As a fintech, how do you compete with an incumbent’s AUD $5B war chest, specifically set aside for technology innovation?

It’s a question a number of Australian fintechs and neobanks will be grappling with this week, after CBA, Australia’s largest bank, announced it is doubling down with its billions, in order to cement and entrench its market leading position when it comes to digital.

According to reports in CIO, its banking app has been voted the best 3 years in a row. That’s impressive stuff for an incumbent, and has raised the bar significantly for neobanks entering the market.

The move is evidence that CBA truly understands the tsunami that is innovation, and they are determined not to be crushed. It is the polar opposite of competitor Suncorp, who this week announced they would ditch their brave financial marketplace strategy, and ‘get back’ to core banking.

Suncorp’s retreat has many contributing factors, but one notable comment was the failure of Suncorp investors to understand the strategy. While far from a full explanation for the pivot, it tells you something about the varying degrees of tech literacy within the investor groups that sit behind both CBA and Suncorp. One gets it, one doesn’t, quite yet it seems.

CBA’s investment in Sweedish fintech giant Klarna will also be causing headaches for listed buy now, pay later businesses After Pay and Zip Money. One defence is these two fintechs are now relatively mature, well recognised, loved and understood by consumers. The challenge for CBA will be implementation and being last to the dance. However pressure is mounting across the pay by instalment space, with Amex now offering instalment payments to some cardholders, and Visa also entering.

It’s early days for CBA, but they have a track record in delivering. If they can build a deeper tech moat with this cash injection, then along with their existing regulatory and capital one, it’s hard to see how any fintech can compete.

I’d love to be proven wrong though. After opening my CBA bank account over three weeks ago, I’m still waiting for my debit card, and there is no immediate digital card issuance. Maybe some of that $5B innovation budget can be put towards logistics. The devil is always in the details, is it not?

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a new superannuation startup in Australia.

I have no commercial relationship with the companies or people mentioned. I am not receiving compensation for this post.

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