Future Innovation In Banking Sector Of Australia

Research objective

Discuss about the Future Innovation In Banking Sector Of Australia.

This report is aimed at facilitating innovation in the banking industry of Australia. The National Australia Bank (NAB) was selected to facilitate the implementation process of innovation with the use of Oracle-based software. The National Australia Bank is known for its services in the insurance unit, loans, accounts, and the credit cards services. The software will be aimed at registering debit cards on the mobile phones to allow for faster and efficient transactions of money. However, innovation goes hand in hand with the leadership styles that are anticipated to provide an enabling conducive environment that advocates for innovation (Fusch and Patricia, 2015, pp.1408-1416). There could be other factors, which are potential drivers to innovation such as the growth in customer demand, gaps in customer satisfaction, stiff competition from the competitors in the same industry, and the availability of adequate technology.

The main objective of this research was to determine the suitable means that could improve the banking services and reduce the time spend at the teller or in the banking hall. A contactless banking approach with smartphones was to be examined to determine its effectiveness and impact in the banking sector in future using the Oracle-based software.

The report by the Price Waters house Coopers (PWC) on the future of banking in Australia outlined the six forces that are the core factors influencing innovation in the banking industry. The forces outlined are, the changing customer demographics, consumer behaviour, technology, Asian influence, the subdued global economy, and the influence of the government. The report indicated that these forces are driving the change at a precise time when the traditional industry drivers such as asset growth and advantage are claimed to be diminishing and may be reversed in future (Alalwan et al., 2017, pp.99-110).

 For a continued economic growth and profit for the stakeholders, the banks should be smaller, simpler, and most importantly be customer oriented than they have been in the past years. In order to achieve this, the report proposed six approaches that the banks in Australia should incorporate in their operations. These include: to explicitly organize the operations around the clients, simplify the face, voice, and offers by the banks, to embrace implemented regulations, to put a positive work culture to work, to focus on specific areas of innovation, and finally to optimize the organisation’s footprint throughout the value chain (Banks et al., 2015). These factors were presented in the pie chart below with the magnitude of their influences.

The factors influencing innovation in the banking industry

The Australian population is becoming more diverse, older, richer, and increasingly urbanised while becoming more interconnected not only with the country but also overseas. This led to increase in the number of customers using the banking services that have intensified the number of daily transactions thus, calling for the upgrade of the existing systems. In addition, the wealthiest group in the history of Australian banking services transfers assets to the most indebted groups, which require the bank to quickly reflect the changes in the financial circumstances for specific customers (Honka et al., 2017, pp. 611-646). This has put pressure on the field of innovation to quickly device measures to cater for the demographic factors.

Information systems are becoming modular and advanced. Dodgson (2018) implies that the banks should increase the speed and scale at which they can handle the analytics of the numerous data to enhance effective communication between the bank and the clients, the bank and the respective branches, and the inter-bank communication. Unfortunately, the same applies to all the competitors with the market ready to adapt to the most effective communication channels and information systems. This has contributed to the need to speed up innovations in the banking industry to counter for the changing technology.

Just like any other developed countries, Australia has set up regulators and the central banks that are aimed at overseeing the banking industry in the efforts to contribute to the macro economy. This has set the big four banks in Australia on the limelight of delivering sustainable and profitable banking services (Bell and Stephen, 2015, pp.454-474). This has contributed to the inventions and innovations in the banking industry as well.

Leong and Kenneth (2016) claim that Asia is increasingly becoming more significant to Australia economically, culturally, and socially. It is reported that the domestic economy of Australia is directly linked to the general fortunes of the Asian economies such as China among other. This is due to the increased exports, foreign investment, domestic services, and business partnership, which heavily rely on the banking services for operations (Cavusgil et al., 2014). The PWC report indicated that this facilitated innovations in the banking sector in Australia in order to cop the internal market demands.

The results from the report also mentioned that the next 3-5 years, Australia would be characterized by slow productivity growth, debt, and repression of financial status, environmental constraints, and an ongoing sense of uncertainty. This economic uncertainty shown by different events around the world is further amplified by the political instability (Davis, 2016). The growth expected is now left upon the micro businesses, which include banking services. This has contributed to the urgency and the need to bring in more innovations in the banking services as an effort to boost the micro businesses operations.

Changing demographics

The current Australian consumers are highly informed, educated, confident, law-abiding, tolerant, and are ready to retract their trust in case of inconveniences. As most of them conduct online businesses, make international business connections, and engage in the international trade, they pose a challenge to the banking retailers (Vyas and Vishal, 2014, pp.321-342). This can be a threat to a given bank with a sluggish system of operation as it has been reported the customers keep shifting from one bank to another.

