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Deep Dive 13 Oct 2021 - 6 min read

'We’re just getting started', says CommBank's X15 ventures chief; plots massive walled garden of services for 15m customers to take on global tech giants

By Brendan Coyne - Editor

Toby Norton-Smith (L) and Justin O'Donnell (R). "A banking app is a great environment to introduce new services to customers in a way that is entirely permissioned by them," says Norton-Smith.

CommBank’s X15 Ventures unit is paving the ground for a massive stack of next gen services that effectively builds an opted-in walled garden for its 15 million retail and business customers, as the bank bids to compete with global tech giants inside its own expanding ecosystem. With a direct-to-customer mortgage play about to launch, it's also eyeing further e-commerce and shopping platforms. Managing Director Toby Norton-Smith told Mi3 there is much more to come from the unit with a billion dollars to spend.

What you need to know:

  • CommBank’s ventures unit is investing in diverse next-gen business that can plug into its app and be used by 15 million business and retail customers.
  • The investments are diverse, from energy to online retail and a direct-to-consumer 10-20 minute mortgage service.
  • X15’s MD Toby Norton-Smith says CommBank needs to provide more than banking products; more integrated services creates better “customer stickiness”.  
  • Per Norton-Smith: “In an increasingly digitised and competitive banking environment, the competitive set is not just the other banks, it’s global tech.”

Long view

Launched to channel CommBank's billion dollar tech funding envelope in early 2020, X15 has since built, acquired or invested in nine tech ventures – from retail marketplaces, energy retail, property management through to fintechs and venue management platforms – and there’s more to follow in the near future. “We’re just getting started,” Managing Director Toby Norton-Smith told Mi3.

X15’s mission is to scale “exceptional next generation services and then plug them into CommBank,” provided that makes sense for both the venture and the bank’s 15 million consumer and business customers, said Norton-Smith.

“Banks are trusted centres where people store a lot of their sensitive data, permissions and authentication. A banking app is a great environment to introduce new services to customers in a way that is entirely permissioned by them,” added Norton-Smith.

“And with many of our ventures, where customers grant permission, [we can] set them up quite easily within the app by authenticating and transferring relevant data like their email address or phone number across. That is the opportunity we are exploring.”

Buying blocks

CommBank is spending significant sums to bring that opportunity to fruition. Earlier this year it invested $50m to take stakes in retail marketplace Little Birdie and energy supplier Amber Energy.

The ventures unit has also built or invested in the likes of Home-In, a residential property buying tool, and Credit Savvy, designed to give user free access to their credit information, both of which complement :Different, a property management platform Commbank invested in last month.

Those ventures sit alongside Vonto (a SaaS management platform for business owners that integrates e commerce providers, Google ad words, Instagram etc.), Backr (a step-by-step guide to starting a business) and venue management platform Doshii.

Next up, X15 is planning to launch Unloan, a cloud-based 10-20 minute direct-to-consumer mortgage service which will crunch customer data to provide loans under $3m for customers with higher amounts of equity.

“We've built an API which connects ventures that sit in our environment and that we can verify as safe, and [via that API] connect them through to customers in the CommBank app,” said Norton-Smith.

As CommBank builds out that ecosystem, it starts to look like a loyalty play.

“The end game – you framed it as a loyalty platform – is exactly that,” said Norton-Smith.

“CommBank is premised on predominantly serving banking products. But in an increasingly digitised and competitive banking environment, the competitive set is not just the other banks, it’s global tech.

“How do you create more value for customers? How do you create more ‘stickiness’ in your relationships by proving that the trust and the data that you share with us is being utilised for your benefit? That is exactly what global tech does pretty well … and we understand the value exchange in engaging with them,” he added.

“Increasingly with banking, it is not sufficient that you provide really good mortgage and lending products. If you are going to share your data with that institution, if you’re going to trust them with some very sensitive data, you should expect to be stitched into the other ‘best of the internet’ digital services.”

So while CommBank’s leadership has termed its approach an "integrated customer proposition" rather than a loyalty strategy, “that is the position,” said Norton-Smith. “But we’re just getting started, really, on that strategy.”

What’s next?

X15’s stated intent at launch in early 2020 was to invest and scale 25 ventures within five years. Norton said the unit is on track to meet its target with further deals are in the offing, “a few of which will drop quite soon”. So where are the gaps? Norton-Smith flagged home services and e-commerce as immediate targets.

Within the former category, it’s latest investment, in property management platform :Different, provides a clue as to where X15 is headed.

