Interview with Michael Harte, Chief Information Officer

June 2009¹⁹⁹

In 1997, over a decade ago, the Financial System Inquiry (the Wallis Inquiry) predicted that the internet had 'the potential to transform both operations within financial institutions and communications between customers.'²⁰⁰ This prediction is now proving to be true. Online banking is the second most popular activity that Australians conduct online (the first is checking email).²⁰¹ By 2007, Australia had one of the highest rates of adoption of online banking services around the world.²⁰²

The Commonwealth Bank of Australia²⁰³ (CBA) is one of Australia's leading providers of financial services, including retail and private banking, business and institutional banking, funds management, superannuation, insurance and investment and sharebroking products and services. Some of its most recognised product brands include the online portal NetBank, the Colonial First State wealth management platform FirstNet, and the online broking service CommSec. CBA is represented in 11 countries and provides banking, life insurance and fund management services in China, Singapore, Indonesia, Vietnam, Fiji and New Zealand. It also has global market activities in London, New York, Tokyo, Hong Kong, Singapore and Malta.

Initial forays into online banking

In 1997 the launch of NetBank heralded CBA as one of the first major Australian bank to provide an online banking platform with 24-hour access to transaction banking services. The focus of the online offering at that time was to enable people to complete the most popular transactions, for example, check their account balance, pay a bill or complete a fund transfer.

Commonwealth Securities Limited (CommSec), the stockbroking arm of CBA, was established in 1995 as a telephone-based service and, in 2003, extended to an online broking service. CommBiz-an online electronic transactional banking channel for institutional, corporate and business customers-was launched in 2006.

The first forays into online banking for CBA were driven primarily by a desire to offer customers an additional channel through which to conduct their financial affairs and provide them with convenience. The online option complemented existing channels such as Automatic Teller Machines (ATMs) and telephone banking, which were also focused on providing the customer with flexibility and convenience.

In the early days of online banking in Australia, there was some reticence on the part of customers to use the internet to assist in managing their financial affairs. However, Australians soon became familiar with transacting online and reticence gave way to a realisation that it was convenient and handy-a time saver. Within three years of launching NetBank, the customer base had grown sevenfold. In its first year of launch, 85 per cent of CommSec's brokerage business was online.

'Finest Online'

Finest Online, CBA's latest upgrade to its internet banking services, was rolled out in February 2009. Customers now have one login and password that provides them with access to all of the financial services offered by CBA, whether it be banking, broking, financial management or insurance. Previously, the online services offered by CBA were delineated and housed by the type of service being provided, which meant customers had to interact with separate sites to access different CBA services.

By building a platform that offers a one-stop-shop for all CBA products and services, CBA aims to position itself as a user-friendly and convenient online bank that can provide services across Australia and eventually across Asia.

Key features of the enhanced platform include:

• A new, easy to navigate website that shows both consolidated account/transaction data at a summary level as well as details of non-financial activities.
• Significantly improved application processes. Existing customers are not asked to re-supply information CBA already holds. Forms are pre-populated with all known data. Key documentation required for the approval process can be uploaded to the site for review by CBA staff. All contract acceptance and funding occurs online, replacing the need for paper contracts.
• Increased self-service. A wide array of self-service features such as credit card limit increases, loan approvals, and card activations give customers the opportunity to control more of their banking at their fingertips. Customers can apply for a range of products through new streamlined processes that offer quick turnaround times.
• Online chat capability. Customers are able to initiate an online chat with call centre staff. This technology hooks into the existing call centre queue management software, allowing for intelligent routing of such requests to specific call centre groups.
• Convenient notifications and security verifications. Customers now receive a variety of messages related to their accounts through a secure, web-based medium as well as via alternative channels of their choice—email or SMS. The security of two-factor authentication provides customers with a double layer of protection when completing transactions.

