Need of IT In Banking Business- Example Of Commonwealth Bank of Australia

Discuss about the Impact of IT on The Commonwealth Bank of Australia.

IT or is rightly said Information technology or system has become an indispensible part of every business house as well as individuals. Any business house not possessing a well knitted IT system within the organization is tagged as ‘out-dated’ and not seen in its true spirit by all, be it investors, employees, creditors, debtors etc. Its importance can be felt in every field such as health care, banking, retail segment, schools and universities, tourism and industries such as fishing, animal husbandry etc. The report below mainly emphasises the impact of IT on the businesses. For the clarity of thoughts, example of Commonwealth Bank of Australia is taken which clearly shows how IT has impacted the banking business. It also details about how sharply the banks have been able to cut down on their costs by introducing internet banking and many such other services of the banks via the help of IT.  Further to this, the customers get attracted towards such banks which provide wider services through their websites, thus saving their travel time and harassment of standing in long queues.. Therefore IT has impacted the business of the banks greatly by helping them reduce manpower costs, gain greater number of customers as well as win the confidence of the customers. However it is equally important to notice the fact that IT brings with itself issues such as hacking of accounts i.e. security, privacy and confidentiality issues which also need to be addressed in a quick so as to maintain their reputations.

Formed in the year 1911, the Commonwealth bank of Australia is counted under the big four banks of Australia. The bank is involved in providing a wide variety of services such as retail banking, institutional banking, fund management, insurance etc. Thus amongst these wide array of services, IT plays a very crucial part in its success.

In this world of e-commerce, the need of IT has increased tremendously. The banking sector considers IT to be a boon for the development of their business and e-commerce is one of them. Banking sector demands maximum connectivity with its customers such as account holders. People expand their business and for that they have expanded their territory of work. In such a scenario if the banking services are not available on the wheels then it becomes very difficult for any business house to conduct important banking transactions and thus stagnate their progression. Thus banking business does need a well installed and timely upgraded IT system so that the customers are served with all the services without any kind of physical presence (Eruemegbe, 2015).

Importance of IT For Survival

Commonwealth Bank of Australia, one of the biggest in Australia, understood the need of the hour and has installed a well knitted IT system which helps to serve its customers better from any part of the world without any kind of limitations. It has increased its business leaps and bounds by enabling its customers with a freedom to bank as per their method and time. This has also in turn helped the bank to reduce costs towards manpower and also increase its turnover. The bank has understood the fact that in today’s world, almost everybody has a mobile phone which is Android or iOS or Windows supporting, hence has created various apps to support so that transactions such as transfer of money, payments or even withdrawals can happen using the mobile phones itself.  Therefore this shows that a well developed IT system is a blessing for the success of any business and especially for the banking sector as is evident from the success of Commonwealth Bank.

The 21^st century demands for a union of various tasks such as computing, information and data communication and knowledge base. The technological advancements have given the banks such potential to expand which they had just dreamt of. Its importance cannot be underrated as it has impacted the lives of the banking business owners, employees and the officials appointed as well as the customers. Deliverables have become easy thus giving a competitive edge to the various other banks. Banking sector is one such segment which is highly customer intensive. Customers will love to bank with such a bank who provides them convenience and innovation in services and products. Earlier people preferred to have a bank account with the branch nearest to their reach, now IT has revolutionised the same to such an extent that people residing in remote areas also have a bank account and within their reach due to conversion of maximum services online irrespective of the location of the branch (Ghaziri, 1998).

Similarly, Commonwealth Bank of Australia has also been able to compete with the rising banks only due to adoption of the IT at the right time and technology does not mean only computer related but also mobile. The Bank has been able to survive and retain and expand its customer base as it has always considered providing high end services to the customers on priority. It is one of the first banks to introduce mobile banking due to which the loyalty of its customers also increased tremendously. Further the Bank has always ensured that the implementation of new technology be coupled with security and confidentiality therefore making it the preference of all customers. The year 2013 helped CBA post a profit of $8.3 Billion and the bank gives majority credit to its well built IT system (Kidman, 2014).  Thus this is a very evident example of how the Bank has been progressing so much that nothing can endanger its survival in the long run.

Requirement For Application of IT Into Business

Installing an IT system involves lot of planning and screening along with high costs. It is a capital investment for any entity and hence adequate brain storming is a must before investing into the same. Just as cost and planning is integral while making any kind of capital investment, similarly in case of an IT investment designing, proper installation and detailed training is equally important. CBA is one such bank which has understood the importance of the same.

The Bank has reconciled the various steps towards a successful implementation of IT. In the year 2014, the Bank had employed 50000 employees out of the total, more than 1/5^th were employed for IT and operations. CBA has been understanding the requirements on a timely basis and due to adequate planning and designing has completed various projects on time such as replacement of the Bank’s main banking system which took five years to become fully functional, but was well on time. The Bank had started a project in the year 2008 and ensured that enough care and attention was given towards the development of the same by taking huge amount of risks and money involved. Not only this, the Bank also ensured that the management focussed enough towards the project so that it could be launched successfully. Applying IT into banks does not mean just implementation of a high end system which is not suitable to serve the purpose. Since the banks are customer centric, therefore each project should be started keeping in mind the preference of the customers (Knight, 2012). Thu it is clearly evident that for the application of a successful IT project within an organization, availability of money is not everything. Along with the same detailed planning, testing of the project, phased implementation, proper training and adequate provisioning for any kind of faults is also equal importance.

