Threat of digital disruption? That’s old news, say banks


Australian banks have hit back at a report by Macquarie, which has warned that the Big Four are set to lose a significant amount of market share to technology disruptors.

The report scrutinised Australia’s Big Four, concluding that they have no option but to ‘double down on IT investments to try to respond’ to what the report suggests is an IT arms race.

The report identified the CBA as leading the charge of the Big Four, but Lachlan Colquhoun, Head of Markets Analysis at East & Partners suggests the jury is still out on who is ahead on investment in technology.

"I don’t really think you could say that those IT investments are yet to pay off for the CBA. They have had some initiatives which – after great fanfare – have not really got market traction. They have delivered efficiencies in terms of commoditised banking services but I think the jury is still out on ultimate technology leadership," he said.

According to the report, ANZ and Westpac are starting this so called race from the furthest back.

A spokesperson from Westpac did not agree that the bank is starting further back, and said the conclusions made in the report were nothing new, because investment in technology does not stop.

The need to invest in technological solutions has been a priority for us for some years now. So, for us to remain competitive and to provide the digital services such as Westpac Live, our new online and mobile banking platform, that our customers want, we know we will have to continue to invest in these capabilities. That is to be expected if we want to remain front and centre,” said the spokesperson.

He also noted that Westpac has been spending a significant amount on its Strategic Investment Priority Projects, with $2 billion already invested in the first phase and phase two already underway.

According to Westpac’s half yearly report released in May 2014, CEO Gail Kelly outlined the banks proactive approach to remaining ahead of the digital game.

“We continue to invest significantly in the future, including around $500 million invested over the half for the long term benefit of the business.  Westpac is responding proactively and strongly to digitisation, and we have delivered a range of new products and services to meet customers’ changing needs.  We will continue to innovate and invest in this area to deliver even more convenience for customers,” according to Kelly.

A spokesperson from the NAB pointed to their NextGen transformation program, “we are one of the few banks internationally that is transforming their organisation in such a comprehensive manner.”

NextGen will retire 100 legacy systems and intergrate them into one to provide customers a simpler experience, according to the spokesperson who also cited recent examples of the NAB’s technology investments ncluding a mobile payments application called NAB Flik, and UBank USaver.

Payments: Watch this space

Lachlan Colquhoun, Head of Markets Analysis at East & Partners pointed to payments as the biggest opportunity for disruptors, “This digital payments area is one of the only areas where the Big Four are not consolidating market share. It presents as a major opportunity for new players and disrupters.”

The Big Four missed an opportunity to stave off threats from disruptors such as Paypal when they abandoned the MAMBO collaboration, according to Colquhoun, which would have seen banks work together for online payment alternatives to credit cards.

“When this was abandoned in 2011 it proved the banks were unable to work together. Without that, all they have is BPAY and that is very limited. MAMBO remains an opportunity lost,” said Colquhoun.