CBA Labs is reaping the benefits of its early ‘blue-sky thinking’ as it starts to bring to life some of the innovations it has been working on, says Toby Norton-Smith, General Manager, Digital Innovation and Growth at Commonwealth Bank.

Toby Norton-Smith

When CBA Labs was first established four years ago, its dual focus was adding value to customer relationships and promoting innovation culture and capability within the bank by educating the staff about taking on an innovation and growth mindset.

It was also about trying to change some of the cultural norms around how staff understand customer problems and develop products.

“In the last few months in particular, we definitely started transitioning to what I’d call the second phase of the labs which is focusing much more on applied and commercial innovation opportunities,” says Norton-Smith.

“It’s not because in any way we think innovation culture isn’t absolutely critical to the success of the bank in the future, but because we think the best proof point of that innovation culture is delivering some of those applied and real experiments.”

Norton-Smith highlights the work the Labs have done on blockchain, which included a proof of concept for the Queensland government on a bond issue. Another experiment involved shipping 17 tonnes of almonds from Sunraysia in Victoria to Hamburg in Germany in a collaboration with our customers using distributed ledger technology, smart contracts and the internet of things to link and co-ordinate the end to end supply chain.

More recently CBA designed and developed a capital markets platform, used by the World Bank to launch  bond-i: the world’s first bond to be created, allocated, transferred and managed through its lifecycle using distributed ledger technology, which raised A$110 million.

“I’m very proud of the team for having built research and capability around blockchain, identified an opportunity and refined it through experimentation, right through to now where we’ve delivered something which has a commercial business model underneath it,” Norton-Smith.

Opportunities in programable money

The Labs are working on other applications for blockchain, including ’programable money’, where money is effectively programmed based on permissions or certain proof points in a chain of actions.

“It opens up staggering opportunities for efficiency and reduced waste and other applications,” Norton-Smith says. “If you think more broadly about the business of government in disbursing funds and, often, disbursing funds in highly conditional ways – i.e. you should receive this payment if Fact A and Fact B are true – a blockchain-based platform provides a really powerful rules engine for doing some of that.”

The Labs are also focussing on RegTech – software and applications that manage regulatory compliance – through the small innovation lab it has in London, which Norton-Smith describes as a “listening post” because the UK is a few years ahead of Australia.

The UK also provides an opportunity for CBA to gain an understanding around how customers are using open banking – which requires banks to give customers access to their transaction data. The UK introduced the regime in January this year, about 18 months before Australia.

The introduction of open banking in Australia will place more focus on the currency of trust in a banking relationship, says Norton-Smith.

There are two dimensions to this. The first is that clients know their data is held securely and there is rigorous customer permissioning over its use.

Secondly, there is the issue of financial well-being. Norton-Smith says there is more value in open banking than just advising customers about the right products. Instead, they can use the insights to help customers save money or spend more wisely. CBA has already introduced some financial well-being features within the app, including spend tracker and transaction notifications and is working on more, including a savings jar and the ability to set a savings goal.

Understanding human-to-technology interactions

Along with its own work, CBA is partnering with FinTechs, deliberately taking a broad view of what FinTech means, including B2B players.

Partnerships include a pilot project with Airtasker to build Australia’s first digital identity solution; with KPMG and Microsoft to launch accounting software service Wiise; and with real estate comparison service Local Agent Finder.

While other banks channel some of their innovation through venture capital funds, Norton-Smith says he is pleased CBA doesn’t have one. “It forces us to focus on solving problems with our partners. We can’t just write a cheque and hope that something emerges down the line,” he says.

The Labs are also working on embodied artificial intelligence or social robotics, which Norton-Smith says is primarily about understanding human-to-technology interactions.

“Increasingly, we see the deployment of different voice devices in people’s homes, right through to how they interact with a bank, be it automated or live chat experience. A lot of that work or the insight we gain from that has started flowing in to real experiences,” he says.

One of those real experiences is the CBA chatbot, Ceba, which the bank launched earlier this year.

The chatbot is available to NetBank and CommBank app customers and can help with more than 200 banking tasks such as activating their card, checking account balance, making payments, or getting cardless cash – and can recognise about 60,000 different ways customers might ask for help.

An increasing number of banks around the world are rolling out chatbot applications, to help them better respond to customer needs and save on customer service costs.

A report by Deloitte Digital says that while the sector is in early days of using conversational interfaces, “customers increasingly demand access to information at any time and day, and digital-core companies have started responding and innovating at a rapid pace”.
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