business landscape of the next five years (in which apps will be a given and chatbots increasingly ubiquitous), but implement digital innovation strategies that will give them a competitive advantage and help resist disruption in the long term.
During their visit to Silicon Valley, the CommBank group wanted to learn more about innovation in payments and, in particular, the potential uses of cryptocurrency. A session with fintech Token – an experience the executives described as “eye-opening” – was the perfect context to satisfy their curiosity and learn about cutting-edge applications for digital banking.
Founded in 2015 with the mission of “doing for value what the World Wide Web did for information,” Token has developed an open platform for banks to interact in a global finance ecosystem and a single application programming interface, or API, to access all banks. By enhancing the access and sharing of data and helping banks meet compliance requirements more efficiently, open-banking platforms and APIs can significantly enhance the delivery of financial services for both retail and business consumers.
Hearing from Token not only brought the CommBank team up to speed on the developments and potential of these tools, but also gave them the chance to gain insights on two growing trends where fintechs are leading the way: instant payments and peer-to-peer transactions with cryptocurrency and blockchain technology.
Emerging (crypto)currencies in finance
Cryptocurrencies have been described as a money revolution and are based on the highly disruptive blockchain technology. Blockchain, by definition, is a decentralized ledger shared across a private or public network and at its core is the absence of third-party intermediaries. With a central premise in such direct opposition to the role of banks, it would seem a major competitor to established financial institutions and the traditional banking ecosystem.
A report by the World Economic Forum has forecast that 10% of global GDP will be stored on blockchain by 2027.
However, as CommBank learned during Token’s presentation, banking incumbents who develop smart strategies to engage with blockchain may find valuable business models within the technology. Over a Q&A, the executives heard about profitable opportunities with cryptocurrency in foreign exchange and after the presentation were very keen to discuss these opportunities with clients they advise.
Blockchain applications for instant transactions
If there is one defining trait of the digital world, it is immediacy. And customers now expect the same in their banking services. As a result, payment systems around the world are increasingly being revamped to offer real-time payments through multiple channels, including mobile apps and digital wallets.
The technology on which these payment infrastructures could be based? Blockchain.
During the presentation, the Australian executives also gained insights into this trend and the use of cryptocurrencies as well as traditional currency to provide instant bank-to-bank payments, a potential application for CommBank to offer its own customers.
Key takeaway from Token: blockchain applications like cryptocurrency are very new and there is space for banks to shape this growing ecosystem. Banks can integrate cryptocurrency to their operations and transform their payment infrastructure on blockchain technology to offer customers real-time transactions, a service with increasing adoption worldwide.
Heading into the future
During their custom immersion program in Silicon Valley, Commonwealth Bank of Australia executives learned about the future of banking and the crucial role innovation will play in the industry’s future. At Google and SVIC, the group was able to dive into the culture of innovation and the way companies can engage with it through startups. A session with Token gave them a thorough overview of digital banking, the role of banks in the future and potential applications of blockchain and cryptocurrencies at finance institutions like their own.
Commonwealth Bank came away with the tools and knowledge to become a simpler, better partner to its customers and a leader in the digital banking future.
Silicon Valley Innovation Center helps financial sector executives experience and connect with the Silicon Valley fintech startup ecosystem through a fintech executive immersion program. As Silicon Valley is a hotbed of fintech innovation, company executives will benefit greatly from visiting the innovation hub and interacting with startups like the ones mentioned in this article. Through this immersive experience, executives will also gain deep insights into how partnering with Silicon Valley startups can be a game-changer for their businesses.