Embracing Digital Transformation: The Future Of Banking

Discuss About The Embracing Digital Transformationthe Future Of Banking.

About organization

Strategy in the organization is deemed as most important element or process of the organization, as it is the only function on which each and every process of the organization. Strategy is defined as the method or plan through which goals and objectives of the organization are achieved. There are number of experts who studied the concept of the strategy, but still no exact definition of the strategy is derived. As scope of the strategic management is very wide and it includes number of aspects in its ambit, as number of experts believed that present situations of the organization must be analysed effectively and also it includes the forecasting of changes which occurred in market or industry in near future. Further, the manner through which they succeed in this plan. However, other experts believe that it is not possible to predict the future and they prefer that strategies evolve organically.

Some experts stated that strategy is the process through which scope and direction of the organization for long run is determined for the long term, and they further state that management is also responsible to determine the manner through which resources of the organization are determined in context of meeting the needs of market and stakeholders (Ren & Hui, 2018.

Strategic evaluation of the organization is deemed as most important task because on this function future performance of the organization depends.

This report mainly discuss the present strategy of the Commonwealth Bank of Australia, which means, five year strategy of the organization, and it further recommends the strategy which is suitable for next five years in terms of meeting the set goals of the organization. Structure of this report includes the brief discussion of the organization, evaluation of the present strategy, and recommendation of the strategy for the next five years. Lastly, brief conclusion is stated in terms of ending this report.

Commonwealth Bank of Australia is the leading provider of the integrated financial services which mainly includes the retail, premium business, and the institutional banking funds management, superannuation, insurance, investment and share-broking products and services. International branches of the organization mainly include the Asia, Europe, New Zealand and North America. In all these countries, Commonwealth Bank offers number of services. The vision of the organization focuses on giving the securing services and also focuses on enhancing the financial wellbeing of the people business and communities (Commonwealth Bank, 2018a.

Strategic evaluation of present strategy

Values of the organization play important role in the functioning of the organization, as these values guides the interaction of the organizations with the customers, business, colleagues, and community. These values include the integrity, accountability, excellence, and service.

Executive team of the organization ensures that business must achieve the profitable growth and support in context of engaging and encouraging the employees of the organization. Further, organization ensures the effective performance through the approach of strong corporate governance. As this approach of the organization helps them in maintaining the highest professional standards and also enable them to act with integrity during the course of their business activities (Commonwealth Bank, 2018b.

Current five strategy of the Commonwealth Bank of Australia mainly focus on the consumer welfare. Customers are defined as the number one priority of the organization, because they are the one who unite the organization. Customers are the central element of any decision taken by the organization, and management continuously focus on securing and wellbeing of their customers. In other words, organization mainly focuses on giving the best experience to their customers. Their five year strategy actually derives the long term value for the customers, shareholders, and people of the organization. As this strategy clearly compile with the vision of organization that is ensuring the financial wellbeing of the people, business, and community. This strategy stands on the four important pillars in terms of ensuring the best services to the customers and all these pillars are described below-

People- Commonwealth is blessed with the culture which is vibrant, focused, and high integrity, as their employees and other staff members play central role in the success of the organization. In this context, organization continually invests in the development of their people, work on the talent management and ensure that groups ensure safety and diversity for their peoples. The employees and other staff management are defined as the central to their success, as they are engaged in customer focused and operates in such culture which encourages the integrity in the organization. As employees of the organization are defined as the competitive advantage of the organization, and some important elements in this context are defined below-

• Almost 51800 employees of the diverse workforce of the organization served to the customers.
• Almost 1350 branches are operated in Australia in terms of meeting the changing needs of the 16.6 million customers.

However, some issues related to the employees are also faced by the organization and all these issues directly affect the execution of the strategy. Recently, royal commission investigates the matter in which employees of the organization are held guilty for the misconduct. Few employees of the organization unfairly charged extra amount from the customers in terms of meeting their targets and also stole petty cash from the bank for same reason. Almost 41 employees of the bank have been sacked for the misconduct, and 9 have resigned because of the investigation. This attitude of the employees cause negative effects on the customers and create hurdles for the organization (Chalmers, 2018.)

After these incidents, it can be said that this pillar of the organization strategy does not work well and organization fails to manage this element of the strategy in effective manner.

Technology- This is the second pillar of which main aim of the five year strategy of the organization is depends. As bank focus on implementing the updated and best technology in terms of meeting the evolving needs of their customers. Applications are developed by the bank that ensures the leverage in the time capabilities, consider new ways to interact with the customers, offer more value and better price to the customers, gives more stability, and enhance the productivity of the organization. Some important elements of this pillar of the strategy is defined below-

• Its real-time core banking system makes it the first bank in Australia in context of go-real time.
• It launches first financial app in Australia, and this app reflects almost 30 million logins in a week.
• Organization gets almost 6.2 million online customers.
• It enables the customers to open the new savings or transactions account in less than 3 minutes.
• Extensive data and analytics capabilities enhance the experience of the customers.
• Significant investments in the cyber security are given for ensuring the protection of the customers (Commonwealth Bank, 2018c.

