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CHAPTER 1-INTRODUCTION
1.1-INTRODUCTION OF RESEARCH METHODOLOGY
Research is an academic activity and as such the term should be used in a technical sense.
According to Clifford Woody research comprises defining and redefining problems,
formulating hypothesis or suggested solutions; collecting, organizing and evaluating data;
making deductions and reaching conclusions; and at last carefully testing the conclusions to
determine whether they fit the formulating hypothesis. D. Slazenger and M. Stephenson in
the Encyclopedia of Social Sciences define research as the manipulation of things, concepts
or symbols for the purpose of generalizing to extend, correct or verify knowledge, whether
that knowledge aids in construction of theory or in the practice of an art.
Research is, thus, an original contribution to the existing stock of knowledge making for its
advancement. It is the pursuit of truth with the help of study, observation, comparison and
experiment. In short, the search for knowledge through objective and systematic method of
finding solution to a problem is research. The systematic approach concerning generalization
and the formulation of a theory is also research. As such the term research refers to the
systematic method consisting of enunciating the problem, formulating a hypothesis,
collecting the facts or data, analyzing the facts and reaching certain conclusions either in the
form of solutions(s) towards the concerned problem or in certain generalizations for some
theoretical formulation.

OBJECTIVES OF RESEARCH

The purpose of research is to discover answers to questions through the application of
scientific
Procedures. The main aim of research is to find out the truth which is hidden and which has
not been discovered as yet. Though each research study has its own specific purpose, we may
think of research objectives as falling into a number of following broad groupings:
1. To gain familiarity with a phenomenon or to achieve new insights into it (studies with this
Object in view is termed as exploratory or formulates research studies);
2. To portray accurately the characteristics of a particular individual, situation or a group
(studies with this object in view are known as descriptive research studies);
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3. To determine the frequency with which something occurs or with which it is associated
with something else (studies with this object in view are known as diagnostic research
studies);
4. To test a hypothesis of a causal relationship between variables (such studies are known as
hypothesis-testing research studies).

MOTIVATION IN RESEARCH

What makes people to undertake research? This is a question of fundamental importance. The
possible motives for doing research may be either one or more of the following:
1. Desire to get a research degree along with its consequential benefits;
2. Desire to face the challenge in solving the unsolved problems, i.e., concern over practical
problems initiates research;
3. Desire to get intellectual joy of doing some creative work;
4. Desire to be of service to society;
5. Desire to get respectability.
However, this is not an exhaustive list of factors motivating people to undertake research
studies. Many more factors such as directives of government, employment conditions,
curiosity about things, desire to understand causal relationships, social thinking and
awakening, and the like may as well motivate (or at times compel) people to perform research
operations.

CRITERIA OF GOOD RESEARCH
Whatever may be the types of research works and studies, one thing that is important is that
they allmeet on the common ground of scientific method employed by them. One expects
scientific researchto satisfy the following criteria:
1. The purpose of the research should be clearly defined and common concepts be used.
2. The research procedure used should be described in sufficient detail to permit another
Researcher to repeat the research for further advancement, keeping the continuity of what
Has already been attained.
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3. The procedural design of the research should be carefully planned to yield results that are
As objective as possible.
4. The researcher should report with complete frankness, flaws in procedural design and
Estimate their effects upon the findings.

I.II- AUSTRALIA NEW ZEALAND BANK



The Australia and New Zealand Banking Group Limited, commonly called ANZ, is the
third largest bank by market capitalization in Australia, after the Commonwealth Bank and
Westpac Banking Corporation. Australian operations make up the largest part of ANZ's
business, with commercial and retail banking dominating. ANZ is also the largest bank in
New Zealand, where the legal entity became known as ANZ National Bank Limited in 2003
and changed to ANZ Bank New Zealand Limited in 2012. From 2003 to 2012 it operated two
brands in New Zealand, ANZ and the National Bank of New Zealand. The National Bank
brand was retired in 2012, with a number of branches closing and others converting to ANZ
branches.
In addition to operations throughout Australia and New Zealand, ANZ also operates in thirty
other nations.
ANZ was named the most sustainable bank globally in the 2008 Dow Jones Sustainability
Index making it the 2nd year in a row ANZ has been granted the title. In 2007 the title was
shared with another Australian bank, Westpac, which had held the title for the previous five
years.
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ANZ was established on 1 October 1951, when the Bank of Australasia merged with the
Union Bank of Australia Limited.








