If the bank technology world could be said to have a rock star, that would arguably be Michael Harte, CIO of Commonwealth Bank of Australia. When he was scheduled to speak at a conference last year, a crowd gathered outside the auditorium doors a good 20 minutes before start time so people could be sure of a seat up front. His every public utterance is reported, usually admiringly, by Australia's technology press. He's been an outspoken advocate of cloud computing, open source computing, mobile payments and the need for banks to compete better with nimble digital companies like Google, PayPal and Facebook.

Harte's team began promoting cloud computing about five years ago, touting such benefits as being able to buy computing services across a network and pay for them on demand. "Where we're disappointed with service quality and/or price, we want to have the opportunity to switch," he says.

The Commonwealth Bank works with two of the leading international cloud user groups, the Open Data Center Alliance and the Enterprise Cloud Leadership Council, to come up with common definitions and standards.

Within the bank, "We've done storage as a grid, we've done development provisioning on demand, we've moved significant parts of our web properties out into the public cloud," Harte says.

Harte doesn't have much empathy for bankers who are too concerned about security and privacy to try cloud solutions.

"There's a lot of conjecture in the industry that country regulations hold data sovereignty as paramount and therefore the public cloud is not good because you don't know where your data is going end up, that in the cloud you're less secure," Harte says. "Quite frankly, that's all baloney, it's just an excuse not to, and we're just going to keep working with other buyers to create standards so that we can have innovation and make sure there's competition and innovation that take us closer to the promise of on-demand [computing]."



The Commonwealth is the largest bank in Australia, with $135 billion in liquid assets, 14 million customers and 52,000 employees.

It's just-completed core conversion took four years; the total tab is an estimated $2 billion. The bank now mostly runs on SAP for Banking, on a host of IBM mainframes, power servers and storage systems.

The bank now has a real-time transaction engine with savings, deposits, loans, and all customer information in one shared repository.

The Commonwealth is one of the few large banks to have such a thing.

"While legacy systems are inherent in all large financial institutions, few have had the courage to challenge and execute the necessary changes," Harte asserted earlier this year. "Our core banking modernization will place us well ahead of our competitors."

All of this sets the stage for the bank's next step in its technology transformation: the development of customer analytics that let it make real-time decisions about pricing, credit, product recommendations and more. CBA has invested in SAS Real-time Transaction Monitoring as a behavioral engine to interface to its SAP Core Banking system, to improve customer experience, monitor credit risk and mitigate against fraud.

"Financial services used to be done very intimately face-to-face," Harte points out. "We'd make an appointment with a person to talk about a home loan. Generally the bank manager was a community-minded person who only had to deal with 30-40 relationships and often knew all about the family from previous generations. They could make a loan decision during the customer conversation because they knew that person was of good character and had the necessary collateral and the credit. It was all based on an intimate and knowledgeable relationship."

As the Commonwealth and other banks like it have gone nationwide and then international, growing their customer bases into the tens of millions, and diversifying into different products and services, that customer intimacy has been lost, he argues.

"All the technologies we're putting in place tend to emulate that intimacy, so that if somebody has a great idea, you can help them make a decision straight away and model something specific to them," Harte says. "Or, if we've got all the information we need, we can rebalance their portfolio and suggest they reduce risk, retire some debt, and move some money around for longer-term planning for retirement or provision for their children's college education. We want to be able to be reactive in the moment our customers come to us for help, and proactive in advance so we have the analytics to suggest a better way to spend or save or invest."

Although there can seem to be endless combinations of factors that make someone a good credit risk or candidate for a product, Harte says there aren't. "There are not that many permutations, really," he says. "We've made everything too complex. We used to architect systems around products, accounts and account types. We put all the variations into those products and launched them in the hope that we would attract enough people to come and buy them. In retrospect, that's rather clumsy. If we have all the information about a customer, based on their daily transactions and our long-term relationship with them, it's not that difficult to calculate their full asset and liability position and offer them choices and prices that would be better for their longer-term financial well being." Along with the ability to make real-time credit, risk and pricing decisions, the new customer analytics platform should help the bank understand its customers' aspirations so it can help them prepare for the future, Harte says.

"That's why you have to have the total relationship, the savings plan and their investment plan and retirement goals," he observes.



The analytics platform will help the bank shift to risk-based pricing, which has become a Holy Grail for many U.S. banks recently. "We can take more measured risk with our customers because we've got the best spending, saving, behavioral and preference information to price our customers' loyalty and risk," Harte says.

Specific, detailed information about each customer will help bank staff make better pricing suggestions and bundle insurance and investment advice, "so that we're making the best possible value proposition and the pricing is specific to that individual customer," Harte says. "It's not a generalized price based on a bundle or a segment."

Even when a customer's numbers are trending down, the customer analytics will be useful, Harte says.