The core-banking program that used to be in existence was having an impact on the customer experience with the stiff competition from the other banks in Australia. The view of the NAB was a single customer view with the customer relationship management platform which was formulated using the Oracle Customer Hub by the NextGen program (Merrett, 2014, p.9). The NAB view was considered to be important due to its efficient way of building relationship models of the business banking thus improving the vital need of the bankers’ interaction with the clients. This enabled the bank to get closer to the customer needs and to device means to address the customers’ concerns in relation to banking and insurance.

Moreover, the NAB view platform created the framework for the bank to customer-centred and not the account centred in a technological sense (Rahman et al., 2017, pp.37-56). This enabled the bank to make improvements on its main NextGen goals which were to deliver new core servicing platforms and the launch of the digital bank Ubank with the creation of 400,000 new banking accounts. Another goal was the establishment of the new finance, the risk and treasury platform that supported the security, pricing of funds transfer, and a new general ledger. During the 2017 financial year reports, it was highlighted that the bank had introduced the new credit risk engine online using the NAB view platform, which implied that the bank could successfully decommission about 37 old legacy servers. This led to an increase in the number of mobile banking over the years as shown in the graph.

Furthermore, the National Australia Bank reported to have delivered three fundamental components of the digital banking platforms out of the planned four which include: The core servicing acknowledged at the Ubank, the integrated Analytics Platform for finance, risk and treasury, and the Customer Hub that was overstretching the NAB view (Tucker and mark, 2018, pp.126-146). With the implementation of the three components, the National Australia Bank was left with one major component, which is still under the plans of the management to be fulfilled. The component is landing origination on the platform, which is said to be completed in a couple of few years. With the completion of the four major components, the bank would have reached the tipping point, which will call for the deployment of a stack that will enable the sustainability in the use of the platform in future. It was reported that the adoption of the NextGen program had posed many challenges to the organisation but it had already yielded a significant profit margin, which had made led to validation of the decision to embark on the core replacement and decommissioning of the legacy program (Hawes and Aubrey, 2016). Concisely, it was projected that once the full adoption of the program has been acquired, it will result in more financial profits than the previous use of the old programs.

Changing technology

For the National Australia Bank to be fully on the track that leads to innovations and implementation of the Oracle-based software project there must be a number of enabling factors that must be put in place to drive the process. This requires a substantial cooperation between the management, stakeholders, and the technical team with a series of activities, which include market/client/consumer research, developing the system, testing the system, and finally implementing the system (Abrahamsson et al., 2017).

In order to achieve the implementation of new contactless application for mobile banking, there is the need to collect the required data from the clients to determine the degree of the current customer satisfaction, the challenges facing the use of the available system, and the effectiveness of the services delivered (Stanley and Rebecca, 2016, p.83). Additionally, the data from the bank employee who interact with the customers on daily basis is essential as well as the views of the stakeholders. The preferred methods of data collection were the questionnaires conducted in different branches of NAB during a 3-month survey. Both quantitative and qualitative data were collected from the customers and the employees. The data was then analyzed using the SWOT analysis to determine the strength, weaknesses, opportunities, and threats in the service delivery by the National Australia bank (Atoom at al., 2017, p.119).

The questionnaires provided essential means to collect data from the customers. They were user-friendly with the option of participant identification. Some of the questionnaires were open-ended while others were multiple choice oriented which, were aimed at determining customer satisfaction (Hill and Nigel, 2017). However, were all dedicated to collecting the same pieces of information from both customers and the employees. After data collection, it was time to sort and analyze the data to align the qualitative data with the research questions and the survey goals. The data obtained was cross-tabulated with crunching the numbers before the conclusions could be made. Below is a sample questionnaire, which was easy to be understood and straightforward in addition to the minimal time taken to fill them out.

After the survey, the data collected was analyzed using the SWOT analysis. The strength detailed showed that the bank had already some effective tools in place concerning customer satisfaction. The weakness showed that the bank needs to re-align its goals and objectives with the satisfaction of the customers.

