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

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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:



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it will look like this:


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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
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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:



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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.

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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

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