Commonwealth Bank is backing artificial intelligence for the long run, with its benefits and value realisation closely monitored at the highest levels of the company.
Mentions of the technology were liberally infused throughout CBA’s full-year results announcement – where it delivered a record $10.25 billion cash profit – and financial analysts were keen to understand what the bank is getting for its investment.
CEO Matt Comyn said the bank used the past year to “accelerate the modernisation of our technology estate and the use of AI to drive better experiences for customers as well as quality and speed of execution.”
Notably, CBA opened a tech hub in Seattle in March to improve its ability to collaborate with vendors developing AI technologies.
Coinciding with the full-year results, CBA also revealed a “multi-year partnership with OpenAI … to explore advanced generative AI solutions.”
Comyn said that in order “to leverage the full benefits of AI”, CBA had chosen to accelerate the modernisation of its technology estate.”
“We completed one of the largest and fastest data migrations of its kind in the Southern Hemisphere, moving 10 petabytes of data to AWS cloud,” he said.
“The infrastructure modernisation work, what we’ve really done is accelerate work that you’d otherwise do over a four or five-year time horizon,” CFO Alan Docherty added.
“We’re trying to get that done within three years and therefore accelerate the number of engineers that are working on that.”
Docherty said he spent “a lot of time personally looking at what the measurable efficacy improvements and the measurable yield that we’re seeing from the last number of years of investment” in technology, including AI.
He said the bank could see productivity benefits for staff and better customer outcomes, both of which translated to topline revenue and supported the business case for additional investment.
“With the work that we’re doing now around infrastructure refresh and generative AI, we’d expect again to see a forward profile of benefits in that regard emerging in the years ahead,” he said.
“We’re continually calibrating, we’re seeing the benefits, [and] we’ve got some room to invest a little more at this point in time.”
Comyn said that some of the benefits of AI usage were most obvious in the engineering function itself, with the technology helping to improve velocity and deliver more new features to customers faster and with fewer errors.
“We’re using AI to increase the speed and quality of code reviews, alert customers to suspicious activity, help process disputed transactions, and create more personalised experiences for customers,” Comyn said.
“This year, we’ve delivered 35 percent more technology changes, reduced critical incidents by 30 percent, and improved recovery time by 25 percent.
“We see it as being a cornerstone of being able to support a great customer proposition but also position the organisation competitively, and I think speed of execution is going to really matter over the long term.”
Comyn also highlighted benefits in the areas of fraud and security detections.
He said that AI was both a “revenue opportunity [and] in some areas, it may be an expense [reduction] opportunity” for the bank.
Some of that would come in the form of productivity improvements.
“In the near term, just about across all parts of the organisation, we see an opportunity for all of our people to be using AI tools and we’d certainly like to see that, to do their job more effectively to a higher level of quality, and to serve our customers,” Comyn said.
“I think there’ll be some near-term incremental cost opportunities.
“In the longer term, you can imagine that there are some much more efficient ways of delivering some of the things that we currently do, but I do think that’s going to take some time – some years – to work through some of the accuracy and quality that’s required.
“There will [also] be a very high standard of regulation placed upon us, but we do think that having core capabilities, learning by doing, delivering benefits, is a structural underpinning of being able to perform well over the next decade or more.”
Engineering hires
CBA said it brought on 2000 engineers during the year, including 700 in Bangalore, which is home to a burgeoning engineering capability.
The growth of the Indian operation is set to be scrutinised by the Fair Work Commission, after the Finance Sector Union (FSU) complained about engineering roles being allegedly offshored.
By contrast, CBA talked up the insourcing of engineering roles, reducing its reliance and expenditure on third-party service providers.
Software licensing costs
Comyn said that another aspect of technology that has the attention of senior leadership is “a lot of software repricing” that is happening globally.
“We’re watching that closely in terms of what inflation there might be from some of our external software and licensing expenses,” he said.
Comyn added that “deliberate choices” made by the bank to insource capabilities could help to reduce its exposure to rising costs in that regard.
“That’s been really important strategically -[and] lower cost [for us] as well, because we’re moving from some of that being provided by external parties.”
Despite the cash profit result, CBA shares were trading down almost five percent at $170.12 at the time of publication.
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