The findings from the analysis of both qualitative and quantitative data from the survey through questionnaires projects that the implementation of the Oracle-Based contactless banking would minimize the delays experienced by the customers especially ATM withdrawals and the time taken to deposit the cash during peak hours of working days (Ezeagwu et al., 2018). The results show that most customers have a trend of shifting from one bank to the other with keen interests in the processes the bank offers loans, interest rates, payment procedure, among other factors. It was also brought to light that some customers are clueless about the mode of operation of the National Australia Bank, their policies, and the rules and regulations. It was registered that the client education was highly neglected and anchored on the basic education offered during the opening of the bank accounts (Rammal and Hussain, 2016, pp.141-156). Moreover, some customers opted for other branches for banking services due to the non-welcoming attitude of the bankers during incidences of an encounter, both at the teller and during filing of transaction complaints. For instance, a team of 20 members conducted a research on 979 customers who were interviewed and their data sampled as below showing different categories of satisfaction. The customers from the NAB bank were interviewed within the period of one month with the help of the branch manager who assigned a staff member to introduce the team to the clients at the bank and the results tabulated as below.

Interventionist governments

On the contrary, the results from questionnaires interviewed on the employees claimed that most customers are ignorant and often less concerned with the policies and modes of operation of the bank. For instance, the graph below indicates the percentage of fulfilling existing customer criteria in terms of the credit cards, mortgages, personal loans, savings account, and transactions account obtained from the National Australia Bank’s website. The bar graphs indicate the high level of ignorance of the customers in terms of percentages as shown below

The results further claimed that most customers are only brought to the attention of these policies during the time of payment of debts, application for loans, or during complaints raised. Moreover, most employees felt that the bank does not have adequate technological infrastructure that can handle the vast transactions that take place during the 24 hours in a day and that led to delays in transactions at certain hours the day. Most employees claim that some branches of the bank are understaffed while some are understaffed which has always led to demotivation of those employees who work for long hours without breaks in order to quench the customers’ thirst for the banking services.

The number of the customers interviewed is quite limited to project conclusive or more accurate results. Moreover, the research was confined to NAB bank only which cannot be applied across all banks and therefore, the entire banking sector.

The research was conducted based on the willingness of the participant. Selection of the participants was voluntary. The data recorded during the survey was accurately recorded during the time of the interviews with the customers at the bank thus making the results reliable. Moreover, the permits and licenses were obtained before visiting the bank branches for research. All the required rules were observed to the later during the research, therefore, causing no moral or procedural/legal implications. 

From the findings of the data, the team established that introduction of the contactless technology in the banking sector will lead to faster transactions with efficiency and convenience to the customers. This would encourage more customers to open accounts with the NAB, which will directly result in increased returns from the transaction costs as evidenced by the Common Wealth Bank of Australia (Schlagwein et al., 2014). The data for smartphone users obtained from the Common Wealth Bank statistics is shown below. It suggests that the most targeted age is between 18-44 years who are reported to use smartphones the most. These could translate to contactless banking with the use of Oracle software on mobile phones.

Asiafication factor

However, the implementation of the software was termed to impose heavy financial investment from the bank to see the end users enjoy the luxury of the contactless banking on their mobile phones. It was suggested that a certain region be put under test using the software to determine the customer reaction, redundancy of the system and the user-friendliness before leveraging to the whole users. Additionally, the time taken for the software to give back the invested amount was considered as a key measure to look into before the introduction of the software. The team projected that should the software be ready for use effectively without failure, it will be the breakthrough for replacement of the current NextGen program being used.

Conclusion

In conclusion, all the Australian companies are aware that the customer-led innovation is going to be crucial for competing in the market. The banks are no different and are expected to deploy their resources to foster these innovations in order to secure a good chance of winning in the market. The laxity by the management to conduct research in the trends in the market by some banks such as the National Australia Bank will be victims of market failure. The banking industry is generally crucial for business retailers as they rely heavily on the daily transactions to make the ends meet. Therefore, the banks especially the National Australia Bank should streamline its operations with the existing technology in order to meet the customers’ demand. Delays in transactions were highlighted as the most annoying factor that hinders effective customer satisfaction. All these could be avoided by use of contactless banking with the use of the Oracle software. 

From the study research undertaken, the National Australia Bank should implement the use of the Oracle Software to gradually replace or back up the NextGen program for it to meet the customer satisfaction needs effectively. The use of the software will also ensure that the bank is in a position to increase the returns due to the high number of new users projected to join the banking company. It is also recommended that the bank to constantly fund the research of the market trends in relation to the customer behaviour in order to sustain the rightful innovations in the future. This will ensure the economic growth of the bank as well as its contribution to the country’s economic growth. With this in place, the bank can be the leader in the banking industry that provides the framework for the other three major banks and all other small banks in Australia (Al-Shanasi et al., 2017, pp.403-428)

Subdued macro economy

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