"From time to time, personal circumstances change," Harte says. "A customer may have some unexpected bill, they may have an accident, they may go through a family upheaval," Harte says. Separation, divorce, death of family members, unemployment and underemployment all have dramatic effects on consumers' financial well-being. "Therefore we should be supportive to help them consider their options and provide good advice that will not only help them in the short term but also put them back on track, get them back to those aspirations they had previously," Harte says.

One aspect of the customer analytics project is to gather and use customers' "lifecycle" information. "We know that there are certain events, certain roles we play from being a child to being a grandparent, and there are certain relationships we have as we go through that lifecycle," Harte explains. "Modeling all that is essential to having a customer-centric architecture and exploiting the capabilities of real-time analytics and real-time transaction processing." In addition to customer risk and lifecycle analysis, the bank will analyze the devices customers use and the channels through which they interact and transact with the bank, especially mobile.

"The interactions and transactions we have with the consumer are increasingly through the mobile device," he says. "We probably have more interactions on a daily basis through the mobile device than we have face to face. People do texting, social media, email and calls with many, many parties. The data underneath all that is getting increasingly infinite about the customer's location, context, behaviors, preferences. If your systems aren't architected to deliver low-cost, convenient, rich content, architected on that primary relationship with the customer, it can get harder and harder to offer value in real time."

The Commonwealth Bank collects "every ounce of customer data that our customers are OK with, and ensures that it is protected with privacy and security," Harte says.

The overall result, it is hoped, will be a stronger and more mutually beneficial relationship with each customer, household and company. "If we know the preferences and behaviors of our customers and we have the ability to interact and communicate with them in real time, we can offer them a price and a package that is specific to their loyalty and their risk," Harte says.

For example, the bank has a mobile app for the iPhone called Property Guide that can tell a customer what an asset, such as a house, is worth. The app uses augmented reality software - as the customer points his smartphone at a house, data about that property such as past sales history, current property listing and recent nearby sales are mapped on to the phone screen. Should the customer want to buy that house, the bank can in that moment help the customer make that decision.

Commonwealth is also using analytics software to provide its business customers with insights into their own operations. "Increasingly we have information for the business owners about their sales activity that not only improves cash management, but improves the sales management and inventory management, so that those businesses operate more efficiently and manage their spend and savings," he says. "The information can help them manage their investments and make risk decisions."



The analytics project is a work in progress, Harte acknowledges. "We'll always be building," Harte says. "We don't have everything, we're not done. But we've taken away a lot of the old legacy which were impediments, and that's a huge breakthrough."

The ongoing work will be to continue the integration of channels and applications, ongoing data normalization, and the increasing capability to mine rich content about interactions to gain more insights about people and offer specific products, prices and packages.

"I think we're in the advanced party when it comes to those things," Harte says. "It's far from perfect, but it's a whole heap better than being locked into the legacy that we were in. We're in a position now where we're exploiting that advantage rather than trying to create it."

The bank is experimenting with analytics methods and tools. "We have at our disposal many different types of Big Data methods and tools, and we're trying as fast as we can on both the business and IT side to learn through experimentation," he says. "We've got a long way to go before we can claim to be the exemplars of those capabilities."

For example, the bank is trying out in-memory computing to process its analytics faster.

It's working on ways to present content on mobile devices such as tablets and smartphones. "Irrespective of people's choice of device, we see opportunities to talk to them with much higher frequency and at much lower cost through these devices," Harte says. "We have customers that have to drive halfway across the country to get into a branch, having taken a week to make an appointment. They can have two or three conversations a day [on a mobile device] and get down to very specific set of options and alternatives at very low cost, which increases the value to the bank and to the customer."

The bank is developing technology to connect mobile consumers to the people best qualified to help them. "So for higher value advice or the management of particular issues, they can have a convenient and added service of talking to an expert, and do that on a higher frequency, lower cost basis," Harte says. The staff advisor could be logged into the customer's session of the system and model the customer's portfolio on screen while talking with that person.



How does Harte's team get advanced technology projects done at a rate large U.S. banks can only dream of? Harte describes his and the Commonwealth's approach to innovation as three pronged.

First is a "relentless passion to be first and to create value for the customer." Second is having staff work with partners such as universities and technology partners to "dream and think about what's possible." Third is to keep pushing the envelope to determine how to determine change or lead the market.

Why is it important to be first? "In many cases we can establish first-mover advantage," he says. "We can find easier or convenient or simple ways to create value for our customers, and not be disrupted by our competitors. We see our competitors now in the form of Google, Amazon, Apple and PayPal. We don't think for a minute that they're lazy on innovation, quite the contrary they're some of the most innovative companies. Their intention is to capture the relationship and direct those relationships to more value. Our responsibility to our customers is to innovate to ensure that we retain relevance and value, and our online interactions and transaction. We can't afford not to want to be first."