Impact of future trends on banking service - MyAssignmenthelp.com

Question: Discuss about theImpact of future trends on banking service. Answer: Introduction In present day scenario, organizations are continuously experiencing a need for change in order to cope up with the volatile environment of corporate culture. Commonwealth Bank of Australia (CBA), is an Australian multinational bank having their business across United States, United Kingdom, New Zealand, Asia and Fiji (Commbank.com.au. 2017). It provides a variety of banking services like transaction accounts, savings accounts, personal loans, insurance, term deposits and international payments (Commbank.com.au. 2017). PayPal took less than three years to establish themselves as a powerful medium for online payment options. Apart from PayPal, there are Apply Pay, Google Wallet, Alipay, rolling out their own digital payment solution (Tinnil 2012). This digitization is not only generating new competitors for the banking sectors but is also providing banks an opportunity to adapt to new change in order to develop a better understanding about their customers and to co-operate with their stakeholders (Tinnil 2012). The report aims to analyse the change management plan of Common Wealth Bank of Australia under the light of digitalization and acquisition. The report also highlights some of probable environmental factors that is capable of affecting the banking market of CBA. Scenario Construction One of the principal challenges faced by the Common Wealth Bank of Australia is the increase in the trend of the disruptive new technologies on their retail payment business (rise of the FinTech). This is fundamentally changing the landscape of the retail payment markets and thus threatening the dominant market position of the bank. Thus this advent of digitalization, competition coming from the non-retail banks and change in customer preferences with influence e-commerce and social media payments have potential to impact the performance of CBA. Apart from technological innovation, the key performance driver for the over the next five years include entry by the new competitors, merger, and increase in competition for key staff. Name of Factors Reason Technical innovation It helps in strengthening the relations with one of the worlds fastest growing economies, China (Commbank.com.au. 2017) New Competitors CBA was not kept cyber-security as second thought and is years ahead in cyber security program. However, increase in the number of market competitors have lead t cut down on their profit margin Merger AIA Group Ltd. has agreed to buy CBAs business of life insurance for A$3.8 billion and will team up with CBA for 20 years (Hu 2017) Competition for key staff With the increase in the number of bank and digitalised mode of banking operation there is a dearth of key banking staffs (Mustafa et al. 2015) Figure: Competitors of CBA (Source: Financials.morningstar.com. 2017) New competitors and technological innovation can be considered to be an optimistic scenario. During 2013, CBA has announced a profit margin of $7.8 billion and this figure is significantly higher than the amount reported by any other Australian Bank. CBA have retained the profit margin via cutting the cost. However, there was no decrease in customer care service and employee retention (Motley Fool Australia 2017). Technological innovation may sound to be negative but CBA approached it with an optimistic approach. The bank has shifted its operating model to more focused on digital platforms which is similar to separate domains. There business is now getting more intimate with the IT and thus they are successful in obtaining a creditable reputation around technology (McLean 2017). Decrease in the number of the key banking staffs can be taken as a pessimistic scenario as it will lead to loss of productivity and increase in the cost of production. Diagnostic tools Kotter Change Management 8-Steps Model Activity based working style of CAB in order to adapt the trend of digitalization Creating Climate for change Engaging enabling the organisation Implementing sustaining for change Create a sense of urgency Build a guiding coalition Form a strategic vision and initiatives Enlist volunteer army Enable action for removing barrier Generate short-term wins Sustain acceleration Institute change CAB has promoted the need for change via taking a bold and aspirational opportunity. It has initiated transition in its work culture via activity-based working. It has communicated its importance via taking a new lavish set-up to support technology friendly atmosphere. In order to build a guiding coalition, CAB has first introduced 3000 staffs out of 6000 staff in the new process and had planned to introduced later 3200 when former 3000 staffs have attended proficiency and is capable to train the rest This special work-culture is done with a strategic