More tech in Commbank's post-core budget

To leverage $1.1 billion core banking modernisation.

The Commonwealth Bank of Australia has committed itself to a new, varied mix of technology investments that will continue past next year’s conclusion of its $1.1 billion core banking modernisation project.

Technology, customer-centricity and a “strong, flexible balance sheet” were key thrusts of the bank’s strategy update, released to ASX investors today (pdf).

Chief executive officer Ian Narev said the bank’s five-year core banking project was a key business advantage, noting that 11 million customers were experiencing “real-time banking” with the new SAP platform.

As the five-year project neared its end, Narev told analysts and media that the bank did not plan to embark on other single, large projects in the near future.

Instead, a mixed bag of technology projects would share funds that had been allocated to core banking in previous years, he said, making reference to the bank’s most recent half-year results.

In the six months to 31 December 2011, Commbank reported spending $188 million on core banking modernisation, representing 29 percent of its $647 million “investment spend”.

“There will be considerable ongoing technology spend on a variety of different things, but not one big project,” Narev said today.

He described the SAP platform as a foundation for innovation, highlighting the bank’s launch of the Kaching contactless mobile payments application in December.

Potential developments could include new applications for real-time financials, account opening and maintenance; and new channels to interact with customers, such as mobile devices and redesigned branches.

Strategy update documents revealed plans to tap cloud computing, and use big data analytics to improve risk and capital insights and draw out “insights to offer more value and to price based on loyalty and risk”.

Earlier this year, chief information officer Michael Harte told iTnews that the bank was working with research organisation NICTA to develop a big data platform based on the Hadoop framework.

Although the bank was confident of Australia’s long-term economic strength, international markets were volatile, and there was “no going back” to the peak, pre-recession conditions of 2007.

Narev said the bank had decided to “focus on very few capabilities and using those capabilities as best we can”, after an analysis of its successes and failures in the “last few years”.

Narev flagged competition from non-traditional players, which could include the likes of Google, PayPal and Facebook, but did not elaborate.

He refuted assertions that the core banking project was simply a “brand positioning exercise”, noting that it would be “impossible [for competitors] to stop customers from realising” that the limitations of legacy platform “bottlenecks”.

“There is a big debate now among the major banks as to whether you need to innovate at the core, or innovate at the customer interface,” he said.

“We see a future where cash is going to be displaced and no matter how good your customer interface is, customers are not going to be happy if [a fund transfer] takes 48 hours.”