Banks in Australia are remodelling themselves, looking beyond selling just loans and transactions accounts, expanding their offer to include services such as broadband, electricity and bargain shopping.
The Commonwealth Bank of Australia's purchase of a quarter share of two small broadband providers last week is the latest example of this trend.
CBA bought 25 per cent equity stakes in More Telecom and Tangerine, broadband providers with a combined 90,000 customers. The purchase will allow the bank to offer special telco deals to its seven million app users.
More Telecom and Tangerine will obviously do very well from having their offerings put in front of several million potential customers, which will earn CBA a referral fee.
The investments follow CBA's May investments in start-ups offering retailing rewards and discount retail energy plans, which it will also offer to retail customers via its app.
CBA will be able to bundle cheap power and broadband into its home loan offerings, at the precise moment when customers are looking to connect to these utilities.
A key driver for CBA, which owns ASB Bank, is that banking apps are becoming increasingly commoditised. Their marketing departments might talk up their unique features, but in reality, the CBA app is much the same as Westpac's, ANZ's and the National Australia Bank's apps.
Anything a bank can do to keep its customers engaged and coming back to the app is critical.
Certainly, banks have a ready audience. Research commissioned by CBA found customers aged 18 to 29 log onto their CBA app 40 times a month and spend 20 minutes online each day looking for deals. This explains the deal CBA did a couple of months ago with retail loyalty platform Little Birdie, which will notify CBA customers about retail deals.
CBA seems to want those 20 minutes customers spend online looking for deals to be spent on its app rather than someone else's.
There's a bigger game at play here.
CBA is in a battle for customers' attention and mobile phones, not just with other banks, but also with other businesses, such as power companies, phone companies, the tech giants and retailers.
As different sectors converge their offerings and companies become more like platform businesses – reselling a range of goods and services – it will become increasingly important for companies to provide 'the app of choice' where customers make their purchases.
For instance, banks would rather customers come directly to them for a home loan or a credit card, rather than procuring a home loan through a property listing app or getting a credit card via a shopping site. Nor do they want tech companies like Facebook and Google to become one-stop shops for all consumers' needs.
Thus, banks will try to make their own offerings as compelling as possible and offer as many non-banking services as they can to ensure they 'own' the customer and not some other organisation.
Adding to this dynamic is the looming introduction of the consumer data right. The Australian government is moving to introduce the right, which will state that customers own the data a company collects about them. It means, for instance, that they'll be able to get their hands on their energy use and charging information and take it to another power company to see if they can obtain a better deal. (Of course, an app would do all the hard work – they wouldn't literally be collecting their data and emailing it to power companies.)
The consumer data right already exists in banking and will soon be introduced to power companies and phone companies, and probably others.
Additionally, consumers will be able to aggregate all their financial data to one place. On their banking app, they might also have details of their non-bank credit cards, power accounts, phone and internet usage, and purchase all these services from their app.
All of this also provides hugely valuable data to the banks, data they can use to make more targeted offers, so they sell more products and hold on to more customers.
This is why banks want to get ahead of any move to converge service and product offerings. If they don't and in a worst-case scenario, more of their financial products will be sold by other companies through their own apps instead of the banks' own apps.
Banks would earn less from their products in this scenario, having to split the profits with whoever brought them the business.
Much of this vision of the future depends on consumers. Will we be comfortable having our bank choose a power deal for us or will we prefer to deal directly with the power company? Likewise, would we want to get our home loans and credit cards from Google or eBay?
But the banks aren't taking any chances and are moving to get ahead of the trend.