Macro Environment (PEST)

Innovation is one of the most crucial aspects for ensuring organizational success. It can be viewed as an application of advanced solutions to meet the business requirements (Chesbrough 2013). The advanced products, methodologies, service, technologies and the business models help the organization to be successful in the competitive marketplace. The banking sector is constantly undergoing changes as the needs of the customers are changing constantly. Hence, it is essential to incorporate innovation in the business processes so that the bank can gain competitive advantage. The two companies selected for the purpose of study are Citibank and Maybank. The two companies are compared with respect to their macro environment, blue ocean strategy, ERRC model, business model and others. PEST analysis and Porter’s Five Forces analyze the macro environment. The types of innovation are defined with respect to profit model, service, channel, brand, and process and customer engagement. This report would broaden the understanding of the innovation process in two reputed organizations.

Political

Singapore has a low political risk and the country is a democratic country in which the people are free to elect their respective leaders (Goncharuk 2016). Citibank is considered as a major “political spender” and Monetary Authority of Singapore (MAS) drives the two companies. Citibank operates in over 100 countries and abide by their rules so that they can expand their business according to the legislation of the respective country. On the other hand, Maybank is a leading Islamic bank and take initiatives for curbing environmental issues through their project carbon closure (NST Online 2017). However, their organization lacks demand and for the same they had to close some of their branches (NST Online 2017).

The Gross Domestic Product (GDP) in Malaysia represents 0.48% of the total world’s economy and worth 296.28 billion US dollars in 2015 (Tradingeconomics.com 2017). Citibank creates job opportunity for efficient candidates that ensure their progress in innovation along with the enhancement in the nation’s economy. While, in context of Mabank, they invest only in gold and insurance. The Singaporean government is involvement in the diversification of the economy.

Citibank targets small and medium business and customers as their major stakeholders. This signifies their innovation in targeting the most active community in market (Goncharuk 2016).  However, in this case, Mabank have much effective innovation that is to generate awareness campaigns for cyber security and love for earth campaign. This ensures their brad recognition among the community for better profitability (Agnihotri 2015).

Citibank associates with Cisco system focus on digital banking through which intellectual capital can be distributed among employees as well as clients (Goncharuk 2016). Initiatives for e- business model represent the innovative move of both the organization. Mabank have Maybank2e.net, card-less withdrawal services and technology for system security and information protection.

 

Fig: PEST analysis

Source: (Goncharuk 2016)

Citibank have low to medium threats of substitute due to internet banking and other applications like PayPal and XE.com but opening bank account cannot be accomplished by these apps and both the banks have the opportunities to implement internet facilities (Gobble 2012).

Porter’s 5 Forces

The threat of new entrants is low for the Citibank, due to the presence of financial framework that have stringent laws and the strict banking regulations; however, ne entrants have a chance to enter by providing internet banking (Porter and Michael 2001). Maybank also have low risk of entrants as they cannot compete with established bank 

The bargaining power of the customers is medium to high for Citibank since there are large numbers of buyers and their concentration ration is medium being international and customers can easily access their information (Agnihotri 2015). Maybank on the other hand have high bargaining power of buyers as they do have much popularity in the market.

Citibank have low to medium risk in this context due to presence of few suppliers of their products categories and switching to one to other products is very expensive (Agnihotri 2015). On the other hand, Maybank face lack of capitals for switching large clients and wealthy individuals this limits their innovation chances.

The competitive rivalry is relatively high for the banking sector in Australia. Citibank and Maybank face little differentiation between competitor’s products and services and hence new banks with same facility also take away their customers. Thus, innovative ideas like CSR activities and customer loyalty programs can be some innovative aspects in this aspect. 

Citibank engages in designating their branches as stores and they have formulated business strategies, which focus on the increased customer convenience (Kim and Mauborgne 2014). On the other hand, Maybank focused on store facilities and the increased recruitment of suitable work force for enhancing the experience of the customers.

 

Fig: Blue Ocean Strategy

Source: (Kim and Mauborgne 2014)

Citibank eliminated bad services such as unethical practices in the bank, bribery, wrong intention in selling (Dhargalkar Shinde and Arora 2016). The delays in the execution of the transactions of the bank should be eliminated and these banks heavily investing on technology in recent times so that reliable, secure, cost effective and cutting edge solution can be provided to customers (Pistol and Tonis 2015).

