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Commonwealth Bank of Australia Analytical Essay


Why the company has been so successful

Commonwealth Bank of Australia has a long history; consequently, it has acquired a large asset base and fostered high penetration among the masses. In fact, one in every three Australians banks with the firm (Commonwealth Bank of Australia 2012). Numerous companies will approach banks for lending purposes if they are confident about their asset base.

This is because it will cushion them from market shocks or other customers who default. The company’s asset base is quite formidable and this has attracted a lot of consumers. Furthermore, it has the highest number of automated teller machines in the country.

With such a huge consumer base, there is no reason to be unsuccessful. Currently, the Australian banking market is saturated, so first movers or older institutions have an advantage over new entrants.

A number of competitors in the Australian banking industry are yielding to increased pressure to cut down operational costs. Some of them have opted to layoff employees or offshore production to cheaper economies. The Commonwealth Bank of Australia has chosen not to pursue these highly disruptive and short term measures. Instead the firm has worked on its internal processes to ensure long-term sustainability.

The company has been at the forefront of technology innovation. It has embraced Australia’s use of social media, smart phones and tablets. Through these platforms, the company has been able to simplify its banking process so as to make its services as easy to understand and use as possible. It has also allowed consumers to gain convenience by banking in locations outside the bank such as their homes or at the office.

Remote access is a trend that bankers cannot ignore in this decade. Additionally, the company has continued to engage with its consumers by providing them with responses to their queries through social media and other platforms. Greater engagement translates into a great customer experience hence high profit.

It should be noted that regardless of increased use of technology, the company has not migrated all its efforts to the new technology platforms. Low-involving transactions such as deposits, payment of mortgages and credit cards have been managed through mobile or online technology.

However, high involving transactions such as complex mortgages, especially for new home owners and investments are still maintained through face to face communication. Its ability to offer multiple channels has kept it above the rest.

The company’s customer service ratings are quite high. It prides itself in its ability to meet consumer expectations as well as develop responses for people who require them. Customers are satisfied with the company’s support system hence explaining why they keep coming back (Commonwealth Bank of Australia 2012).

Lastly, this bank has stuck to a rigorous lending process that has insulated it from excessive risk. Sometimes these standards have cost them some business in the short term, but they have ensured that the company maintains its reputation as well as its balance sheet in the long run. It derived its lessons from goings-on in the rest of the world. Banks in the US and Europe ignored business fundamentals and experienced immense loss.

Issues that will impact the organisation in the future

It is likely that volatility in the international market will continue to influence business within the banking sector. Market pricing is likely to be affected, and this will minimise the firm’s ability to lend. If it does not anticipate these problems and work out a solution towards them, then profitability may be undermined. Funding costs are likely to go up because of the effect of the global unavailability of capital.

There will be more competition for deposits as well as increases in costs for deposits (Ernst and Young 2012). This will definitely put pressure on profit margins. Over the past three decades, business, housing, and personal growth have been increasing at a slow pace. In the near future, it is likely that slow growth in those areas will continue and this will also reduce revenue growth within Commonwealth Bank.

The regulatory framework in banking is getting crowded. The bank has complained about the excesses of legislations on superannuation, liquidity, Basel capital and many others. It is likely that pressure to comply with the regulations will increase in future. Banks may try to work out a strategy to minimise them as the Commonwealth Bank representatives did, but it will take a lot of time and effort to undo these decisions.

Consequently, the institution will have to work around the problems in a more systematic way in the future. First, the institution is likely to increase its requirements for capital such as mortgage. It may also increase costs of compliance or it may also alter its liquidity targets.

As stated earlier, one of the reasons behind the company’s success is its ability to embrace technology. The use of Apple’s ipad and facebook for banking is highly commendable, but the company needs to get more people on board. It especially needs to reach out to the older generation, which may be reluctant to use these new platforms.

In the future, it is likely that the company will have more of its customers using technology applications for banking. However, that will only come about as a result of massive awareness campaigns and provision of those devices at affordable prices. In the area of technology, the company is not the only bank that is aware of its benefits.

Other institutions such as Westpac are also rolling out their own innovations that are geared at making banking convenient and simple. In the future, it is likely that Commonwealth Bank will borrow some ideas from its competitors so as to meet consumer expectations about technology. Most technologies are initiated by one bank and then spread out to other institutions; likewise, the same scenario may occur to Commonwealth Bank.

The use of technology in service provision also leads to heightened overhead costs. Now the institution must monitor expenditure in several outlets. In the future, it is likely that it will experience an increase in these costs. It may also have to challenge the way it develops its brand, because new platforms will be at the forefront (Creighton 2012).

Competition is likely to soar in the next years from unlikely quarters because technological change will level the playing field. Customers will access markets directly and new entrants can identify new market segments. Asian banks will step in to leverage on European banks’ reduction in trade in Australia. This means that the rate at which the company can sell its products will reduce tremendously when this occurs.

Furthermore, unlikely competitors will also stem from payment service providers such as paypal or merchants such as Tyro. They will increase the rate of cross selling in the industry, which could hurt Commonwealth Bank’s bottom line.

Customer knowledge and expectations will increase in the coming years. The company’s future growth figures will emanate from its ability to retain its client base. This means that it will most likely step up its customer service experience through working on clients’ perception.

Instead of focusing on its own financial products as a selling point, the company will redefine the way it does business through consumer needs. Engagement with clients on their level through business seminars and home ownership bazaars will be typical examples.


Ernst and Young 2012, Australian banking environment: the rise of the deposit. Web.

Commonwealth Bank of Australia 2012, . Web.

Creighton, A 2012, Sending banking back to the future, The Australian, 24 August, p. 1.

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"Commonwealth Bank of Australia." IvyPanda, 27 June 2019, ivypanda.com/essays/commonwealth-bank-of-australia/.

1. IvyPanda. "Commonwealth Bank of Australia." June 27, 2019. https://ivypanda.com/essays/commonwealth-bank-of-australia/.


IvyPanda. "Commonwealth Bank of Australia." June 27, 2019. https://ivypanda.com/essays/commonwealth-bank-of-australia/.


IvyPanda. 2019. "Commonwealth Bank of Australia." June 27, 2019. https://ivypanda.com/essays/commonwealth-bank-of-australia/.


IvyPanda. (2019) 'Commonwealth Bank of Australia'. 27 June.

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