CBA’s business model ‘not sustainable’

Speaking recently at the ASIC Annual Forum 2016, CBA’s group executive for wealth management, Annabel Spring, said the big Australian banks can “absolutely” survive the coming wave of fintech innovation.

“Innovation is a process of creative destruction. That means that aspects of the way we run our business now will not be sustainable in this new world as we move through the blockchain and big data,” she said.

“As big institutions, we have to be agile and we have to recognise that some parts of our business have to change in response to what the customer wants.”

Ms Spring said banks like CBA are “big enough” to take on risks when it comes to technology and can “try things”.

“That will involve partnering increasingly with the fintechs, just as we have with [payments systems] Kounta and Albert, along with some of the P2P lending sites,” she said.

“We have to do that ... that brings in fresh blood. But we also have to innovate ourselves – [for example with things like] cardless cash.”

Joining Ms Spring at the forum was Digital Asset Holdings CEO Blythe Masters, who said fintech providers have underestimated the costs of acquiring new customers.

“What banks have, to varying degrees, believe it or not, is in many cases very loyal customer bases and a very sticky mix of products,” she said.

“So if banks have the opp to capture the benefits of the technology that’s being offered by the new providers but to offer it to their existing incumbent customer base, they have an opportunity to win [the battle with ‘disruptors’].

“That’s why we’re seeing now almost without exception the leading fintech interfaces don’t use the word ‘disruption' anymore’ – they use the word ‘partnership’.”

Former NAB chief executive Cameron Clyne pointed out that none of the new fintech players are accepting deposits, which means that banks could end up being marginalised.

“What a lot of major players [including regulators] are concerned about is – somebody’s got to take deposits,” he said.

“All these new players are offering great functionalities and a whole range of things. But very few of them are offering deposits.

“And I think one of the concerns of legacy players is that they could be marginalised.”

[Related: Big banks ‘won’t be replaced’, says Macquarie]