his report is about the innovation audit of Barclays PLC
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Business innovation refers to an organisational process of brining new ideas, methodologies, workflows, product or services with an aim to either improve its current performance or to achieve competitive edge (Herrera,2016). Current report is about Barclays Plc which is a British multinational financial and investment service company headquartered in London since 1690. It holds 18th position in the banking industry and deals in services like retail, commercial & investment banking and wealth management (Bank Rankings,2018). The main purpose of report is to analyse the innovational capability of Barclays by examining its innovation history, present capabilities and future innovational requirements.
This report starts by identifying various macro environment that supported Barclays in its growth and development using PESTLE analysis, then Porter's five force model is used for analysing the force that foster in growth of company. After this analysis of existing innovational capabilities of Barclay is performed using SWOT analysis and at last industrial analysis performed for identifying future opportunities.
Organisation & Industrial Overview
Organisation and its Innovation History
Barclay Plc is a British multinational investment as well as financial service provider which has its origin from London and deals in corporate banking, personal banking, retail banking, investment and wealth management. It has a long history of achievements which support in growth and success of Barclay and make it third largest bank in term of capital within the United Kingdom (Top 10 British Banks, 2016).
It refers to an analytical tool that support in identifying the innovational history of Barclay Plc on the basis of various macro environmental factor. These can be understood using following points:
Political:- This factor undertakes the political scenario of a country which affects an organisation's operations. Barclay started from London and keep on expanding its business in other countries worldwide. The political environment in London has been quite supportive to innovation. With its certain regulations which state equality on the basis of gender, allowed Barclays to introduce the UK's first female branch manager in 1958 (Newspaper cuttings on the appointment of Hilda Harding, the UK's first female branch manager. 2018). Moreover, the country imposes several governmental cyber crime related regulation for security purpose which always foster Barclays to bring innovational approaches to provide safer financial service access like “Hitachi's Finger Vein Authentication technology”.
Economical:- Barclay stated its operations from London which was known as the centre of financial access because banking was underdeveloped in other places as compared to London (Tan, Chew and Hamid, 2017). This was the major factor toward the growth and success of Barclays as traders required credit and at that time Barclays started innovating new sources to make fund accessible such as mortgage loan, Contactless devices, credit cards etc (A story of innovation, 2018).
Social:- The social environment of the UK has always been ahead in terms of innovation. Innovation has always been widely accepted and promoted by the people of the country. Thus, Barclays always got encouragement to present customized and satisfactory services to its customer. They always concentrate on following a trend at its initial stage. Therefore after assessing customer need of quick fund access, Barclays launched Barclaycard in 1966 which was UK's first all-purpose credit card for improving and simplifying its transactional processes from paper to plastic money (Barclaycard, 2018).
Technological:- Barclays has a great history in terms of bringing several technologies to provide a great experience of assessing financial services to its customers and known as a leader of innovation in the banking sector. It was the first bank to introduce ATM machine in the world (A story of innovation, 2018).
Legal:- There were certain regulations in European countries which encouraged modifications in Barclays.The countries implemented a 'Single banking license' around 1990s which allowed banks from EU nation to setup their branches easily in other European nations (Banking services in the EU, 2011). This legal support allowed Barclays to expand its operations in different areas by focusing on innovational activities without getting shuffled in the formalities of licensing. The legal support in financial upfront enabled Barclays to introduce the UK's first company credit cards for businesses (Barclaycard marks 50 years of the credit card in the UK, 2018).
Environmental:- The environmental issues affecting the UK and other European Nations had a huge impact in the operations of the banking companies.Barclays always kept a major concern toward performing operations that should not be harmful for the environment (Maina, 2017). Therefore, banks continuously brining innovation from past year to convert its operations from paper-based to technology-based for saving trees. By 1995, the firm was the first company in the UK to go online by the name of Barclaycard Netlink. It further decreased the use of paper as customers were enable to perform their accounting operations using debit cards (Barclaycard marks 50 years of the credit card in the UK, 2018).
Porter's Five Force Model
Porter's five forces model is used to determine the forces that support Barclays in achieving growth and competitive advantage in industry:
Threats of New Entrants:- The financial service access was limited earlier but increasing demand of customer for more authenticate and time saver financial services attract players to enter into banking industry (Ondiek, 2016).Therefore the threat is higher,but this factor motivate Barclays to bring innovative services for restricting new entrants like Hitachi's Finger Vein Authentication technology.
Buyer Power:- The bargaining power of Barclay's buyer was higher as earlier customers have less financial needs and services provided by bank was also limited. They were not interested in involving banks for managing their money but with the innovation of new techniques in banking services, customers started getting attracted towards banks. Barclays reduced power of suppliers by launching innovate services like ATM, plastic money, E-banking etc.