“Home ownership and buying a home is synonymous with CommBank’s main business. There is always more that we can experiment with on making that big and emotional decision for people, not just in buying a new home and moving in, but then actually and owning and managing the home,” said Norton-Smith. “There’s tonnes of innovation still to come in how people can make owning, running and managing a home less stressful. So that’s one area.”

While the bank recently invested $30m in a pre-launch investment in retail platform Little Birdie – effectively putting the bank in competition with the likes of Amazon, Woolworths, Ebay and Kogan – Norton-Smith indicated that another chunk of X15’s $1bn funding envelope will be heading in that direction.

“There’s more than one solution shoppers are looking for in the e-commerce space, so I think you should expect to see more there.”

Shopping is “a very natural extension” added Norton-Smith.

“That is one of the challenges we have to ask ourselves: What are the things that when someone logs into the CommBank app they might expect or feel comfortable with permissioning from that environment? Shopping clearly is one, because often people check into their app to see what they have spent, what they can spend.”

Doshii: Shifting gear, scaling fast

Norton-Smith said a third investment category is digital services for small business – with X15 simultaneously scaling its existing ventures within that category. One of which, hospitality management platform, Doshii, is notching up serious growth. International pilots are now underway and CEO Justin O’Donnell thinks the pandemic has concentrated the sector’s collective mind on efficiency while permanently shifting consumer habits.

He describes the SaaS platform as a “‘Maître D’ for a venue’s hospitality apps”, synchronising all the apps a venue might use across ordering, reservations and staff rostering – and linking them directly into its point of sale system (POS). That makes life easier for managers, and cuts costs from double handling of orders and manual errors, boosting profit.

Given the “brutal” impact of Covid, he said Doshii is now pushing at an open door – and platform sales have soared through the latest lockdowns as pubs and restaurants have used enforced downtime to get match fit and rebuild their finances.

When lockdowns kicked-in, the firm decided to waive fees for users until the year-end in a bid to get customers back on their feet while reopening under occupancy limitations – and attract more venues that may be struggling under the weight of technology they have had to adopt.

Tech integration: clearing venues' plates

The challenge many operators face is that with the plethora of ordering apps – including ecommerce and delivery apps as well as in-venue – is that the costs of integrating disparate platforms can end up outweighing the benefits and the hassle factor becomes counterproductive. 

As Mike Fraser, Creative & Design partner at Shadowboxer (which is working with Doshii on brand and go to market strategy), puts it: “Put simply, Doshii clears a venue’s plate, and allows them to focus on doing what they do best.”

The approach appears to be working, despite minimal direct customer marketing to date.  O’Donnell told Mi3 the platform has instead focused on growing through partners, primarily ordering apps and POS providers.

In the last 12 months “we’ve gone from having nine POS [providers] on the network to 18 and from 39 apps to 55 apps on the platform,” said O’Donnell. “In December last year we had access to about 20 per cent of the hospitality market, we’re now sitting at about 55-60 per cent. By the year end we should have access to 70 per cent from a POS perspective.”

Meanwhile, it has moved up the food chain, signing big names including Hard Rock Café, Outback Steakhouse, Chiswick owner Solotel and Three Blue Ducks.

Secret sauce: sharper insights

With partnerships filling out, the next phase of the plan is to give hospitality operators sharper tools to drive growth, with Doshii now recruiting a head of data science to build a “venue intelligence tool”, according to O’Donnell.

“It will be much more sophisticated than just ‘what does your spend look like?’. The insights venues want to understand is how far does a burger need to travel and what type of packaging is needed to keep that burger from going soggy. Because at the moment, the insights they are getting is ‘your most sold item is a burger’. But they don’t know whether that is in-venue or if it is now going to home,” said O’Donnell.

“So we want to provide tangible value – and work out how to start connecting those ecosystems of suppliers and ways of working. Because we have very powerful data there, we have now captured over 160 million orders. Getting our heads around how that information can actually help a venue to start-up or an operator expand – what types of drinks sell best with what types of food, and what specials work best on what days – that is where we really want to start playing.”

X15’s Toby Norton-Smith thinks Doshii has now earned that right.

“We’re been very clear [since the acquisition] that it has to work for any hospitality venue. So the directive for Justin was ‘build the ecosystem, don’t worry about customers’. Make it so that every POS in Australia works with Doshii so that anyone in hospitality can use it. Double the number of apps so it works with any services a hospitality company can use. Then we can scale it.”

A tall order, but Doshii appears to have delivered significantly in less than a year of CommBank ownership.

How the year ahead plays out for CommBank’s broader loyalty play – and what it buys next – could prove instructive for the future of banking-led commerce, first party data and the shape of things to come.

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