The analysis of ''big data'' has become one of the biggest strategic focuses for Commonwealth Bank chief executive Ian Narev.
Banks worldwide are quickly realising they must improve their understanding of customers by examining the vast volumes of data shuffled around the digital economy. The banks' focus on big data is partly a defensive mechanism, to protect retail banking's market share from potential competition from the large technology companies.
However, banks are also aggressively building up their capability to push their prized customer relationships in new directions, and thereby improve their ability to cross-sell new products. The CBA's controversial drive to cross-sell products by more traditional methods has come under the microscope following scandals in its financial planning division.
''The opportunities across the group [from big data] are literally endless,'' Mr Narev said. ''This is a huge strategic focus. It's a huge topic of conversation in the bank.''
Initially, CBA is using big data to analyse customer risk. ''It can get better risk assessment by analysing businesses' ongoing cash flow performance, to have early warning of risk challenges,'' Mr Narev said on Wednesday after delivering the bank's record $8.68 billion full-year profit. ''Storage costs are going down dramatically and your ability to search across it is going up exponentially in an unstructured way. That gives us all sorts of opportunities,'' Mr Narev said.
CBA has 5 million online customers and its applications are used by 2.6 million people. It is also planning to push new proprietary technology to point-of-sale customers via its Albert device (named after Albert Einstein), which will compete with traditional eftpos terminals by creating a new platform for merchant-customer interaction. The data will flow into CBA's systems.
CBA is already selling a big data analytics tool, known as Daily IQ, to its business customers. Launched in March as an iPad app, it provides cash-flow reporting, and business insights from similar industries in comparable locations, to give businesses an idea of their success.
''To small business we are saying, you might not be able to afford to do this but we can tell you how you are going compared to the butcher down the road. That's just gold for a small business customer and helps make them better,'' Mr Narev said.
Macquarie analyst Mike Wiblin said the opportunity for the banks from big data was large. ''Banks will become tech companies,'' he said. ''Technology can inform risk analysis, but the big picture is [that] they are moving away from branches towards interacting with customers on iPhones and tablets. This requires a change in mindset.''
The banks are scrambling to change their cultures to ensure they are ready to capitalise on the new technologies that have thrust customers into the driving seat and radically reshaped interactions between borrowers and lenders.
CBA is not the only one getting in on the action. The financial system inquiry's interim report, released last month, says ''growing amounts of structured and unstructured data are being collected, stored and used by private sector firms and governments. Firms increasingly seek to extract value from these vast stores of data through information analytics to create and capture value in new ways.''