Productivity- Organization mainly focuses on simplifying the ways through which organization can achieve the better results for their customers and also for their people. This is deemed as the most important function of the good business an also important for the long term growth of the business. In this context, management focus on reducing the errors and also on reducing the unit cost of the organization. In other words, it focuses on simplifying the ways through which things are done in terms of ensuring the capability to invest in the future. Some important elements of this pillar are defined below-

• Cost-income ratio of the organization was 41.8%, and this number reflects the focus of the organization on the cost management and efficiency.
• Bank invests on continuous basis in the productivity and growth initiatives, as $ 681 million is invested in the FY-2017.
• Organization focus on improving their customer experiences by reducing their cost by giving more self-service options to the customers.

Financial Strength- After the global crises, organization discovered that strength and ability of the bank makes them trusted brand in the eyes of Australian customers for ensuring the security of their money. Strong and flexible balance sheet of the organization is important in terms of ensuring the continuous support to the customers and capitalizing the opportunities. Strength of the organization lies in the continuous performance of the organization and also in the deep expertise of the organization in financial and risk management. It also lies in the long term operational stability. Some important elements in this context are defined below-

• Commonwealth Bank is the largest company of Australia by market capitalization, with total assets of $976 billion.
• This organization has more than 80000 shareholders and almost 76% average profits are distributed as dividend.
• Common equity tier 1 ratio 10.1% APRA basis, 15.6% international basis.
• 67% deposit funded.
• Solid credit ratings: AA- / Aa3 / AA- (S&P, Moody’s and Fitch)

Above stated strategy is effective in nature and works well for the CBA, but still some loopholes are present in this strategy. CBA fails to take measures in terms of the risk management and fraudulent activities. During the reporting period of the current strategy, numbers of challenge are faced by the management such as inquiry is committed by the Royal Commission for the fraudulent activities of the employees of the CBA. All these issues and challenges cause loss of reputation to the CBA and also result in the broken trust of the consumers. In other words, CBA fails to ensure the effective internal working while serving their customers and also fail to focus on these areas while framing thee current strategy of the organization.

The transformation of the Commonwealth bank is underway with the strategic focus on the retail sector and commercial banking businesses which is aimed at delivering the simpler and best banking services for its customers. This is the area in which actual competitive advantages and strengths are present, as CBA further focus on building its leadership in the digital banking. This Bank has more than 6.5 million active Australian consumers on digital platform and more than 5 million mobile app logins each day. It becomes important for the organization to focus more on the digital platform, because in future more number of customers prefers the digital channels.

These new advanced technologies allow the CBA to strengthen their customer engagement with the offerings which are personalized and innovative in nature. As organization can offer number leverages to their customers with the help of mobile apps, swipe cards, ATMs, card readers, and sensors. It also gives the new opportunity in context of the real-time asset financing. There are number of banks in the market which use the blockchain technology in their banks, because this technology in the organization offers secure and convenient options to the customers in comparison of the traditional banking process.

Blockchain in the banking industry gets spotlight because of its ability to reduce the frauds in the financial sector. There are number of financial instruments in which blockchain is used such as banking, including payments, private equity asset transfers, tracking derivative commodities, trading management, spending, mortgage and loan records, microfinance applications, and customer service records (Reiker, 2018.

In terms of the payments occurred in cross borders blockchain can be used by CBA such as blockchain reduce the processing time of the transactions to minutes in comparison of the standard time of three to six days. This further elevates the experience of customers to the new level with cost-real time transactions. Further organization can improve the stack processes by block chain which mainly includes the clearing networks, international transfers, clearing and settlement, auditing, reconciliation, and reporting; and asset ownership.

However, Digital agenda by itself cannot be considered as enough criteria in context of ensuring the leading position of the bank in market. As branch networking is equally important, currently more than 1000 branches are operating by the bank across the globe and also the group’s Australian-based contact centers. In terms of getting the leading position, bank needs to focus on the branch networking also. Combination of effective branch networking and strong digital platforms works well for the organization and help the organization in giving best services to their customers. In other words, combination of the best digital experience with the best branch networking will result in growth and success for the organization.

In last few years, few challenges are faced by the CBA which mainly includes the reputational and regulatory issues, and all these issues cause huge loss to the organization in both the terms that are monetary and reputational. In terms of referring to the Australian Prudential Regulatory Authority’s, prudential inquiry is conducted in the board and management of the organization. CBA further settled number of actions of the Court with AUSTRAC and ASIC and the Royal Commission in the financial services industry. Management accepted the fact that CBA made the mistakes, and they fail to implement the strategy in right manner.

CBA further recognize that they fail to done enough good job for their customers, as some things goes wrong and few mistakes are made by the organizations. Therefore, it is necessary for the organization to take measures and ensure that such mistakes are not committing again by the organization.