Traded as
ASX: ANZ, NZX: ANZ

Industry
Banking, Financial services

Founded 2 March 1835
Headquarters

833 Collins Street
Docklands, Melbourne, Australia
Key people

Michael Smith, (CEO)
John Morschel, (Chairman)







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ORGANISATIONAL STRUCTURE


ANZ Bank Headquarter Building in Docklands, Melbourne
Australia
Retail Products
Retail Distribution
Commercial Banking
Wealth (including ETrade in Australia and OnePath)
New Zealand
ANZ Bank New Zealand
o ANZ Bank
o UDC Finance
o Eftpos New Zealand
o Bonus Bonds
o Direct Broking - Share trading
o OnePath New Zealand
Institutional Banking
Institutional banking
Corporate Finance
Working Capital
Corporate banking
Economics@ANZ
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Asia and Pacific
International Partnerships
Asia-Pacific
ANZ is one of the leading Australian banks in the Asia-Pacific region. It has been aggressive
in its expansion into the emerging markets of China, Vietnam and Indonesia. ANZ is also a
leading bank in New Zealand as well as several Pacific Island Nation where it competes in
many markets with fellow Australian bank, Westpac. ANZ's arm in New Zealand is operated
through a subsidiary company, ANZ National Bank, from 2003 to 2012, when it changed to
ANZ Bank New Zealand upon merging the ANZ and National Bank brands.
In March 2005, it formed a strategic alliance with Vietnam's Sacombank involving an
acquisition of 10% of Sacombanks share capital. As part of the strategic alliance, ANZ will
provide technical assistance in the areas of risk management and retail and small business
banking.
ANZ has followed a similar strategy in China, where it acquired a 20% share in Tianjin City
Commercial Bank in July 2006. It also negotiated a similar deal with Shanghai Rural
Commercial Bank.
In August, ANZ purchased RBS's retail units in Taiwan, Singapore, Indonesia and Hong
Kong, as well as RBS'si banking businesses in Taiwan, the Philippines and Vietnam. It was
purchased for the price of A$687 million.
In 2008 ANZ was awarded Deal of the Year - Project Finance Deal of the Year at the 2008
ALB Hong Kong Law Awards.
As of September 2012, the company had a total of 1,337 branches worldwide.
Offshoring of jobs
ANZ have been progressively increasing work output from offshore offices. ANZ's
Bangalore office has been operational since 1989, making it one of the first organisations to
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employ IT staff based in India. ANZ employs around 4,800 staff in Bangalore, India. 1500 IT
positions, 2000 positions in Payments and Institutional Operations and International and High
Value Services and 1300 positions in Operations Personal Banking have been shifted from
Melbourne to India. In 2006, ANZ predicted that by 2010, over 2000 jobs would have been
shifted from Australia to Bangalore. In 2012 ANZ has transferred 360 permanent staffs from
Melbourne and Bangalore to Capgemini. All these staff worked in the Technology Testing
and Environment Space
.
As ANZ CIO Anne announced earlier that ANZ want a Hybrid
model of technology in order to achieve the 2017 Technology roadmap.
Advertising
In 2005 an advertisement included two famous robots: Lost in Space robot, and a Dalek from
Doctor Who, although the Dalek was replaced in subsequent versions of the ad.
In 2006 the company started a TV campaign with a series of ads featuring their new mascot -
the Falcon, a bird trained to stop credit card thieves, illustrating the company's measures in
prevention of credit card fraud.


The headquarters in the Melbourne Docklands, inaugurated 2009
In 2010, ANZ ran an ad campaign parodying common banking scenarios with a fictional
character known as 'Barbara who lives in Bank World', a middle-aged, rude, sarcastic and
unhelpful bank manager. The adverts have received acclaim for wit and humour, but also
criticism for stereotyping bank managers. Barbara is portrayed by Australian comedian
Genevieve Morris.
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In 2011, a series of ads were fronted by Simon Baker, the star of the American television
show The Mentalist.
New headquarters
In September 2006, plans were unveiled for ANZ's new world headquarters to be located in
Melbourne's Docklands precinct. The complex features a vast low rise office building, shops,
car and bicycle parking facilities. The new complex will enable 6,500 ANZ staff to work in
one integrated area, however the company will maintain its flagship building, 100 Queen
Street Melbourne. The new headquarters is the largest office complex in Australia at 84,500
m NLA, 130,000 sqm GFA and an accredited 6 Green Star Building. Construction
commenced in late 2006 and the building opened in late 2009. The building is located at 833
Collins Street. It has been designed by HASSELL & Lend Lease Design - fronting the Yarra
River.
In 2006, it was expected to cost A$478 million to build,
[19]
but ended up costing $750 million
by the time it was complete in 2009.
The building was one of the winners at the 2010 World Architecture Festival in the category
"Interiors and Fit Out of the Year".

Arms of the Australia and New Zealand Banking Group

Arms of Australia and New Zealand Banking Group

Notes The arms of the Australia and New Zealand
Banking Group consist of
Crest Upon a helm with a wreath of the colors an
antelope and a unicorn both armed and craned Or and gorged
with a collar Gules supporting saltirewise a key Gold and a
sword Proper quillons hilt and pommel Gold.
Escutcheon Per pale Azure and Or a pile couped and
per pales its point on a mound issuing in base also per pale
eight roundels and as many billets in circle all counterchanged.
Supporters On the Dexter side a kangaroo Or and on the
sinister side a kiwi Azure beaked and legged Gold.
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Compartment Desert and grass proper.
Motto Tenacious of purpose.