Citibank and Maybank increase the quality of the banking services like improving employee training; fast access of funds, opening more number of bank branches, increased time of operations of the bank and this reveals the innovative moves of these two organization (Dhargalkar Shinde and Arora 2016).

Citibank and Maybank took initiatives for reducing the cost of customer acquisition, enhances the investments in recruitment of effective manpower and formulating research and development teams in order to assess customer’s demand (Najmaei 2011).. These actions reveal their innovation in contemporary business strategies.

Citibank and Maybank can create effective organizational culture and brand recognition. Formulating social media marketing can also be an innovative steps for interacting with the potential customers by aware them regarding their facility and benefits (Agnihotri 2015).

Eliminate	Raise
Bad services of the bank such as unethical practices in the bank, bribery, wrong intention in selling products	Quality of employee training, fast access of funds, opening more number of bank branches, increased time of operations of the bank
Reduce	Create
Reduction in the costs of customer acquisition, recruitment of manpower and service fees to the customers	Enhanced organizational culture and the increased brand image

Fig: ERRC Model

Source: Created by author

The key collaborates of Citibank and Maybank includes the technology alliances as well as the commercial partner (Zolnowski Weib and Böhmann 2014). The key activities of the bank include the transaction processing, payments network management and the value added services. The key resources of Citibank includes payment products platform while the key resources of the Maybank include VISA brand (Maybank.com 2016). The value proposition of Citibank comprises of the payment product platforms and the cashless payments (Citigroup.com 2016). The value proposition includes improved sales and the providing greater customer convenience. The various channels used by the banks are sponsorships, TV ads, conferences and tradeshows. The customer segments of the banking sector include financial institutions, cardholders and merchants. The cost structure of the banking sector would include the personnel, network communications, brand promotion and litigations provision. The revenue streams of Citibank include data processing revenues and that of Maybank include services revenues.

Blue Ocean Strategy

 

Fig: Business Model Canvas for banking

Source: (Zolnowski Weib and Böhmann 2014)

Innovation	Citibank	Maybank
Profit Model	Citibank Singapore has a separate Client Experience Centre and a Client Collaboration Centre that encourages users to interact more with the organization and access more information	The President’s Innovative Idea Awards was restructured and relaunched, engaging energetic contribution across sector and for harnessing the experience and talent present in the organization
Service	They offer special airport limousine transmit for classified clients	Maybank has aligned with 1337 Ventures to come across capable FinTech startups and pace up the industry substantiation and commercialization procedure.
Channel	Citi’s Smart Banking channel has modified the retail banking process, bringing in technology and innovation to improve user experience	Maybank has emphasized on ensuring multi channel access for customers to keep them updated about the organizations’ latest offerings
Brand	Citi is requesting customers with their latest marketing campaign intended for removing some of the discomfort drawn in when discussing about money (Letsfacemoney.citi.com 2016).	Exclusive partnership with Groupon for customers to enjoy special deals, discounts and services from them (Maybank2u.com.my 2016)
Customer Engagement	Citi’s innovative mobile app would contain an open structural design to give Citi’s clients admittance to the finest utilities of the smartest fintech apps (Fortune 2016).	[email protected] is a division of Maybank’s scheme to introduce the youth to the accessibility of suitable banking services
Process	Docusign company has teamed up with Citibank for helping clients to use electronic signature method for signing investment documents, as an alternative to regular signature.	Collaboration with Sage for digital banking solution into instantaneous electronic payments via online and mobile banking channels straight from their Accounting and Payroll units (Maybank2u.com.my 2016).

Conclusion

After looking at the innovative measures taken by both Citibank and Maybank, it can be comprehended that both the organizations look for innovative measures to advance their businesses. Innovations in the banking industry are facing the latest trends in the global innovation section. Some innovation trends for these two banks to look out for are:

Data monetization: Using data analytics to leverage market opportunity, as more and more customers are becoming willing to pay for this.

Social value chain: Majority of the customers nowadays want to get involved in the banking processes, and even banks are willing to engage them in crowd sourcing innovative ideas for building a next generation bank.

