How Westpac’s New Operating Model Could Put Them Ahead of the Pack

By ,

This morning, Westpac [ASX:WBC] announced their organisational structure is getting a makeover. It’s going to be much slimmer, sleeker and more efficient.

Instead of a single retail and business section, they’ll be split. There will be a consumer bank and a commercial and business bank. Each division will get to create their own banking products, market them as they wish, and develop their own digital capabilities. In other words, they’ll get to tailor the whole customer service experience from end to end.

CEO Brian Hartzer explained the reason for the change:

We recently set an ambition to be one of the world’s great service companies, and this new structure will accelerate our progress towards this goal.

…The new structure clarifies accountability and allows us to create simpler, consistent, end-to-end processes, such asone way to open a transaction account or approve a mortgage. This will help to deliver efficiencies.

…The new structure [also] enables us to drive product and digital innovation specific to the needs of our customer segments and brands…[We will become] more agile in meeting the needs of customers and adapting to changing market dynamics.

Westpac’s old model
In other words, splitting consumer banking from business banking will help them quickly respond to what customers want and expect.

In the past, retail and business banking went together under the group Westpac Retail & Business Banking. It was led by Jason Yetton, a banking industry veteran with over 20 years on the clock at Westpac and BT. He held the Group Exec position for three and a half years.

In the past, whenever they wanted to offer a new product or create new rules and guidelines, they’d have to work out how they applied to consumers versus businesses. Not all solutions would work for both individuals and businesses.

For example, there’s digital solutions. The Westpac banking app wouldn’t be the best fit for businesses’ needs. So they launched Westpac Live for businesses. But both retail and business solutions were handled by the Group as a whole. That meant it took longer for the business solution to get sorted out, because the business banking managers didn’t have ‘dedicateddigital capabilities’. If they’d been able to do that sooner, they might have captured more of the SME market.

Now, instead of being split up by brands, it will be split up by capacity. Instead of this:

 

1

Source: westpac.com.au
[Click to enlarge]

it will look like this:

2

Source: asx.com.au
[Click to enlarge]

And then under the Consumer and Commercial boxes, will go each brand’s commercial or consumer branch.

Other banks’ models
Back in 2009, when Hartzer was still at ANZ [ASX:ANZ], ANZ did a similar thing.

They reorganised themselves not around customer type, but around region.

CEO Mike Smith said ‘Our new structure simplifies ANZ by organising ourselves around our customers and reducing the management layers between me and staff who serve our customers…

But each location still had its own retail and commercial divisions. And still shared the same technology resources.3
Source: asx.com.au
[Click to enlarge]

Perhaps that’s why ANZ’s digital platforms are still a bit underwhelming. In July last year, research firm Forrester put out a study of the Big Four Banks’ apps. These were the results of the 2014 Australian Mobile Banking Functionality Benchmark:

4

 

Source: blogs.forrester.com
[Click to enlarge]

 

ANZ scored the worst.

And Westpac scored the best.

Plus, there was that time in May last year when ANZ’s goMoney app stopped working. Hundreds of thousands of people couldn’t access their money for a whole day.

Could Westpac pull ahead?
Of course, digital platforms are just one aspect of customer experience. Westpac’s aiming to do better on all fronts. In the most recent Canstar reviews, Westpac didn’t stand out from the rest of the Big Four in any particular category.

5
Source: canstarblue.com.au
[Click to enlarge]

It’s possible that Brian Hartzer thinks reorganising will allow Westpac and its brands to improve those product range, internet banking and other lacklustre scores.

By the way, Westpac’s not the only bank that’s doing things to improve their market position. In his report ‘The Five Best ASX Stocks for 2015’, Kris Sayce discusses a high flying investment bank that was brought low during the GFC. He talks about how low interest rates and a rising taste for risk looks set to boost this stock’s price in 2015. Click here to find out how to get your free copy of the report.

Eva Mellors,
Contributor, Money Morning

Join Money Morning on Google+

About Money Morning

At Money Morning our aim is simple: to give you intelligent and enjoyable commentary on the most important stock market news and financial information of the day - and tell you how to profit from it. We know the best investments are often the hardest to find. So that's why…

Westpac Share Price on Watch after 3Q21 Results (ASX:WBC)

The Westpac Banking Corp (ASX:WBC) shares fell on the release of the bank’s 3Q21 results. WBC shares are currently trading at $25.36 per share, down 1.69% for the day.

Afterpay Share Price: Introducing ‘Money by Afterpay’ (ASX:APT)

After a steady rise that saw the Afterpay Ltd [ASX:APT] share price peak at $160 in February, the BNPL stock has pulled back in recent months, down 8% year to date…

Plenti Share Price Down: Analysing its FY21 Results (ASX:PLT)

The Plenti Group [ASX:PLT] share price is largely flat today despite the lender growing its loan book by 61% year-on-year. Plenti — the consumer lending and investing platform — saw its shares drop as much as 4.5%…

Why Westpac Is the Real Winner in Its Afterpay Partnership

It’s official — Afterpay is going to start offering banking! That revelation in and of itself isn’t all that surprising, but their means are. On Tuesday it was revealed that Afterpay would be teaming up with Westpac…

Big Four Banks Rise on ASX Rally, CBA and WBC Admit to Bad Practices

The Australian share market has rallied to its highest level since early March and briefly reclaimed the 6,000-point level on buying of leading blue chips. The Big Four banks have returned strongly after being hit hard by the fallout from the coronavirus…

NAB to Take $1.1 Billion Hit — What It Means for the NAB Share Price

This morning should come as a warning to all shareholders of Australia’s banking sector. The National Australia Bank Ltd [ASX:NAB] share price is down a little over 1% today at time of writing, and some may be wondering why it didn’t take a bigger dip…