INTRODUCTION

Banking is a key industry, critical to the survival of the economy and the health of any
society.ANZ has a strong heritage in Business Banking and offers a full range of banking
options, including Personal, Rural, Corporate, Commercial, Institutional and Private Banking.
ANZ Bank history dates back over 175 years. ANZ is committed to building lasting
partnerships with their customers, shareholders and communities in 32 countries in Australia,
New Zealand, throughout Asia and the Pacific, and in the Middle East, Europe and America.
ANZ Bank provides a range of banking and financial products and services to around 8
million customers.
ANZ Bank aims to become a super regional bank. This involves growing their presence in the
Asia Pacific region, while also being very focused on growth in their core domestic
businesses in Australia and New Zealand. ANZ is currently one of New Zealand's largest
companies based on profit and assets. With that scale comes responsibility, and we take that
responsibility seriously.
ANZ is a culturally diverse organization with employees born in more than 130 countries
who speak over 90 languages, and we promote flexibility as the way we work. Our work/life
flexibility options include: flexible hours, job sharing, roaming work, part time work, career
extension for over 55s, career breaks and careers, lifestyle and study leave.
ANZ has an exciting ambition to become a super regional bank providing the scale and
quality of a global business to customers in core markets of Australia, New Zealand, Asia and
the Pacific.

About ANZ Bank

ANZ is one of the five largest and most successful listed companies in Australia, and
we are the number one bank in New Zealand.
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Nearly one in two New Zealanders have a banking relationship with one of ANZ
brands.
ANZ finances over 30% of all home loans in New Zealand.
ANZ accounts for around 1% of New Zealand's Gross Domestic Product.
ANZ approximately has six million Retail and Commercial customers through a
network of around 800 branches, 115 business centers, 2700 ATMs and leading
online and mobile banking applications.

ANZ Products & Services

ANZ is New Zealand's largest rural bank, with a market share of 39%. ANZ is New
Zealands leading provider of rural financial services. The business meets the needs of
customers in the corporate, property construction finance and commercial sectors including
UDC Finance.
ANZs Wealth & Private Banking business in New Zealand provides private banking,
insurance, investment, Kiwi Saver and other retirement savings products and services to help
its customers build and protect their wealth.
ANZs personal and small business department focuses on helping it customers achieve their
goals and ensure theyre receiving great customer service.
ANZ Private & ANZ Trustees has simplified and greatly expanded client access to its team of
experienced, highly respected and industry qualified wealth managers and specialists. Having
recently completed a successful trial of the technology, ANZ Private & ANZ Trustees is now
announcing the launch of Wealth Presence, an exceptionally life like video meeting
experience.
Wealth Presence makes it far more efficient and convenient for clients to have life size face
To face meetings with experts from across a wide range of disciplines, who may be located
hundreds or thousands of kilometers away, yet feel as if they are sitting across the same
conference table.





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THE ROLE OF GEOGRAPHY AND THE FIRM

In the beginning when the business plans are creating or making decisions, it is very much
important to scan the external environment. This can be achieved through a PEST analysis,
i.e. an investigation of the Political, Economic, Social and Technological influences on a
business.
Political Influence relates to changes in government influence and can have huge role for the
ANZ. Changes in the priorities for public spending or the ANZ relationships with other
countries can open or close major markets. Laws are always being updated in a wide range of
areas, e.g. legislation of consumer protection, environmental legislation, health & safety law
and employment law, etc.
Economic Influence is very much related to social individuals. The economy goes through a
series of ups and downs associated with general economic activity. Other economic changes
that affect ANZ include changes in the interest rate and the rate of inflation (i.e. general level
of increase in prices.
Social Influence relate to pattern of behavior, tastes, and lifestyles. A major component of
this is a change in consumer behavior resulting from changes in fashions and styles. The age
structure of the population also alters over time (currently we have an ageing population). An
understanding of social change gives business a better feel for the future market situation.
Technological Influence has played an important role for the enhancement of ANZ Bank in
the recent years. This is particularly the most updated version of the technology used by ANZ
Bank.
The creation of databases and electronic communications have enabled vast quantities of
information to be shared and quickly distributed but ANZ need to be updated of the latest
relevant technologies for their business.

THE ROLE OF CULTURE AND THE FIRM

Australia and New Zealand are located at the Oceania, near the South Pacific Ocean. Talking
about the culture, the population of Australia of over 23 million (Australian Bureau of
Statistics,
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2013) and New Zealand nearly 4.5 million (Statistics New Zealand, 2013) shares a very rich
culture. Major ethnic group are Caucasian and Asian and the region shares varied religions
like Christianity, Anglican, Buddhism and Islam.
ANZ believes that a diverse workforce is the key for the success of the firm. ANZ has its
operation in over 32 countries, which speaks 91 languages, follows 84 religions and a huge
workforce which characterizes 123 cultural backgrounds (cultural ethnicity, ANZ, 2013). The
cultural impact in the organization starts at the very beginning i.e. at the time of recruitment.
ANZ put its arms open for candidates who have international mindset, diversity in knowledge
and extra ordinary thinking. ANZ runs special training programs which brief their employees
with the local culture and festivals of the countries in order to provide a professional but
personal feel like environment to the customers. Unemployment is an issue which is very
well dealt by the ANZ group. Recruiting employees from different ethnic groups, religion
and genders with a non
Discriminatory manner makes ANZ to be a good motivator and leader. ANZ has more than
48,000 employees in whom women made up a 55% of workforce and 38% of management
roles (ANZ, 2013). Being a worldwide extended organization, ANZ has to negotiate with
different people, organization that has different cultural values. The diverse workforce proves
to be a major tool in this phenomenon. The success of any organization depends upon the
performance of its employees. ANZ provides various benefits, in addition to the
remuneration, to its employees in order to motivate them to work better which eventually
yields to astonishing performance by them. Cash profit of ANZ bank ason 30 September,
2013 was A$ 6.5 billion as compared to previous years A$ 5.8 billion
(Narayanan Somasundaram, Bloomberg, 2013) clearly depicts the great work done by the
organization.