One of the first banks to enter the technology was CBA and has been a successful user of the same. The Bank has been known for using the IT in business in the most judicious manner. The Bank’s main motto is to serve the customers preferences above all and it achieves the same by involving its 50000 employees with the customers. The work culture has been made employee friendly simply due to the flexible and highly upgraded technology installed. It believes that an organization can succeed not only with a good leader but also with healthy and high motivated team members as well (Commbank.com.au., 2013).  The Bank is women friendly so much that it provides the facility to the women workers to work from home once a fortnight which is possible only because it has invested in forming an IT system which allows working from home.

How Does Commonwealth Bank of Australia Use IT

Similar to the same, the CBA also provides a wide array of facilities to the customers which they can avail of without visiting the branch. Initially, the entire banking system was manual, then it switched to computerised system within branches which also helped to speed up the processing of customer request. Then the technology developed further so much that people stopped visiting banks and accessed their account details via the internet. Soon the same advanced towards installing the entire banking services within an app(Chung, 2016). Thus it helped the customers to inculcate a security of the fact that their money was available with them every moment and that hard cash is not required any more. Thus CBA used the IT to double its customer base.

As is evident from the report, the benefits offered by IT to CBA are manifolds. First and foremost is the cost reduction that the Bank has achieved since the employee turnover has reduced and the technology has been able to attract better manpower as well. Secondly, IT has enabled the Bank to widen its customer base. It has been able to increase its profits not only via an increase in the number of customers but also via the increase in the productivity of the officials and the employees. 

Technology brings with itself a whole of security risks. With the increasing dependency on the apps for the various smart phones and tablets, the customers are able to perform their banking transactions anytime anywhere. However due to increasing dependency on the mobile banking and the internet banking, a failure or any kind of system fault can bring the entire system in jeopardy. The customers will not be able to perform tasks online and will have to visit the branches and due to the technological advancements, the branches are not as well equipped as it used to be. Secondly, due to the increasing number of password hackers, there is a high risk involved with regards hacking of account details and thus withdrawing of money from someone else’s account. Due to the same although the Bank has introduced the concept of changing the password every fortnight and has been continuously trying to fix any kind of issues in the system, yet these risks cannot be ignored in totality.

Another risk associated with the IT is that of timely upgradation of the system and the bank rates (Vater et.al. 2012). If not done on real time basis then there is a risk of the customers being mislead and thus in turn hamper the reputation of the banks, therefore Commonwealth bank of Australia has to always ensure that the information displayed in the apps and the website of the Bank is updated one without any kind of differences.

Conclusion

Thus it can be rightly said that Commonwealth bank of Australia uses the services of IT in the best possible manner which could support not only external customers but also internal customers such as employees as well. They are now equipped with performing their transactions and activities in a  much faster manner due to the application of the leveraging technology and also employing a team of highly knowledgeable IT professional. Therefore IT has had a very promising impact n the business of Commonwealth Bank of Australia who has reaped benefits out of the said technology while wading off the risks involved in a strategic manner. 

References

Commbank.com.au., (2013), Our Strategy, Available at https://www.commbank.com.au/content/dam/commbank/microsite/2013shareholderreview/downloads/CBA-OurStrategy-2013.pdf (Accessed 01st February 2017)

Chung, F., (2016), Ian Narev says it Innovate or die for Commonwealth Bank, Available at https://www.news.com.au/finance/business/banking/ian-narev-says-its-innovate-or-die-for-commonwealth-bank/news-story/727a288aaa1234afb5eda58af2e8bbb9 (Accessed 01st February 2017)

Eruemegbe, G.O., (2015), Effect of Information and Communication Technology on Organization Performance In the Banking Sector, International Journal of Research in Engineering and Technology, vol.3, no.4, pp. 13-22

Ghaziri, H., (1998), Information Technology in the banking sector, opportunities, threats and strategies, Available at https://ddc.aub.edu.lb/projects/business/it-banking.html (Accessed 01st February 2017)

Kidman, A., (2014), Lessons every IT Pro Can Learn From Commonwealth Bank, Available at https://www.lifehacker.com.au/2014/08/lessons-every-it-pro-can-learn-from-commonwealth-bank/ (Accessed 01^st February 2017)

Knight, E., (2012), Technology to keep CBA ahead of pack, The Sydney Morning Herald (Online), Available at https://www.smh.com.au/business/technology-to-keep-cba-ahead-of-pack-20120419-1xa4n.html (Accessed 01st February 2017)

Vater, D., Cho, Y., & Sidebottom, P., (2012), The Digital Challenge to retail banks, Available at https://www.bain.com/publications/articles/digital-challenge-to-retail-banks.aspx (Accessed 01st February 2017)