X15 and CBA seek AI dreamers
Commonwealth Bank, buoyed by last week's launch of its partnership with Swedish payments giant Klarna, unveiled X15 Ventures, a play to attract - and possibly retain - fintechs for its customer base.
X15 is a wholly-owned subsidiary of CBA, headed by managing director Toby Norton-Smith, with funding provided from the group's A$1 billion annual technology investment budget.
The bank has also brought on board Microsoft - with its platform and engineering capability - and KPMG High Growth Ventures to provide specialist advisory services.
One major point of difference between X15 and the venture capital arms of its Big Four rivals is that CBA intends to take a much more hands-on approach to nurturing the businesses under the X15 umbrella.
The sweet spot will therefore be among "seasoned entrepreneurs", primarily those with early stage operations that can build into stand-alone digital businesses via access to CommBank's 15 million customers, distribution networks, security standards and balance sheet.
Matt Comyn, CBA's chief executive officer, pushed this line at the launch yesterday, reminding attendees that CBA sees its rightful place as the clear leader on technology among its peers, and this venture is designed to achieve that.
"X15 will enable us to innovate more quickly, and continue to offer the best digital experience for our customers."
Newly appointed MD Toby Norton-Smith unveiled the first two ventures to be launched through X15: Home-in, a digital home buying concierge, and Vonto, a business insights aggregation tool.
"We intend to launch at least 25 ventures over the next five years," he said.
What wasn't said is that this venture puts into play a strategy that the CBA has been mulling for at least five years - with time out to deal with an unending string of scandals.
Back in 2015, when CBA was riding high, its then-chief financial officer, David Craig, told a Bloomberg Summit in Sydney: "We have the brand, we have the customer base, we have the capital, and, most importantly, we have the willingness to embrace change, and I think that's critical."
Craig said CBA spent A$1.4 billion a year on technology, although most of that was aimed at the group's existing products and services rather than on high risk ventures: "evolutionary, not revolutionary" was how he described the approach back then.
"At the same time we have a bit of an advantage over the start-ups as we have the capital to be able to experiment and actually to fail occasionally, as long as we learn from our failure," Craig said.
Fast forward to 2020 and CBA's chief executive officer Matt Comyn told the crowd at the X15 launch that CBA had a tech budget of $1 billion, some of which would be diverted into its new start-up venture, but would not be drawn on exactly how much.
That is, the venture is about regaining CBA's technology leadership - this time through harnessing the energies of fintechs, rather than going it alone.
Comyn said that the plan was to take a controlling stake where needed, while trying out different ownership structures. The key requirement was that the outcome will benefit CBA's customers, rather than just giving a return on investment. "Integration is really important - it allows us to get scale," he said.