Head of Commonwealth Bank’s start-up venture division x15 Toby Norton-Smith said the demise of Volt was “stiff news,” particularly for the numerous employees now flooding LinkedIn looking for new jobs.
He said he believed there are numerous areas or niches where start-ups can still offer a differentiated value proposition to consumers, but that established institutions had inherent advantages over new brands seeking to win broad banking account customers.
Technology alone isn’t enough to build a scalable bank, especially in the current environment where capital costs have markedly increased.
— Sean O’Malley, AMP Bank managing director
“Markets clearly move in cycles that have moments of excess on both ends, and much of the last few years have been a relatively friendly time to raise capital. But now it’s a difficult time, particularly for capital intensive businesses, and I don’t think it’s over by any means,” Mr Norton-Smith said.
“It is very hard to compete with something like CommBank’s ecosystem strategy, where we have 7 million digitally active customers on one of the top 10 most used apps in the country. We can plug in additional services such as our digital conveyancing business Home-in, and expose them instantly to a large customer base.
“So the scale of an established bank is significant. The alternative for other digital players in that broad ecosystem trying to acquire new customers is to bid against each other for the same keywords in online advertising, which makes it much harder to differentiate.”
As former Google Australia and New Zealand boss, Ms Carnegie was brought to ANZ to help it head off the emerging threat of tech insurgents. Recently promoted to become its retail banking boss, she is in the midst of delivering a new technology platform, dubbed ANZ Plus.
The jury is still out on whether it will deliver on its promise to put the bank at the forefront of digital banking experiences. Even so, the new platform’s estimated cost of about $400 million to date and the insistence of CEO Shayne Elliott that it is one of the most important things ANZ has done during his tenure shows the giant’s commitment to keeping fintech insurgents at bay.
‘Looking for trust’
Ms Carnegie said there are a number of reasons why neobanks are finding it more challenging, including increasing difficulty in raising capital, and the improved technology capability at incumbent rivals.
She said ANZ had already implemented and integrated more than 20 new cloud-based IT platforms to form the heart of its future Australian bank, and that by building and tailoring its own platforms it could now deliver new features faster than before.
“When it comes to the banking sector, customers are very much looking for trust, and there is no doubt it takes time to earn that trust as well as build a strong brand,” Ms Carnegie said.
“Many established Australian banks are also heavily investing in better technology and improving customer experiences.”
Westpac’s group technology officer David Walker has recently spoken about the adoption of cloud-based fintech platforms to offer new services, and the ongoing overhaul of internal systems to reduce the clunkiness that previously defined operations at major banks
He said Westpac has been forming partnerships and acquiring fintech start-ups – such as money management app MoneyBrilliant – in recent times, and had become much more nimble since the concept of digital disruption first emerged.
“There’s traditionally been a narrative that pits banks against start-ups, but that’s just not true. They are a good source of innovation, and we partner with many to deliver better services and experiences for our customers,” Mr Walker said.
“We are always open to working with start-ups, including fintechs and neobanks.
“It can be hard for any start-up to succeed, even well-capitalised ones. It’s also a particularly tough time for start-ups, with funding lifelines weaker at the moment. In addition, full-service banks like Westpac have taken major leaps forward over the last few years.”
NAB’s chief operating officer Les Matheson said it had also made a concerted effort to invest significantly in strong tech foundations, modernising internal technical skills, insourcing capabilities and accelerating public cloud adoption.
On facing off with neobanks, he said net promoter scores (a customer service metric) had increased across its mobile, online banking and NAB Connect business banking services, and that NAB’s capital heft meant its UBank digital bank was very competitive.
“We took a different approach with UBank. As Australia’s first digital bank, it has provided very competitive products and great value to customers for more than a decade, but customers were telling us they wanted more fast-paced technology change to help them be more successful with their money,” he said.
“In acquiring 86 400, we saw an opportunity to accelerate UBank’s growth and bring innovation to our customers faster.
“While we considered alternatives – including building a new platform for UBank – combining disruptive, innovative technology with UBank’s established customer base and brand provided the best outcome.”
The ascension of Sean O’Malley to lead AMP’s Banking operations in 2021 highlighted the focus of older institutions to put tech excellence at the centre of their plans.
He had previously been in charge of technology and operations, and had delivered a “Future AMP Bank” systems modernisation program.
He said the fall of Volt illustrated both the competitive nature of the banking landscape, and how challenging it is to start a bank from scratch.
“It also demonstrates that technology alone isn’t enough to build a sustainable, scalable bank, especially in the current environment where capital costs have markedly increased,” Mr O’Malley said.
“I do think that fintechs and mid-tier banks are having a positive impact and they will continue to have a place in the market, which is a good thing for competition and for customers. A key part of our strategy in AMP Bank is to partner with innovators to disrupt and grow AMP Bank’s market share – our recent partnership with Nano is an example of that.”