Internal challenges faced by ANZ Institutional Banking

Discuss about the Organizational Challenges and Recommendations.

ANZ Institutional Bank has business objective of connecting consumers to the opportunities focused on capital, trade along with investment flows within the nation. The bank has a deep sector expertise within geographies which represents 75% of the international trade flows (Bergh et al. 2016). As the consumers focus on capitalizing movement of their goods and money they look for strong banking partner that can facilitate them in managing their liquidity and investments that presents challenges for the bank in developing its financial services. The objective of the paper is to analyze the challenges faced by ANZ Institutional Banking. The report will also analyze the internal challenges faced by the bank that includes changing needs of consumers, globalization and the digital revolution. It will also focus on elaborating the external environment-based challenges faced by ANZ Institutional Banking. This includes consumer preferences for customization, commitment to ANZ Enterprise Agile Model and technology pressures that encompass increase on digital currencies.

The internal challenges faced by the bank that includes changing needs of consumers, globalization and the digital revolution (Bessis 2015). The external environment-based challenges faced by ANZ Institutional Banking incudes consumer preferences for customization, commitment to ANZ Enterprise Agile Model and technology pressures that encompass increase on digital currencies.  Globalization has presented challenges for the bank as international banking industry is adapting to changes in technology, global trade along with regulations which indicates that consumers require bank to be more global. Digital transformation has presented certain challenges as digital disruption is taking place within the banking industry. Consumer preferences for customization of ANZ banks services is also creating pressure on the bank in offering personalised services to them. Automated communications which are mass delivered within time-dated metrics are posing challenges for the company in implementing Artificial Intelligence. Increase in digital currencies such as bitcoin and cryptocurrency are presenting challenges to ANZ Institutional Bank. Near Field Communication is necessitated to be used by all the banks in facilitating consumers to pay wirelessly with the help of their devices (Bromiley et al. 2015). Commitment to ANZ Enterprise Agile Model is also challenged as the bank has to make increased effort in organizing and delivering work that can enhance the way in which the bank can respond to changing consumer needs. Anz Bank is facing challenges of competing with Google and Facebook those launching new products faster than bank grapples with ensuring low credit growth. To increase commitment in this model, the bank must develop higher staff engagement along with making further efficiency improvements.

External challenges faced by ANZ Institutional Banking

Review of the contemporary management literature has presented analysis of the management challenges that are faced by the Australian banks these days. According to DeAngelo and Stulz (2015) Australian banks faced the issue of shifting consumer preferences affected from engagement, interaction and innovation. The way in which banks interact with the consumers are changing and managing technologies for financial accounts are also changing. For addressing such challenge of bank service personalization for consumers, numerous banks including Westpac have employed digital channels. Fitzroy, Hulbert and O’Shannassy (2016) indicated that for being technologically competent in the Australian banking industry and dealing with technological pressures, most of the banks have developed mobile banking applications that serves as the major way in carrying out routine transactions. Previous literature has presented the fact that more than 45% of the millennials those have savings account engage with the banks through their mobile applications. Grant (2016) also evidenced that the Australian banks are addressing technological competition through facilitating its consumers to interact with their banks through IM/ Chats for attaining banking accounts and service needs advice.

In contrast, Hubbard, Rice and Galvin (2014) explained in previous literature that the digital currencies are imposing increasing pressures on the Australian banks. These researchers identified that Bitcoin is resulting in revenue cuts and lack of Return on Investment (ROI) in most of the banks. Bitcoin is observed not to require a central bank, it might also cut revenue that arrives from making payments. This is also deemed to completely compromise the needs of the banks. Jeucken and Bouma (2017) stated that there is an increased chance that Bitcoin has turned out to be a fleeting technology that might never really catch on. For such reasons, it can be extremely early for the banks for investing within a strategy to participate. Dealing with such management Challenges, Westpac bank of Australia has considered advancing their digital technologies in a way that users send and attain payments. Moreover, Riasi (2015) also observed that Near Field Communication Technology has been developed by most Australian banks that can facilitate the consumers to make wireless payments. Apply Pay is a cryptocurrency that decreases the need to carry a physical credit card.

Adapting to the external banking environment and rowing trends of using digital currencies, moat of the Australian banks is adapting such technology through facilitating its consumers to pay by means of MasterCard, American Express or Visa Bank Cards digitally at participating retailers. Rogers (2016) revealed that globalization has presented numerous regulatory pressures for Australian banks that is increasing with time. Considering the same, the banks are becoming liable to spend a great part of their discretionary budget on being compliant along with developing processes and systems to keep up with increasing requirements of global banking industry. Addressing such challenge, Lasserre (2017) evidenced that Westpac along with other Australian banks has attempted to attain benefits from cross border bank consolidation. It has been gathered that most of the Australian banks are maintaining overhaul in financial regulation that is acceptable individual states as well as international bodies. Moreover, the combination of financial transformation along with leverage has been maintained by Australian banks that has developed an effective mechanism through which the financial system can address the requirements of the economy.