Opportunities
ANZ has a pool of opportunities for all segments of the society. Franchise seeking firms,
individuals, and employees are all benefited by the opportunities that ANZ offers.
Opportunities provided by ANZ are a major part of the cultural setting in the organization.
Organization's operation includes various programs that give its customers diverse
opportunities. We can classify the varied opportunities given to:-

Customers
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Everyday banking account, savings account, insurance products and internet banking
with high quality features.
With its presence in various countries such as India, China and countries of Europe,
ANZ gives a world class banking opportunities not only to the individuals of that
country but also to someone who is planning to move to Australia and New Zealand
area. They help them to set up their bank accounts prior to leave their country.
ANZ also deals with all the payment options done on the behalf of their customers
such as phone bills, electricity bills and mortgage etc.
Agribusiness: Banking advice, investment and finance facilities to the people engaged
in agriculture business.
Corporate: Dedicated banking facilities, investments and risk management programs
for corporate clients.
Employees
ANZ offers a set of opportunities to its more than 48,000 full and part time employees
worldwide.
Maintaining a diverse workforce ANZ has a commitment towards the Aboriginals,
Torres Strait and Islander people of Australia and New Zealand.
Provision of various trainee programs for graduates, internship and a promising work
experience to its future employees.
ANZ has its Operations and Technology department located in Bangalore, India sets a
great example of globalization and diversity. It provides good opportunity to local
people to be a part of this renowned organization.
Few benefits and opportunities provided to the employees at ANZ are health
insurance, travel and holiday discounts, EAP's and flexible leave provisions.
Supporting and Related Industries
Related industries of ANZ such as Metro bank Card Corporation, Philippines and
Shanghai Rural Commercial Bank are also getting the benefits of the global image
and experience of ANZ.
ANZ conducts human rights training sessions in various countries of its operation.
Indirectly helping the government of various countries by providing employment to
locals and improving the GDP.

Challenges
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Along with all the opportunities in the cultural setting of the bank comes the challenges that
stood in its way. There is no business, company and profession in this globalized world
which is infallible. ANZ being a multinational bank, with its presence all over the globe has
to tackle with various challenges in its day to day working.
Some of the challenges are as follows:-

Contradictions with government policies of various countries while performing its
international operations.
Serving the community with best and up to date facilities is itself a challenge.
Political conditions and government policies in Asia Pacific region also accounts for
the performance delivery by the bank.
Tough competition posed by the competitor also adds to the challenges which can
hinder the smooth functioning of the bank.
A risk management strategy, motivation of employees and positive goodwill among
customers plays a vital role in overcoming these challenges.


FIRM STRATEGIES

ANZ banking group has a proud heritage of more than 175 years. It operates in 32 markets
globally with representation in Australia, New Zealand, Asia, Pacific Rim, Europe, America
and the Middle East. ANZ is among the top 50 banks in the world having branches and
offices in more than 35 countries worldwide.
Business strategy
ANZ Group introduced a new management model that derived business strategy, mainly
focusing on geographies and customer segments rather than the individual product focus of
the past. ANZs objective has been to become a superregional bank Through strengthening its
businesses in Australia, New Zealand and the Pacific While establishing a significant
presence in other key markets in Asia in order to drive competitive advantage and proclaim
success through an agenda of change to become a world class global bank.

Business Strategy has been comprised on three significant factors as stated below:-
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Geography
Customers
Capabilities
Interaction of Geography & Business Opportunities
Recognizing the historical shift of economic growth opportunities from West to Asia
Balanced attention & approach towards Asia's developing Economies
Promoting regional Connectivity & extending Cooperation between Asia Pacific &
Euro Zone
Expanding network to emerging global & regional financial markets
Strengthening domestic markets in Australia, New Zealand and Papua New Guinea
Helping bridge economic and social divides between urban and rural regions
Improving access to banking and encouraging financial inclusion to small Pacific
nations
Building super regional capabilities
Diverse & multicultural Bench strength/talent hunt
Creating Technology operations hubs
Supporting Urban sustainability across the Asia Pacific region
Setting up a Global core brand positioning
Strict adherence to corporate governance and effective risk management
Building an astounding product capability and innovation
Strong Customer focus
Deep understanding of customer needs and requirements
Providing customers with the right financial solutions and insights
Supporting customers facing financial hardship through flexible Micro
Financing & Refinancing
Reach out to small and medium scale businesses, such as Agriculture, industries,
services, and infrastructure/construction companies
Launched Banking on Australia, a five year $1.5 billion program that includes
branch transformation and greater focus on new consumer technologies and channels
all aimed at fostering an improved customer experience and more flexible and lower
cost footprint
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Fluent Trade and investment flows to community based organizations