Robot service: Implementing of robotic technologies in the place of tellers to advise customers on banking services.

Distributed payments: these are the latest innovative trends in the banking industry that makes banking as a status symbol, making the whole payment process easier too.

Live transactions: Removing regular transactional statements, many banks are bringing in alive transactions for banking apps to alert users about their spending and credits.

Implementing these latest trends would definitely progress the business operations and revenue generation for both the banks in future.

References

Agnihotri, A., 2015. Low-cost innovation in emerging markets. Journal of Strategic Marketing, 23(5), pp.399-411.

Arvidsson, N., 2014. Consumer attitudes on mobile payment services–results from a proof of concept test. International Journal of Bank Marketing, 32(2), pp.150-170.

Chesbrough, H., 2013. Open business models: How to thrive in the new innovation landscape. Harvard Business Press.

Citigroup.com. 2016. Citi | Responsible Finance – Financial Ingenuity – Global Bank. [online] Available at: https://www.citigroup.com [Accessed 11 Dec. 2016].

Dhargalkar, K., Shinde, K. and Arora, Y., 2016. A universal new product development and upgradation framework. Journal of Innovation and Entrepreneurship, 5(1), p.27.

Fortune. 2016. Here’s How Citigroup Is Embracing the ‘Fintech’ Revolution. [online] Available at: https://fortune.com/citigroup-fintech/ [Accessed 11 Dec. 2016].

Gobble, M.M., 2012. Innovation and strategy. Research-Technology Management, 55(3), pp.63-67.

Goncharuk, A.G., 2016. Banking Sector Challenges in Research. Journal of Applied Management and Investments, 5(1), pp.34-39.

Kim, W.C. and Mauborgne, R., 2014. Blue Ocean Strategy, Expanded Edition: How to Create Uncontested Market Space and Make the Competition Irrelevant. Harvard Business Review Press.

Letsfacemoney.citi.com. 2016. Let’s Face Money – Citibank® | letsfacemoney.citi.com. [online] Available at: https://letsfacemoney.citi.com/?BT_TX=1 [Accessed 11 Dec. 2016].

Maybank.com. 2016. Welcome to Maybank. [online] Available at: https://www.maybank.com [Accessed 11 Dec. 2016].

Maybank2u.com.my. 2016. Maybank2u.com – M2U Biz with Sage Solutions Promotion. [online] Available at: https://www.maybank2u.com.my/mbb_info/m2u/public/promoDetail.do?channelId=PRO-Promotions&cntTypeId=1&cntKey=PRO09.24&programId=&chCatId=/mbb/Personal/PRO-Promotions [Accessed 11 Dec. 2016].

Maybank2u.com.my. 2016. Maybank2u.com – Maybank2u.com wins Innovation in Social Marketing at the Asian Financial Services Congress 2012. [online] Available at: https://www.maybank2u.com.my/mbb_info/m2u/public/personalDetail04.do?cntTypeId=1&cntKey=HL12.02.27&programId=HI-Highlights&newsCatId=/mbb/Highlights/2012&chCatId=/mbb/Personal [Accessed 11 Dec. 2016].

Najmaei, A., 2011. Dynamic Business Model Innovation: Proposing an Integrated Organizing Framework.

NST Online. (2017). Normal to shut, relocate branches: Maybank. [online] Available at: https://www.nst.com.my/news/2016/08/168647/normal-shut-relocate-branches-maybank [Accessed 20 Apr. 2017].

PISTOL, L. and TONIS, R., 2015. Model for Innovation through Information Network Sharing. Editorial Board, 10(4), p.34.

Porter, M.E. and Michael; ilustraciones Gibbs, 2001. Strategy and the Internet.

Tradingeconomics.com., 2017. Malaysia GDP | 1960-2017 | Data | Chart | Calendar | Forecast | News. [online] Available at: https://www.tradingeconomics.com/malaysia/gdp [Accessed 20 Apr. 2017].

Zolnowski, A., Weiß, C. and Böhmann, T., 2014, January. Representing Service Business Models with the Service Business Model Canvas–The Case of a Mobile Payment Service in the Retail Industry. In 2014 47th Hawaii International Conference on System Sciences (pp. 718-727). IEEE.