How the Commonwealth Bank made it happen
The Australian banking sector was one of those quiet achievers who leveraged the first wave of the MobCon to not only reduce its costs of doing business but also enter into profitable new markets.
The growth in online banking is an illustration of just how successful Australia’s banks have been in migrating their customers out of the bank branches and into becoming self-servers who, through the purchase of the their computer and monthly ISP fees, are willing to fund a significant part of the ongoing costs of doing business with the banks.
Growth in online banking
Some banks have been more successful than others. The Commonwealth Bank (CBA) has not only succeeded in leveraging the MobCon technologies to enter and dominate new markets.
Today the CBA is the market leading online stock broker in Australia. Delivering an additional 3% to the group’s overall profitability.
It has also succeeded in reducing it costs of doing business. The CBA has utilised the first wave of the MobCon to improve their overall productivity to the point where these efforts now deliver around 10% of the group’s overall profitability.
Breakdown of CBA Profits for 2008
What this means is the overall profitability of the CBA today is as much a tribute to these productivity gains as it is to the new business generated today by the AuD$8 Billion merger with Colonial First State back in 2000.
These results confirm the general eBusiness theory that it is easier, and more profitable, to leverage the internet to reduce costs than it is to chase new opportunities.
As you can see from the chart below the Commonwealth Bank (CBA) is one of the many Australian corporations to have indirectly profited from Telstra’s AuD$15 Billion investment in the MobCon over the past decade.
Commonwealth Bank vs Telstra share performance since 1998
The question is will it be as easy for the banks to profit from Telstra’s investment going forward?
In the first wave of the MobCon it was relatively easy for the Banks to reduce their costs of doing business while simultaneously increasing their fees. Essentially they had little to no competition in the credit and settlements markets.
Today things are different. As we shall see as I expand on this theme during the rest of the week ahead, new technologies and players are emerging that could revolutionise the banking industry. Indeed there are some who are already suggesting that the emergence of the smart phone payment systems could render the global banking systems as we know them today obsolete.
The first wave of the MobCon for Australian Banks was just about doing more with less. The next wave may be more of a battle for relevance and survival in a hyper-connected world.
What are the chances in 15 years time that newspapers will be a distant memory and we will be talking about “the impending death of banking“?
After all, if you no longer use cash, cheques or credit cards and you just use your mobile phone to buy everything. Do you really need a bank charging you monthly fees to manage the digital money residing on your mobile phone account?
Certainly if you are a shareholder in Telstra today you would be thinking a healthy slice of Australia’s retail credit market would do wonders for the embattled Telco’s share price.
ARPU Mobile Phones vs Credit Cards
Other posts in this series
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