Global Challenges & Remedies

Amidst the global financial crisis (GFC) of 2008, Regulatory & political changes, stakeholder
pressure, demographic shifts and climate effect continued to have an impact on the overall
business environment in the world. Banking & Finance sector provides economic backbone
to many government and business organizations which were badly tormented by. Only the
banks and corporations survived that possessed the characteristics such as effective Crisis
management technique, responsible leadership, and self accountability that played a
significant role in building a competitive edge. Moreover, adherence to international best
practices in corporate governance, risk management and compliance standards remained a
vital necessity for any global organization.
ANZ Group not only addressed all above stated challenges successfully, but also carried out
transformational process well ahead of time. Groups leadership sought perfect opportunities
in such a complex and rapidly changing world while focusing on following objectives:-

Global Financial Crisis (GFC) Remediation and Opportunity addressing legacy issues
requiring significant remediation while also taking advantage of opportunities
resulting from the GFC
Establishment of a Real Franchise in Asia/Pacific That how ANZ is moving from just
having a presence in Asia to establishing a real thriving business in the region
Strengthening Australia, New Zealand and the Pacific building strategic advantage in
its core domestic businesses through a focus on strategic growth opportunities,
business simplification and connectivity
Adapting to the Lower Growth Environment the changes are underway to ensure
Group to be successful in a lower growth world with materially higher bank capital
requirements



Restructuring & Implementation of Priorities

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ANZ restructured its business around priorities that directed its sustainability initiatives
towards success and becoming a top performing regional banking group. The priorities such
as developing responsible internal practices and minimizing environmental impact by looking
inwards by seeking to optimize operational management, while other priorities focus on
outward impact such as developing educational and employment activities to further socio
Economic inclusion and financial capability, and bridging socioeconomic divides between
rural and urban areas in key markets.
Executive management also undertook a multiyear program to shift its inner culture, and to
invest more in the training and development of employees to help focus more strongly on
superior customer service and performance. ANZ anticipated that motivated, highly educated
and experienced employees are critical to developing innovative financial products and
services as well as in attracting and retaining clients.
That program has resulted in having a diverse, engaged, and inclusive workforce for ANZ
Group. It aimed to achieve gender balance in recruitment policy, to render learning and talent
programs and provide accelerated development opportunities for high potential women to
gain a breadth and depth of experience in key banking roles necessary for future careers as
senior leaders in the industry. As per ANZ annual report in 2012, the organization has over
48,000 employees around the world. Women made up about 55% of ANZ workforce, and
about 38% women are represented in management roles.
By implementing on structural ideology and highly innovative strategies, ANZ embarked on
a transformation which recognized that there is a unique opportunity to create value for
shareholders by becoming a bank of global quality with regional focus. The move also
recognized that a once in a century shift was underway in the global economy as growth
opportunities moved from the developed economies of the West towards Asian economies
and China in particular.

Achievements

ANZs business strategy has growing momentum and the Groups share price is now
performing well against its domestic peers & competitors, and investors are ranking ANZ
highly for its long term growth strategy. At retail and commercial levels, ANZ pursued a
professional approach towards attracting and retaining huge customer base, through offering
innovative, flexible, beneficial, and value added financial products.
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All such efforts have resulted in strengthening Capital, the Balance Sheet and Liquidity, that
led ANZ to a strong positive position among the most successful banks of the world. ANZ
has recently been given top notch ratings by Business Rating Agencies.

Key facts and figures have been presented below to exhibit ANZ corporate success and
business
Strengths:

ANZ Banking group has engaged a strong customer base of about 8 Million in 32 countries
worldwide

Groups Assets worth AUD $531.74 billion as of June 30, 2011

There are 411,692 shareholders of ANZ excluding employees whose only ANZ shares are
held in trust under ANZ Employee share schemes

Banks capital was increased by around AUD$11 billion since 2007 with the Groups
Common Equity capital ratio at 10.0% at the end of year 2012

ANZ Groups Business delivered a record underlying profit of AUD$6.01 Billion up by
6% in 2011

Increased diversity of revenue with 21% of group revenues were generated outside of
ANZ Region in 2012

ANZ has been ranked the most sustainable bank globally in the 2012, Dow Jones
Sustainability Index (DJSI), the fifth time in six years

OPPORTUNITIES AND CHALLENGES

Australia and New Zealand Banking Group (ANZ) provides a range of banking and financial
services to individuals, small businesses and corporate and institutional clients. ANZ is one
of the largest banking groups in Australia, and the largest in New Zealand and these market
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strengths provide revenue visibility. However, regulatory changes and intensified competition
are likely to affect its revenue and profitability in the years to come.
Below is the analysis of
ANZs opportunities and challenges in terms of SWOT analysis.