The site is also designed to make transactions truly real-time or as close to real-time as possible. This means, for example, that the approval time of applications for new financial services has been significantly reduced. Previously it took 14–22 days for approval of a home loan top-up but using CBA's latest online platform, this can be fully approved within 14–15 minutes.

The strategy driving Finest Online has changed from that which led to the development of the initial services of the late 1990s. Rather than providing a third means (in addition to ATMs and the telephone) of completing the most common banking transactions, Finest Online aimed to provide a full self-service experience. This means that customers don't have to go into a branch or contact a call centre. The CBA site now offers richer content with the ability to go beyond account management and reach into research and related offers—ultimately customers can better manage their financial lives.

The benefits of online banking

Of CBA's 11 million customers, over four million are registered to use its online services and it receives over 60 000 new applications to register for internet banking every month. Of the four million registered internet banking customers, approximately one to two million CBA customers are online and active every day.

The benefits to CBA from offering online banking are the much lower cost per transaction, higher rates of accuracy and greater staff satisfaction because they avoid routine transactions and are able to focus on the more interesting and complex sales advisory services and offering higher value advice.

The platform improvements have led to increased revenues. For example, Term Deposits was one of the first products on the new platform and the rate of investments in Term Deposits has doubled since the beginning of 2008. CBA has also enjoyed cost reductions by rationalising existing and duplicated online systems and lower customer management costs due to the increased take-up of online customer self-service. The use of email and SMS in NetBank registrations has seen the annual cost of this process reduced by seven times the pre-Finest Online cost.

The response to CBA from its customers has been that they feel a sense of empowerment by having access to all of their information in one place, they enjoy the greater transparency it provides into their CBA financial products and services, and they gain a greater understanding into the fee and product structures. CBA's latest customer satisfaction report indicates close to three-quarters of NetBank customers rate their overall satisfaction with NetBank with a score of nine out of ten.²⁰⁴

The future—co–creating value with customers

The internet has transformed our personal and working lives, and it will continue to do so at an unrelenting pace. Equally, the operations within financial institutions have been reshaped dramatically by the presence of the web. The communications between customers, however, are at the cusp of transformation and the potential for innovation is excitingly high.

People across the world are becoming increasingly mobile, connected and eager to make and share content with one another. Social networking sites like FaceBook and MySpace, content sharing sites like Flickr and YouTube, and micro-blogging site Twitter all have at their heart innovation and the concept of 'co-creation'.

For financial institutions to offer customers improved, richer services and keep pace with the new ways of communicating they must find ways to co-create value with them. Organisations that want to deliver value to customers should provide the environment for people to behave and interact in ways that are meaningful to them.

There needs to be a platform that allows our customers to co-create unique products and services.

'The firm must efficiently innovate 'experience environments' that enable a diversity of co-creation experiences. It must build a flexible 'experience network' that allows individuals to co-construct and personalise their experiences. Eventually, the roles of the company and the consumer converge toward a unique co-creation experience.'²⁰⁵

Such a platform enables a broader reach to a wider range of customers. To become more meaningful in the lives of customers we will have to facilitate mobility, community, and the making and sharing of content.

With Finest Online, CBA enables customers to personalise their online banking homepage-a first in the Australian financial industry. The future will allow us to unfold many more delightful ways for customers to create unique experiences with us. Only then will the communications between customers be wholly transformed.

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[199] Reuse or distribution of this case study must include the following attribution: Australia's Digital Economy: Future Directions © Commonwealth Bank of Australia and the Commonwealth of Australia, 2009, www.dbcde.gov.au/digital_economy/final_report

[200] Wallis Financial System Inquiry. p. 96.

[201] ACMA, Australian in the Digital Economy, Report 2: Online Participation, November 2008. p. 21

[202] User acceptance of Online Banking Service in Australia, Communications of the IBIMA, Volume 1, 2008, p. 191.

[203] See www.commbank.com.au/

[204] April 2009 - Nielsen

[205] C. K. Prahalad and Venkat Ramaswamy, The Future of Competition: Co Creating Unique Value with Customers, 2007.