Advantages and limitations of Kotter’s 8-step model and SWOT analysis

• Changing needs of consumers- PWCs 2017 Digital Banking Consumer Survey indicated about a drastically changing digital banking consumer behavior. The most significant consumer preference that is causing threat to ANZ Institutional Banking’s business is the considerable rise of the “Omni-digital” group. This consumer segment focuses on employing mobile phones and computers for banking purposes because of which the bank’s traditional physical channels will not be effective (anz.com. 2018).
• Globalization- Globalization is evidenced to present challenges for ANZ Institutional Banking. This is for the reason that globalization results in increase of overhead and distribution costs that has decreased the profits of the bank. This has resulted in development of liquidity along with balance sheet structure which is statistically insignificant. After the current global financial crisis, the bank is facing challenges from high economic vulnerability.
• The digital revolution- Increase in digital strategies within banking industry has presented challenges for ANZ Institutional Banking for the reason that, it has necessitated high investment from the bank in digital agenda. Introduction of digital inside-out and outside-in strategies is forcing the bank in considering FinTech startups in order to improve the knowledge of strategic choices and industry issues. It is evidenced that Westpac bank in Australia has upgraded its technology platform in order to address the challenge from increasing SWIFT traffic payments, treasury, trade finance along with securities such as KEBiNet (anz.com. 2018).

• Consumer preferences for customization- In the recent era, consumer preferences for customization is increasing in the global banks. ANZ Institutional Banking is dealing with the pressure as it is not capable to offer the service level that is demanded by consumers, specifically in consideration to technology. A digital banking report has evidenced that consumers along with global financial services community facilitates in determining major beliefs along with personalization of banking relationship. ANZ Institutional Banking feels the pressure of personalizing its digit service offerings in order to make sure that it offers personalized digital offerings along with real time contextual engagement.
• Commitment to ANZ Enterprise Agile Model- ANZ also faces challenges associated with being committed to its enterprise agile model. It has been evidenced that the company is dealing with issues related to lack of executive commitment, concerns related with its organizational culture and employees along with the challenge of neglected the need for technical excellence. There is a lack of establishing efficient working relationship among the people those have interest within successful outcome of such model that is employees. Political dynamics along with communication boundaries indicates lack of involvement.
• Technology pressures- ANZ Institutional Banking is dealing with technological pressures concerned with baking operations. Few of such challenges include automation of services, emergence of advanced payment technologies and introduction of non-blockchain fintech. Growing number of Financial Technology Companies (FinTech) that offers financial services based on software are imposing competitive challenges to the bank. Enhancing popularity of these technologically advanced companies is affecting the traditional banking of ANZ Institutional Banking. This also generates challenge to the bank as it is not able to adjust rapidly to such changes.

ANZ Institutional Bank focuses on analyzing long with explaining the likely threats along with repercussions that might take place in the future. The bank also focusses on analyzing the opportunities that can be tapped by means of recognizing the effective change leaders along with the major stakeholders. The bank also has weak areas to make sure that the team encompass influential people from different cross functional departments (Bergh et al. 2016). Digital transformation has presented certain challenges as digital disruption is taking place within the banking industry. Consumer preferences for customization of ANZ banks services is also creating pressure on the bank in offering personalised services to them.

• Strengths- ANZ Institutional Bank is positioned as one of largest banks within New Zealand and in addition diversified product portfolio decreases the business along with operating risks within the bank. The bank has significant market share within Australia and better financial position offering resilience to poor market developments.
• Weaknesses- Global exposure is decreased in comparison to different major banks. The bank also faced tough competition from the present competitors that makes it highly difficult to increase the market share (Bergh et al. 2016).
• Opportunities- ANZ Institutional Banking is positioned as the first Australian Bank in order to attain license to carry out retail business in China that serves as an opportunity for attaining larger shares in global banking market. There is an increased opportunity to expand within the Asian Markets.
• Threats- Determining economic conditions within New Zealand and Australia. The company is also observed to face threat from fluctuations along with changes in the banking system of Australia. There is also increase in competition from the international banks within pacific regions and in Australia.

Kotter’s 8 step model has several advantages in analyzing management challenges of companies. This model facilitates in generating a guiding coalition, developing an effective strategy and vision communicating the change vision along with empowering employees for taking broad based action. Kotter’s 8 step model also has certain limitations that must be considered while analyzing the management challenges faced by ANZ Bank through this model (Bromiley et al. 2015). One of the limitation is that it assumes that C process unfolds in a rational and logical sequence. This model has also been criticized as it anticipates rational and logical change sequences that makes the model very simplistic.

SWOT analysis is helpful in recognizing and understanding major concerns that impacts the business of ANZ Bank. Certain other advantages associated with this analysis is that it focuses on the most vital challenging factors that impacts the business. Through employing this analysis, it will be easier to understand the business of ANZ Bank in a better manner and can facilitate in dealing with the weaknesses (Bergh et al. 2016). This analysis also facilitated in determining threats faced by the bank, capitalizing on opportunities along with facilitating the organization to develop business goals and strategies for attaining these objectives. However, there are certain limitations associated with SWOT analysis in identifying the management challenges faced by the companies. This analysis also does not priorities the issues, does not offer solutions or provide alternative decisions.