Strengths
ANZ strong market position sustained through increasing footprint. It is one of the Big 4
(ANZ,
CBA, NAB, and WBC) banking groups in Australia. Through its wholly owned subsidiary,
ANZ
National Bank Ltd., ANZ is the leading commercial bank in New Zealand. The group has
consistently increased the number of its branches, offices, representative offices and agencies
from 1,327 at end FY2007 to 1,381 at end FY2011. As a result, the group's revenue and
underlying profits increased consistently. The group's increasing footprint enables it to
sustain strong market position which in turn enables it sustain recurring profitable business.
Diversified product portfolio reduces the business risk of ANZ. The group offers a wide
range of products and services. It essentially follows a banc assurance model with a presence
across the value chain in retail to corporate to wealth management businesses. This business
model has allowed it to diversify its revenue streams.

Weaknesses
ANZs expense management shows a deteriorating trend for 2008
The groups operating costs increased at a higher compounded annual growth rate (CAGR) of
12.8% during 2008 when compared to revenue expansion rate of 7.7%.Though during this
period, the groups profits continued to expand, much of that growth is attributable to lower
provisions for credit impairment. Moreover, the groups cost to income ratio deteriorated
from 42.2% to 45.9% indicating weakness in expense management. Deteriorating expense
management has impacted the groups adjusted profits and could continue to do so in the near
future as well.
ANZ's reliance on wholesale funding is high. In 2009, ANZ's funding mix (term deposits to
other sources of deposits and borrowings) varied between 43.8% and 56.2%. This means that,
the group is predominantly funded by volatile wholesale funds. Though funding mix
improved
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During 2009 the groups reliance on wholesale funding is still higher than its historical best
figure of 35%. Moreover, the group's proportional reliance on short term wholesale funding is
also still between 15% and 17% compared to its historical average of 13%. Such a high
reliance on wholesale funding markets impacts the group's liquidity.
ANZ launched its super regional strategy in 2007 to turn it into a full fledged Asian bank.
Since then it has succeeded in securing just one Asian banking asset through acquisition
Royal Bank of Scotland's modest and loss making Asian banking platform, in August 2009.
The Asian acquisition opportunities have not emerged, or when they have ANZ has been
outbid. As a result, the group has not been able to achieve its goals stated in its super regional
strategy. Failure in the implementation of its acquisition strategy is majorly attributable to its
lack of scale in Asia.

Opportunities
Australian economy is expected to show a turnaround in 2012. In 2011, the economy grew
At a modest annual growth rate of 0.2% when compared to 1.1% growths in 2010.
However,the Economy, as of now (end February 2012), remains fundamentally solid because
of low Unemployment and healthy wage growth. Economy directly effects banking sector
including ANZ. Moreover, growth prospects are favorable in 2012 as mining and gas
investment Strengthens, in anticipation of ongoing growth in Asia (especially China). As a
result, several estimates suggest that Australian economy could grow at 1.4% in 2012.
Turnaround in economy could spur demand for corporate loans.
Australian government proposed a bill to amend the Banking Act of 1959, which planned to
allow financial institutions in Australia to issue covered bonds. On 20 October 2011, APRA
Announced that Prudential Standard APS 120 Securitization had been amended to remove the
Prohibition on the issuance of covered bonds by Authorized Deposit-taking Institutions
(ADIs).
Following the regulatory amendment, it is widely believed that Australia's four major banks
including ANZ could now be able tap the market for an additional $154 billion. This could
ease the pressure on the Australia's four major banks to refinance the existing AAA-rated
government guaranteed debt worth of $192 billion, most of which matures in 2012 and 2014.

Threats
ANZ is likely to face hurdles from Australian Prudential Regulation Authority (APRA) in
implementing its strategy. Politicians have been increasing their criticism of the banks,
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particularly over the pricing of mortgages. Moreover, in February 2012 when ANZ
announced decision to push through an interest rate rise independently of the Reserve Bank,
and revealed
Plans to cut 1000 staff by September 2012, it received negative press and warnings from
APRA.
Banks account for a high proportion of branches in Australian financial services industry.
But,
The situation could change as the government contemplates on increasing competition for
banks.
This could allow mortgage customers to shift to non banking institutions NBIs.

CONCLUSION

ANZs distinctive strategy is seen in financial management. It remains one of the best
Capitalized bank in the world with an increasingly high quality balance sheet. This is a strong
performance; the result of a distinctive long-term strategy focused on growth in domestic
franchises and targeted expansion in Asia. In International and Institutional Banking (IIB),
third
Institutional clients are now using ANZ in more than one country. Importantly, it is continues
to drive organic growth using strong operational and financial management disciplines to
fund significant investments for the future. There is still more for ANZ to do to provide
across the board truly leading examples of best practice in relation to simple products and
services. From an international perspective, ANZ is demonstrating approaches that mark it as
a leader among banks addressing financial literacy and inclusion, but it needs to maintain its
commitments and build upon them over time. For now, the imperative should be to continue
and extend its existing range of programs and to build upon the achievements it has made to-
date. Consistency, commitment, and a successful track record of addressing an issue over
time will ultimately demonstrate and determine corporate leadership.





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CORPORATE GOVERNANCE

The following statement sets out the governance framework the board has adopted at anz as
well as highlights of the substantive work undertaken by the board and its committees during
the financial year

Key Areas of Focus and Achievements

Continued monitoring of the ongoing volatility and uncertainties in global markets
and their impact on the risk culture and management of ANZ.

