Aussie banks extend way beyond traditional services

Thus, banks will try to make their own offerings compelling . . . to ensure they “own” the customer.

Banks in Australia are remodelling themselves, looking beyond selling just loans and transactions accounts, expanding their offer to include services such as broadband, electricity and bargain shopping.

The Commonwealth Bank of Australia’s purchase of a quarter share of two small broadband providers last week was the latest example of this trend.

CBA bought 25 per cent equity stakes in More Telecom and Tangerine, broadband providers with a combined 90,000 customers. The move will allow the bank to offer telco deals to its seven million app users.

More Telecom and Tangerine will obviously do very well from having their offerings put in front of several million potential customers, which will earn CBA a referral fee.

The investments follow CBA’s May investments in start-ups offering retailing rewards and discount retail energy plans, which it will also offer to retail customers via its app.

CBA will be able to bundle cheap power and broadband into its home loan offerings, at the precise moment when customers are looking to connect to these utilities.

A key driver for CBA, which owns ASB Bank, is that banking apps are becoming increasingly commoditised. Their marketing departments might talk up their unique features, but in reality, the CBA app is much the same as Westpac’s, ANZ’s and the National Australia Bank’s apps.

Anything a bank can do to keep its customers engaged and coming back to the app is critical.

Certainly, banks have a ready audience. Research commissioned by CBA found customers aged 18 to 29 log onto their CBA app 40 times a month and spend 20 minutes online each day seeking deals. This explains the deal CBA did a few of months ago with retail loyalty platform Little Birdie, which will notify CBA customers about retail deals. CBA seems to want those 20 minutes customers spend online looking for deals to be spent on its app.

There’s a bigger game at play here. CBA is in a battle for customers’ attention and mobile phones, not just with other banks, but also with other businesses, such as power companies, phone companies, the tech giants and retailers.

As different sectors converge their offerings and companies become more like platform businesses — reselling a range of goods and services — it will become increasingly important to provide “the app of choice” for customers to make purchases. For instance, banks would rather customers come directly to them for a home loan or a credit card, rather than get a home loan through a property listing app or a credit card via a shopping site. Nor do they want tech companies such as Facebook and Google to become one-stop shops for all consumers’ needs.

Thus, banks will try to make their own offerings compelling and offer as many non-banking services as they can to ensure they “own” the customer. Adding to this dynamic is the consumer data right. The Australian government is moving to introduce this, which will state customers own the data a company collects on them. It means, for instance, they’ll be able to get hold of their energy use and charging information and take it to another power company to seek a better deal.

The consumer data right already exists in banking and will soon be introduced to power and phone companies, and probably others.

Additionally, consumers will be able to aggregate their financial data to one place. On their banking app, they might also have details of their non-bank credit cards, power accounts, phone and internet usage, and purchase all these services from their app. All this also provides hugely valuable data to the banks, data they can use to make more targeted offers, so they sell more products and keep more customers.

This is why banks want to get ahead of any move to converge service and product offerings. If they don’t, and in a worst-case scenario, more of their financial products could be sold by other companies through their own apps instead of the banks’ apps. Banks would earn less from their products in this scenario, having to split the profits with whoever brought them the business.

Much of this vision of the future depends on consumers. Will we be comfortable having our bank choose a power deal for us? Likewise, would we want to get our home loans and credit cards from Google or eBay?

But the banks aren’t taking any chances and are moving to get ahead of the trend.