Supplier Power:- Earlier the power of suppliers was relatively higher due to limited availability of suppliers like brokers, payment agents etc. But with the digitalisation of its services Barclays now have a range of supplier such as Kaspersky, Microsoft etc. which provide software and other technical support to bank (A Porter’s Five Forces Analysis of Barclays, 2018).
Threat of Substitute:- Barclays have less threat of substitution earlier, as that time it was the first bank to bring ATM and credit card services. With the enhancement of technological industry the threat of substitution is higher but this risk foster Barclays to keep on bringing innovative services like Facial recognition Authentication technology (Wesulah, 2016).
Competitive Rivalry:- Earlier the competition is lower in banking industry but with the increasing customer demand and globalisation, the rivals of Barclays are increasing. Their main rivals includes HSBC, RBS etc. But these competitors act as a driver of innovation and motivate Barclay to introduce new innovation i.e. “Hitachi's Finger Vein Authentication technology” (Barclays Bank SWOT Analysis, Competitors & USP, 2018).
The Organisation existing Innovation Performance and Capabilities
Barclay Plc is one of the best financial service provider which provide services like personal banking, wealth & investment management, corporate & investment management, credit cards etc. to customers worldwide. Bank is best known for its innovational practices and making efforts toward bringing new technologies for providing more authenticated and secure sources for accessing financial services. So, in order to develop capabilities for bringing future innovation it is very essential for Barclays to identify its current strength and opportunities that support them in achieving success in marketplace. This can be done using SWOT analysis which is explained below:
Strength: Barclay has a global presence which is one of the major strength of company and allows organisation in enjoying economies of scale and spreading risk. But in terms of technology, Barclay Plc is known as a leader of innovation in banking sector (Singh, 2017). Recently bank signed a partnership agreement with largest open payment platform provider company PayPal to provide its customer an option of digital wallet for making payments online. This proves to be a greatest strength of Barclay plc as this new featured services help in removing trouble of updating expiry card, bring able to see all finances at one place etc. Hence it help in broadening the customer base.
Apart from this Barclays also launched contactless payment technology for providing more authenticated access to financial services. It is one of the most secured medium of payment as consumers are required to just tap near point-of-sale terminal without any PIN or signature which reduces the chance of hacking. This technology is the major source of attraction for customers which strengthen the position of Barclays in banking industry and also increases its customer base.
Weakness: Though the Barclay Plc is an international financial service provider and comes under top performer despite of this it has certain weaknesses which affects its performance. The greatest weakness of Barclays is lack of earning visibility, it means that bank doesn't disclose about its accurate or exact financial position in market (Barclays Plc’s Greatest Weaknesses, 2018). This make it less attractive for investors who are willing to invest in bank and also make it harder for investors to predict whether the Barclays is right choice to invest or not.
Opportunity: Being an international player Barclays have several innovational as well as expansion based growth opportunity that support them to achieve greater heights in banking sector (Nabwire, 2014). The customers are becoming more demanding with the increase in cyber crime, so it is one of the greatest opportunity for Barclays to introduce new technology that provide more authenticated and secure services. It can introduce a new feature in its existing mobile application i.e. “facial recognition authentication” which only allow customer to login into its account after verifying their face which is registered in documents. This help in keeping data secure and away from hackers which may misuse the information of clients. In addition to this facial recognition authentication system can also be used by Barclay for its third party payment platform services which it offers after becoming partner of PayPal. This capability will support Barclays in providing more reliable techno-driven payment platform which is less time consuming and more secure.
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Threat: After being a techno-driven financial service provider, Barclays is facing several major challenges from the market. One of the greatest issue faced by Barclays is increase in competition from Financial technology companies which provide financial services using software. Increasing popularity of such companies disturbing the way Barclays provide its services because as compare to such companies, Barclays not able to adjust its operations quickly with the changes in technological environment (Blakstad and Allen, 2018). But this threat act as a motivational driver for Barclay as with the introduction of new technologies in market, it tries to bring the new and more reliable innovative approach to provide its customer more satisfactory services. Best example of this is innovation bring by Barclays “Hitachi's Finger Vein Authentication technology” after forming a partnership with Hitachi. This biometric technology provide a more reliable authentication approach where this finger vein scanner is used as a pin or password replacement. This allow customers to securely access services like payment authorization, cash management, loan facilities and so on, as this biometric system scan the blood flow of user's figure through infrared light.
Banking across the world moved through several changes and improvement from the past few years by transforming to more strategically minded, digitally connected and development of well equipped institutions to maintain market leadership (Gianiodis, Ettlie and Urbina, 2014). But these transformation bring several challenges like complex and diverging regulation, disruptive model and technologies, growing techno-savvy competitors, legacy systems and increasing customer expectation.