vision to promote the concept of digitalization among the staffs CAB has failed to communicate the proper vision of the purpose of new work culture. In order to remove the each notebook supplied to the employee have been equipped with locational software They do not gave proper frame-work to access the success They have sustain the change via deploying Apple Macbook Airs for all employees They have make the change to stick via making the entire organisation a paperless mode of work-process (Source: Kotter 2018; Commonwealth Bank shifts to activity-based work culture 2011). Lewin Change Management Model Merger and Acquisition: AIAs acquisition on CBA life insurance Unfreeze: There is no major unfreeze in the organization as the company is supposed get benefits from this acquisition. It will help to boost its Common Equity Tier 1 capital by A$3 billion. However, CBA faced numerous law suit along with regulatory investigation over allegation of wide-stretch breaches of anti-money. Transition: The transition phase is not smooth. Moreover, the acquisition deal is for 20 years and this extended the transition phase. The transition phase is supposed to get over b y the end of 2018 Refreeze: Company is accepted to operate stably via the end of 2018 (Reuters 2017) Recommendation Among this two above discussed tool, Kotter 8 force model was more effective is describing and analysing the change management model. This is due to the fact that its three major traits which are further subdivided into 8 total trait help in examining the change management more critically. In the domain of change management, it can be stated that CBA must have notified the employees about its merger acquisition plan so that the employee might get certain time for the mental preparation. `in the field of digitalization, if CBA had a specific evaluation plan regarding how the employees are adapting the digital change, then it would be helpful for the managers to implement further revision or modification of the plan. Conclusion Thus from the above discussion it can be stated that digitalization along with acquisition with the AIA have helped them to stay in the competitive world of the corporate world. However there are certain modifications which CBA might have undertaken in order to facilitate the smooth transition of the organisational change like proper progress analysis plan for digitalisation along with proper leadership plan to facilitate unfreeze mode. References Commbank.com.au. (2017). Commonwealth Bank showcases innovation leadership to strengthen Chinese ties. [online] Available at: https://www.commbank.com.au/guidance/newsroom/CBA-showcases-innovation-to-strengthen-Chinese-ties-201703.html [Accessed 11 Jan. 2018]. Commbank.com.au. (2017). Personal banking products - CommBank. [online] Available at: https://www.commbank.com.au/personal/products.html?ei=mv_banking [Accessed 11 Jan. 2018]. Commonwealth Bank shifts to activity-based work culture, s. (2011). Commonwealth Bank shifts to activity-based work culture, swanky new head office. [online] CIO. Available at: https://www.cio.com.au/article/401530/commonwealth_bank_shifts_activity- Financials.morningstar.com. (2017). CMWAY: Commonwealth Bank of Australia ADR Top Competitors and Peers. [online] Available at: https://financials.morningstar.com/competitors/industry-peer.action?t=CMWAYregion=usaculture=en-US [Accessed 11 Jan. 2018]. Hu, B. (2017). AIA Buys Commonwealth Bank of Australia's Life Insurance Business for A$3.8B. [online] Insurance Journal. Available at: https://www.insurancejournal.com/news/international/2017/09/21/464991.htm [Accessed 11 Jan. 2018]. Kotter. (2018). The 8-Step Process for Leading Change - Kotter. [online] Available at: https://www.kotterinc.com/8-steps-process-for-leading-change/ [Accessed 11 Jan. 2018]. McLean, A. (2017). CBA preparing for 'digital gorillas' to join fintechs as competitors | ZDNet. [online] ZDNet. Available at: https://www.zdnet.com/article/cba-preparing-for-digital-gorillas-to-join-fintechs-as-competitors/ [Accessed 11 Jan. 2018]. Motley Fool Australia. (2017). Commonwealth Bank defies trends set by competitors. [online] Available at: https://www.fool.com.au/2013/08/16/commonwealth-bank-defies-trends-set-by-competitors/ [Accessed 11 Jan. 2018]. Mustafa, S., Warraich, U.A., Khan, B.S. and Shaikh, K.A., 2015. Assessing the Level of Information Security Awareness Displayed by Administrative and Operational Staff of Banking Sector. Journal of Business Strategies, 9(1), p.31. Tinnil, M., 2012. Impact of future trends on banking services. Journal of Internet Banking and Commerce, 17(2), p.1. U.S. (2017). AIA close to buying Commonwealth Bank of Australia's $4 billion insura. [online] Available at: https://www.reuters.com/article/us-cba-m-a-aia-insurance/aia-close-to-buying-commonwealth-bank-of-australias-4-billion-insurance-unit-sources-idUSKCN1BV12S [Accessed 11 Jan. 2018].