Commonwealth Bank of Australia (CBA) chief executive and managing director Matt Comyn has confirmed its WA-based banking arm, Bankwest, will transition to a “predominantly” and likely “solely digital” customer service operating model in the coming years.

In response to a senate enquiry questioning why Bankwest was not included as part of CBA’s temporary pause on regional bank closures, Comyn conceded that in-branch Bankwest services “will be scarcer”, with the WA-based bank providing “more digital offerings” with a “limited physical distribution”.

“Of course,” he said, “that allows [Bankwest] to deliver a very different product [and] potentially a different pricing model to customers and the way they support them.”

He noted that Bankwest, which was acquired by CBA in 2008, maintains a unique operating model, separate from the rest of parent’s banking businesses.

“Bankwest is a very different financial institution,” Comyn said in his response to questions posed by senators at the ‘Bank closures in regional Australia’ hearing today.

“Obviously it’s owned by CBA and I’m accountable for both. But, strategically, Bankwest is moving into a predominantly digital, and probably over time solely digital-only [model].”

Bankwest, he added, has “decided that a much larger footprint in regional WA in the next few years won’t commercially be good for them.”

Also using its own home loan origination model, Comyn noted that Bankwest has “a much larger intermediary distribution via mortgage brokers” than CBA does.

“The Commonwealth Bank does not have a business model that supports that”.

Comyn noted that while Bankwest did previously have some East Coast distribution, this has since been scaled back.

“Bankwest does have a national customer base, but outside of WA, [it has] no physical footprint.”

Bankwest early last month revealed it would close three Perth metro branches by late 2023 amid declining branch transactions and, it said, a growing customer preference for digital and broker services.

“The closures reflect Bankwest’s strategic focus on growing as a WA-based bank for current and future homeowners nationwide by investing in improved digital and broker services for its homeowner customers,” the bank said in a statement on 3 August this year.

Bankwest general manager for personal banking Scott Spittles acknowledged the changes would “cause some inconvenience”, but said the branches had become “increasingly unsustainable to operate as customer banking preferences shift to digital options”.

“Customer demand for digital banking services continues to grow, with digital transactions accounting for more than 90 per cent of all transactions, while in-branch services have declined by almost half in the past three years.”

Citing figures from CBA’s 2023 Annual Report, Comyn said the use of bank’s digital channels has grown significantly among its customers. Currently, CBA counts more than eight million digitally active users, each averaging around 38 logins per month to the bank’s digital services.

“[Digital] is one of the most important features our customers use,” Comyn said. “Customers highly value the investments we make in digital.”

With Bankwest likely to pursue further branch closures, Comyn said CBA’s retail banking arm would offer a different proposition that would complement Bankwest’s offering.

CBA promises community consults on branch future

While committing to a moratorium on regional bank branch closures for at least the next two years, the post-2026 future of CBA’s branch network remains uncertain.

Comyn said the bank will weigh up the costs, its historic obligations (as a bank, he noted, “created by an Act of Parliament”), customer uptake and acceptance of digital alternative banking services, as well as local community input, before making any further decisions on closures.

CBA, according to Comyn, maintains a current network of around 728 branches – the largest in the country.

The bank invests around $1 billion to sustain this branch network, he said, with “tens of millions” of additional dollars spent on maintaining its Bank@Post partnership, which enables customers to make deposits or withdraw cash at selected Australia Post Offices.

The cash economy is also withering, with cash representing only around 15 per cent of point-of-sale transactions.

Costs to maintain cash services, however, run at around $400 million each year for CBA (around $40 per customer each year), which, Comyn said, must be cross-subsidised by the bank.

“I believe cash will continue to be important, [but] we [at CBA] pay a significant proportion of the costs of providing cash in Australia.”

He noted that digital service alternatives are often accepted – even if at first begrudgingly – by customers who have borne a local branch closure.

“Despite the inconvenience, the vast majority of customers – around 95 per cent – don’t change banks after a branch closure,” Comyn said.

“While there might be a temporary reduction in customer satisfaction [ratings], or NPS scores, these tend to recover within 12 months.”

When questioned on whether CBA would seek consultation with local communities before a decision on a regional branch closure is made, Comyn said the bank was taking active steps to ensure community input was factored into any decision.

“We’re moving to the most telegraphed banking consultation practice in history,” he said.

“We’ve made a commitment until 2026. We want to engage with the community, of course, to ensure that that decision is valued, and if there are opportunities to serve more customers more deeply, then we would welcome that.”

He said the bank has also committed to supplying program and status updates “along the way” to local communities on changes to branch statuses.

He acknowledged that CBA, like its competitors, had up to now not been sufficiently transparent with local communities on its plans for branch closures, and had failed to fully gauge the impact of these business decisions on regional communities. CommBank, he said, has sought to remedy this deficiency.

However, he also said it was also incumbent on local communities to prove the commercial value of maintaining a local branch.

“For us, where we can see our competitors making different decisions, it gives us an opportunity, frankly, to pursue a strategy which we haven’t taken in the past, in which we’re very clear about the decisions that we’re making well in advance.”

“[We’d like to see] Mark [Jones, CBA’s EGM, customer service network] and the team to sit down with the local mayor and say, ‘This is the proposition, here’s the decision we’re making, here’s how you can help us continue to support having a physical presence in this location beyond this date.”

Comyn was questioned by senators on whether a digital experience can effectively replicate the personal touch of an on-the-ground banker, particularly for rural and farming communities that have long depended on their personal relationship with local staff.

He responded: “Building that relationship that is much better had in-person. For the foreseeable future, face-to-face services will be important.”