Review of the increasing global regulatory requirements in relation to capital and
funding, and the implications for ANZ, including both the potential risks and
opportunities.

Oversight of Managements execution of ANZs super regional strategy.

Overview of productivity focus in recognition of industry-wide pressures on revenue
growth, particularly in Australia and New Zealand.

Strong focus on ANZs technology program, including upgrading infrastructure to
deliver improved systems security, stability and standardization and to respond to
growing demand, scale and complexity.

Successful implementation of the New Zealand simplification program which
involved the transition to one technology system and the combination of the ANZ and
National Bank brands into one ANZ brand ANZ Bank New Zealand.

ANZ was assessed the global banking sector leader in the Dow Jones Sustainability
Index (DJSI). This is the sixth year in the past seven that ANZ has received this
assessment.


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Approach to governance

In relation to corporate governance, the Board seeks to:

Embrace principles and practices it considers to be best practice internationally;
Be an early adopter, where appropriate, by complying before a published law or
recommendation takes effect; and
Take an active role in discussions of corporate governance best practice and
associated regulation in Australia and overseas.

Compliance with Corporate Governance Codes

Australia

As a company listed on the ASX, ANZ is required to disclose how it has applied the
Recommendations contained within the ASX Corporate Governance Councils Corporate
Governance Principles and Recommendations (ASX Governance Principles) during the
financial year, explaining any departures from them. ANZ confirms it has followed the
Recommendations of the ASX Corporate Governance Council during the reporting period.

Full details of the location of the references in this Statement (and elsewhere in this Annual
Report) which specifically set out how ANZ applies each Recommendation of the ASX
Governance Principles are contained on anz.com > About us > Our company > Corporate
governance. The information in this Statement is current as at
11 October 2013 except where otherwise indicated.

New Zealand
As an overseas listed issuer on the NZX, ANZ is deemed to comply with the NZX Listing
Rules provided that it remains listed on the ASX, complies with the ASX Listing Rules and
provides the NZX with all the information and notices that it provides to the ASX.

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24

The ASX Governance Principles may differ materially from the NZXs corporate governance
rules and the principles of the NZXs Corporate Governance Best Practice Code. More
information about the corporate governance rules and principles of the ASX can be found
at asx.com.au and, in respect of the NZX, at nzx.com.

ANZ has complied with all applicable governance principles in New Zealand throughout the
financial year.

Other jurisdictions

ANZ also monitors best practice developments in corporate governance across other relevant
jurisdictions.

ANZ deregistered from the US Securities Exchange Commission with effect from October
2007. Despite no longer being required to comply with United States corporate governance
rules, ANZs corporate governance practices continue to have regard to US corporate
governance regulations in relation to the independence of Directors, the independence of the
external auditor and the financial expertise of the Audit Committee, as described in this
Statement.















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CHAPTER II-CASE STUDY

Internet Banking in ANZ Bank:
Project Tiger's Leap Toward Scale

FINANCIAL INSIGHTS OPINION
This Financial Insights case study revisits ANZ Bank two years after it scaled up its Internet
banking proposition and will be instructive for other banks that seek to develop their own
online strategies. Key points discussed include:

ANZ Bank's Internet banking initiatives were run amidst a steady growth of Internet
banking in Australia. Australia's Internet banking users has now exceeded half of the nation's
banking market, with an estimated 30 million online banking accounts.

ANZ Bank's Project Tiger was unique because of the bank's specialist unit model, which
meant several business stakeholders defining business and customer requirements. This
required disciplined project scoping. Also, from the outset, the primary principle was that the
Internet banking application would be a platform for ANZ Bank's operations across the
region.

There are many valid motivations for pursuing enhancements to the Internet banking
channel. Core to these objectives should be improvement in the customer experience. The
right customer experience framework will create the virtuous dynamics of higher activity
rates, improved product take-ups, higher customer loyalty, and lower cost-to-serve.

The most successful Internet banking initiatives are contextualized to the bank's overall
channel strategy. This would allow the banking organization to map out effective
multichannel integration, better articulation of channel-specific customer strategies, and a
more insightful understanding of return on investments (ROIs) of channel investments.

New metrics will be used by banks as they look at the online banking channel more
traditional metrics around activity rates, cross-product holdings, cost-to-serve, and also new
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customer-centric measures around loyalty, as well as metrics to identify advocates and
dissenters.




IN THIS REPORT
Continuing the series of reports that looks at the most notable technology initiatives of banks
in the region, this Financial Insights case study revisits ANZ Bank two years after the
implementation of its Internet banking system for consumer banking. This report discusses
the key lessons learned by the bank in scaling up its Internet banking proposition and will be
instructive for other banks that seek to develop their own online strategies.
This report follows a series of interviews undertaken by Financial Insights Asia/Pacific IT
Benchmarking with senior executives of banks in Australia, including ANZ Bank.
Benchmark data was derived from these interviews as well as from publicly available
information.