Based on the analysis of internal and external management challenges faced by ANZ Institutional Banking, certain approaches have been selected in dealing with such concerns. The bank must consider to consider five major trends in addressing the changing consumer needs that include service expectation, personalization, self-service option and new branch experience. The bank must also consider improving its digital onboarding, enhancing response to new technologies and enhancing digital banking all over Australia (Bessis 2015). Improve consumer service can be offered by the bank through employing new devices such as capabilities of new data insight. The capability to leverage open APIs, AI and loT are all aspects of such digital advancement approach of the bank. NFC technology must be implemented by ANZ Bank that can support in decreasing fraudulent charges in order to maintain security within the new system. If the bank considers implementing this technological approach, it can facilitate in attaining benefits of increased security and visibility that is highly relevant and competitive.

Proposed approaches for success

To maintain a competitive edge, the company can maintain strong payment offerings though implementing a API-based and mobile centric application. Payment offerings must be made by ANZ Institutional Banking relied on open API infrastructure along with collaborative approach. In following the digitization approach, the bank must also leverage its social, analytics, mobile along with cloud-based capabilities. This can facilitate in generating a secured payment surrounding that also safeguards privacy of all its consumers (Bessis 2015). Advancing the ANZ Enterprise Agile Model, the bank can employ an agile approach for better product development that can facilitate fast and constant advancement. From setting such strategic approach it can be gathered that or ANZ Institutional Bank to win against the non-bank competitors, they require developing a compelling along with competitive digital payment options. Increasing globalization has necessitated that the bank must develop digital revolution approach in making digital payments for matching simplified user experience.

A comprehensive mobile wallet strategy can be considered within the digitization strategy of the bank along with offering considerable benefits. Digitization approach of ANZ Institutional Banking must also consider implementing consumer customization services such as Money along with clear change that can facilitate transfer of seamless domestic funds. In ensuring better consumer experience, the bank must consider offering simplified and cost effective domestic and international P2P offering. This can facilitate ANZ Institutional Banking in attaining a high share of digital payments. An effective P2P offering can also facilitate the bank in reaching out to a huge consumer base of local and immigrant people attempting to transfer money to their relatives in internationally (Bromiley et al. 2015). ANZ Institutional Banking must also consider utilizing its social media abilities within the payment ecosystem in order to develop innovative payment products. Through partnering with P2P currency exchange platform, the bank can attain access to the currency matching platform. They can also expose such platform services within their digital channels. Such approach can facilitate the bank in attracting transfers to unbanked recipients along with expanding its distribution network.

Conclusion

The objective of the paper was to analyze the challenges faced by ANZ Institutional Banking. It was gathered from the report that Globalization has presented challenges for the bank as international banking industry is adapting to changes in technology, global trade along with regulations which indicates that consumers require bank to be more global. Digital transformation has presented certain challenges as digital disruption is taking place within the banking industry. New technology in banking has increased consumer expectations and ANZ bank has become highly vulnerable. Considering such challenges, ANZ Institutional Bank must develop higher staff engagement along with making further efficiency improvements. Moreover, an effective approach that is also recommended to solve the bank’s management problem considers the combination of financial transformation along with leverage has been maintained by Australian banks. This has developed an effective mechanism through which the financial system can address the requirements of the economy.

References

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Bessis, J., 2015. Risk management in banking. John Wiley & Sons.

Bromiley, P., McShane, M., Nair, A. and Rustambekov, E., 2015. Enterprise risk management: Review, critique, and research directions. Long range planning, 48(4), pp.265-276.

DeAngelo, H. and Stulz, R.M., 2015. Liquid-claim production, risk management, and bank capital structure: Why high leverage is optimal for banks. Journal of Financial Economics, 116(2), pp.219-236.

Fitzroy, P., Hulbert, J.M. and O’Shannassy, T., 2016. Strategic management: The challenge of creating value. Routledge.

Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.

Hubbard, G., Rice, J. and Galvin, P., 2014. Strategic management. Pearson Australia.

Jeucken, M. and Bouma, J.J., 2017. The changing environment of banks. In Sustainable Banking (pp. 24-38). Routledge.

Lasserre, P., 2017. Global strategic management. Palgrave.

Riasi, A., 2015. Competitive advantages of shadow banking industry: An analysis using Porter diamond model. Business Management and Strategy, 6(2), pp.15-27.

Rogers, D., 2016. The big four British banks: Organisation, strategy and the future. Springer.

Shareholder.anz.com. (2018). Annual Report / Annual Review | ANZ Shareholder Centre. [online] Available at: https://shareholder.anz.com/annual-report-annual-review [Accessed 20 Apr. 2018].