The Commonwealth Bank of Australia (ASX: CBA) share price has fallen over the past year despite record profits of $10.2 billion in FY2023. Australia's largest publicly-listed bank has seen its shares slip 4.2% lower versus a year ago, while the S&P/ASX 200 Index (ASX: XJO) has retreated only 2.9%.
Part of the pessimism could be fuelled by the bank's shrinking home loan book — a core profit-producer for CBA.
Given the retail-focused bank makes much of its earnings from lending to home buyers, concern could be swirling as purchasing a home becomes more difficult. In August, the Intergenerational Report revealed home ownership among 30 to 34-year-olds was as low as 50% in 2021.
The 2021 census cohort showed that 66% of Aussies owned a home, which fell from 71% in 1966. This trend may present a challenge for CBA in the future.
However, it appears the $173 billion bank is already planning ahead with its newest innovation.
Clipping the ticket on rent
Today's press release shows that a new CBA product could land early next year. Tapping into the rental market, Commbank will unleash a platform purpose-built for handling payments for tenants and real estate managers.
Dubbed 'Smart Real Estate Payments', the payment solutions platform is expected to ship in early 2024. The launch will see CBA enter into what it estimates is a $49 billion-a-year industry in processing rental payments in Australia.
Commenting on the announcement, CBA executive of business banking Mike Vacy-Lyle, said:
Nearly 1 in 3 Aussies rent their home and we want to make the processes around making rental payments simple and easy for both renters and their agents by automating and digitising payments. Our solution will accept all payment types and reduce the cost of taking payments while employing our leading security features and privacy protection for both renters and agents.
The rental payments market is not a new one. Trekking back almost 30 years ago, Macquarie Group Ltd (ASX: MQG) established its DEFT (direct electronic funds transfer) service. Originally it took shape as a tenant payment card. Now it's a broadly used digital payment system.
Furthermore, reports suggest the platform may also gather data on real estate agent firms. An article published by The Australian Financial Review indicates the bank might use this information to lend to real estate agents.
What does it mean for CBA shares?
It is unclear what the new product could do at this early stage for CBA's revenue and profits. Nothing has been disclosed, and it's likely no forecasts will be supplied.
However, it could offer a route for CBA to justify its premium price-to-earnings (P/E) ratio. At 17 times earnings, Australia's largest bank trades at a much richer multiple than the global bank industry average of 8.1 times.