Banking Industry is a sector of economy which devoted toward the holding of financial assest and then investing them for creating more wealth. Earlier, banking was restricted to smaller geographical area with limited number of services and its operations are also stick to paper work. This become harder to manage the financial information on papers which leads industry people to innovate their services and went from paper to computer based work. It supported in improvisation of services as well as expansion of banking through out the world. But the global financial crises faced during year 2008 has ruined the whole banking industry reason behind this is that bankruptcy of investment bank Lehman Brothers through which crises spread through out the world. The global money market froze and bank as well as insurance company have no source to borrow fund.
But after recovering from financial crises, banking industry experience an immense growth in term of expansion of services and its operations. This crises enhance the regulatory implication toward the management of financial services. After overcoming from financial crises, banks started becoming more technological advanced for attracting customers toward financial services and gaining their trust back toward banking sector. This changes includes customer centric, mitigating cyber crime, regulatory recalibration, re-imagining the workforce technology management, fin-tech and big techs.
Nowadays, banking industry is becoming more customer oriented ever before and continuously making efforts to provide as frictionless experience as possible to financial service user. Industry is supporting player in market who are bringing new themes as well as technologies for offering customers more convenient services. This also encourage player to bring technology like “Facial recognition Authentication technology”.This will be more beneficial and successful innovation approach for banking industry which help in reducing several issues that are faced during financial transactions (Yu and Van Luu, 2016). This will help in eliminating the issues related to signature mismatch, PIN hack and forgotten password as this new innovation will provide an option to assess the financial services after being verified through facial impression as a password.
Apart from this with the increase in strictness of regulatory system for banking player due to growing cyber crime it become mandatory for financial institutions to comply with all this authentication standards before bringing new services or techniques. This also act as a opportunity for player as “Facial recognition” will provide them more secure platform for accessing financial services that remove the risk of fraudulent activities as it is based on facial impression as password and which is not possible to copied or hacked. Major players in banking industry are HSBC, Industrial & Commercial Bank of China Limited, China construction Bank Corporation etc. Out of them Industrial & Commercial Bank of China limited holds first position and Barclays bank PLC has 18 position in banking industry (Bank Rankings, 2018). Main products of banking industry are deposit account, loan, payment cards, investment products, insurance and many more.
From the above given report it can be concluded that innovation is one of the major aspect that a company must consider in order to keep its customer satisfied and in maintaining market position. For bringing any innovation and capabilities to market SWOT analysis support a company in determining the strength that they can use for exploiting the opportunities present in market. In addition to this PESTLE analysis support them in determining the opportunities for innovation present in market and threat that may influence their operations. By determining these factors company will be able to asses its industrial position using Porters five force model that act as a innovational driver which support them to brining innovation in the market.
Books & Journals
- Herrera, M. E. B., 2016. Innovation for impact: Business innovation for inclusive growth. Journal of Business Research. 69(5). pp.1725-1730.
- Blakstad, S. and Allen, R., 2018. Technology vs Solution. In FinTech Revolution (pp. 261-272). Palgrave Macmillan, Cham.
- Tan, L. H., Chew, B. C. and Hamid, S. R., 2017. A holistic perspective on sustainable banking operating system drivers: A case study of Maybank group. Qualitative Research in Financial Markets. 9(3). pp.240-262.
- Maina, J., 2017. Effects of Environmental Factors on Performance: A Case of Barclays Bank (Doctoral dissertation, United States International University-Africa).
- Ondiek, A. A., 2016. The Effect of Generic Competitive Strategies on the Growth of SME Segment at Barclays Bank of Kenya Limited (Doctoral dissertation, United States International University-Africa).
- Wesulah, L. N., 2016. Competitive Strategies Employed In The Banking Industry In Kenya: A Case Of Barclays Bank Of Kenya Ltd (Doctoral dissertation, United States International University-Africa).
- Nabwire, M., 2014. Factors Affecting Implementation of Strategy A Case of Barclays Bank of Kenya (Doctoral dissertation, United States International University-Africa).
- Singh, A. P., 2017. Merge or Acquire-A Strategic Framework. Annals of the University Dunarea de Jos of Galati: Fascicle: XVII, Medicine. (3).
- Weber, O. and Feltmate, B., 2016. Sustainable banking: Managing the social and environmental impact of financial institutions. University of Toronto Press.
- Gianiodis, P. T., Ettlie, J. E. and Urbina, J. J., 2014. Open service innovation in the global banking industry: Inside-out versus outside-in strategies. Academy of Management Perspectives. 28(1). pp.76-91.
- Yu, P. and Van Luu, B., 2016. Bank performance and executive pay: tournament or teamwork. Review of Quantitative Finance and Accounting. 47(3). pp.607-643