The big part of the future strategy is to make sure that we are simple and better bank for our customers, and work closely with all those customers who have bad experience with our bank. The most important area in which this organization needs to work while framing the strategy is ensuring that these issues do not occur again. CBA focus on gaining back the trust of the customers which is broken because of the mistakes occurs by CBA.  

Simplifying the bank includes the formation of the strategic choices in term of its future direction, and the process accelerated under this needs to focus on the core Australian and New Zealand retail and commercial banking sector, because this sector generates more than 90% of the group profit and also contributes in the majority of its organic capital.

Following Decision are taken by the CBA in terms of selling the Australian Comm Insure Life and New Zealand Sovereign Life insurance businesses to the AIA Group-

• The proposed demerger of 2019 of the group wealth management and the mortgage broking operations as it includes the including Colonial First State, CFS Global Asset Management, Count Financial , Financial Wisdom and Aussie Home Loans.
• CBA sale its 37.5% equity interest in BoComm Life Insurance Company of China to Mitsui Sumitomo Insurance Company.
• CBA further planned to sale its group shareholding in TymeDigital of South Africa to minority shareholder, African Rainbow Capital; and
• Strategic reviews in terms of the group general insurance business, CommInsure, its shareholding in Vietnam International Bank and its Indonesian life insurance business PTCL (John, 2018.

All these Decision taken by the organization ensures the inflow of cash in the group and through these funds organization can more stringently focus on the digitalization and Branch networking. After considering the above statement, following are the most important attributes which need focus of the CBA in context of the future strategy-

• Digital platform is the most important area of future strategy because in coming times, customers mainly rely on the digitalization and prefer those banks which offer them best services through digitalized modes.
• Branch networking is another area which needs to be focused by the organization because digital platform services are not the enough criteria to get the leading position in the market.
• Blockchain technology can be adopted by the organization in terms of preventing the financial frauds occurred in the organization.

Conclusion

After considering the above facts, it is clear that current five strategy of the Commonwealth Bank of Australia mainly focus on the consumer welfare. Customers are the central element of any decision taken by the organization, and management continuously focus on securing and wellbeing of their customers. As this strategy clearly compile with the vision of organization that is ensuring the financial wellbeing of the people, business, and community. This strategy stands on the four important pillars in terms of ensuring the best services to the customers that are people, technology, financial strength, and productivity.

Above stated strategy is effective in nature and works well for the CBA, but still some loopholes are present in this strategy. CBA fails to take measures in terms of the risk management and fraudulent activities. All these issues and challenges cause loss of reputation to the CBA and also result in the broken trust of the consumers. CBA fails to ensure the effective internal working while serving their customers and also fail to focus on these areas while framing thee current strategy of the organization.

It becomes important for the organization to focus more on the digital platform, because in future more number of customers prefers the digital channels. However, Digital agenda by itself cannot be considered as enough criteria in context of ensuring the leading position of the bank in market. Combination of the best digital experience with the best branch networking will result in growth and success for the organization.

References

Chalmers, S. (2018). Commonwealth Bank boss Matt Comyn faces parliamentary grilling over CBA misconduct. Available at https://www.abc.net.au/news/2018-10-11/big-bank-bosses-face-parliamentary-grilling/10364290. Accessed on 18^th October 2018.

Commonwealth Bank of Australia, (2018a). About Commonwealth Bank. Available at https://www.commbank.com.au/about-us.html. Accessed on 18^th October 2018.

Commonwealth Bank of Australia, (2018d). International branches. Available at https://www.commbank.com.au/about-us/our-company/international-branches.html?ei=abt-international-branches. Accessed on 18^th October 2018.

Commonwealth Bank, (2017). Annual Report 2017. Available at https://www.commbank.com.au/content/dam/commbank/about-us/shareholders/pdfs/annual-reports/annual_report_2017_14_aug_2017.pdf. Accessed on 18^th October 2018.

Commonwealth Bank, (2018b). Our Company. Available at https://www.commbank.com.au/about-us/our-company.html#exec. Accessed on 18^th October 2018.

Commonwealth Bank, (2018c). Our Strategy. Available at https://www.commbank.com.au/content/commbank-neo/2014shareholderreview/strategy.html. Accessed on 18^th October 2018.

Commonwealth Bank, (2018e). Annual Report 2018. Available at https://www.commbank.com.au/content/dam/commbank/about-us/shareholders/pdfs/results/fy18/cba-annual-report-2018.pdf. Accessed on 18^th October 2018.

John, D. (2018). Strategy To Build A Simpler, Better Bank. Available at https://www.commbank.com.au/guidance/newsroom/cba-fy18-results-strategy-201808.html. Accessed on 18^th October 2018.

Reiker, F. (2018). Embracing Digital Transformation: The Future Of Banking. Available at https://www.digitalistmag.com/customer-experience/2018/02/21/embracing-digital-transformation-future-of-banking-05880240. Accessed on 18^th October 2018.

Ren, C. and Hui, Y. (2018). Responses to Rival Exit: Product Variety, Market Expansion, and Preexisting Market Structure, Strategic Management Journal, 7(2).