About ANZ Bank

ANZ Bank is the third largest Australian bank, with assets of A$392.6 billion as of end-2007
(US$1= A$1.05 as of April 2008). Among the country's Four Pillar banks composed of
National Australia Bank (NAB), Commonwealth Bank of Australia (CommBank), ANZ
Bank, and Westpac Banking Corporation (Westpac), the bank is the most aggressive in
expanding operations to other geographies. The bank has operations in 30 other countries
New Zealand (where it is the number one bank), the rest of Asia/Pacific (ROAP), Europe,
including the United Kingdom, the United States, as well as a technology and operations
center in Bangalore, India.
Across its global operations, the bank has more than six million personal banking, private
banking, small business, corporate, institutional, and asset finance customers.

Brief Description of the Solution

ANZ Bank launched Project Tiger in 2004 to upgrade the bank's Internet banking system for
consumer banking. The bank switched from a first-generation Internet banking solution,
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provided by Edify, to an Infosys Finacle platform. The Finacle product is also envisioned as
the Internet banking platform for the bank's regional operations.

Situation overview
Australia was one of the first markets in the region to take on Internet banking. From
1.1million in 2000, the country's Internet banking base has grown to an estimated 8.6 million
in early-2008
Australia's Internet banking take-up has now exceeded half of the nation's banking market,
with an estimated 30 million online banking accounts.

The following trends have contributed to the continued growth of
Internet banking in Australia:

Banks saw an upsurge in online account sign-ups in mid-2007 before lowered caps for
superannuation accounts were introduced.
Banks saw the highest increase in traffic in the lead-up to the July
2007 cutoff, with customers expanding balances in accounts and increasing transactions
between online accounts.

The highest growth in Internet banking sign-ups has recently come from older customer
segments. In the past three years, annual growth of online banking sign-ups from customers
aged 50 years and above was higher than 20%. This is attributed to an increase in customer
education as well as greater confidence in the security solutions used by banks.

Activities most frequently undertaken online by Australian Internet banking users are, as
with other markets, account balance checking and fund transfers between same-owner
accounts. It is estimated that 80% of online banking users use the online banking channel to
pay bills one of the highest percentages we have seen in key online banking markets
worldwide. Much of the growth in online bill payments comes from customers doing more
BPAY transactions through the Internet (BPAY is a bill payment interchange owned by a
consortium of Australian banks.)

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Efforts by banks to improve Internet banking functionalities have impacted growth in sign-
ups and online banking activity (discussed in the following sections). These also include
improvements to online banking security.

The Approach
The Journey to Project Tiger
ANZ started its online banking journey in the late-1990s when the bank, along with other
banks, was still trying to make sense of the promise of the Internet. ANZ Bank, along with
Commonwealth Bank of Australia (first in the market with earlier versions of its Netback
offering) and Westpac were the pioneers in Australia's Internet banking market.
ANZ Bank had a Personal Computer Banking (PC Banking) project from the mid- to late-
1990s, which essentially was a test bed for the bank's Web proposition. In
1998, as Internet access and users surged, the bank selected an Internet banking solution
(primarily for consumer banking) offered by Edify. The bank ran the Edify solution through
the growth stages of its online banking offering until 2004 when it was felt that the Edify
solution had already come close to its end of life. Project
Tiger was launched in 2004 to decommission Edify and implement a new Internet banking
offering that would support the next stages of growth for ANZ Bank's online channel.

Leadership of the online channel has also evolved through time. Up to about 2000, the
leadership was held by the Emerging Channels unit, which looked at "modern" channels such
as interactive voice-response (IVR), operator-assisted banking, and PC banking with the
latter evolving to become Internet banking. From 2000 to about 2004, ANZ
Bank created a separate business unit, ANZ.com, which set out to originate customers and
sell products through the online channel.
ANZ.com later on morphed into a more functional area called personal ecommerce.
From the outset, Project Tiger envisioned the Finacle solution as groupwide infrastructure,
seeing it as a platform for Internet banking offerings not only in Australia and New Zealand,
but also across ANZ Bank's units across Asia. As is necessary, IT management of the online
channel is under Central IT, which looks after the operation of the solution as well as
software development and maintenance. Central IT deals with the various business units
(ANZ operates under a specialist business unit model) as they come up with online
propositions for their businesses. These units cover mortgages, consumer finance, credit
cards, investments and insurance, among others. This structure is thus able to maintain the
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single platform that is customized on a needs basis. The various business units and
geographies have to go through rigorous justification for requested customizations.

Business Drivers
John Harries, managing director for consumer finance of ANZ Bank in Australia, looks back
at the key motivations of the bank's Internet banking strategy.
Harries stated that the first motivation was around customer experience, acknowledging
especially that a good online banking system would provide an easy and convenient way for
customers to interact with the bank. This focus on customer experience was seen in the
design of the system itself the key consideration was whether the system was convenient in
terms of accessibility, response, and availability. Customer interfaces had to be simple and
easy to use (in that users intuitively understood what needed to be done). Apart from these,
the system had to provide good "functionalities from day one."
This meant that the system put forward the best content (information related to customer
accounts and to other available products and services), tools (value-added capabilities as
personal calculators), and transaction capabilities. An important aspect was security, and
here, consideration had to be made both in terms of the confidence that people have in the
security of the system, and the trade-offs that users would need to make in order to be secure.
The role of the online channel was contextualized to ANZ Bank's overall channel strategy,
especially at the start of Project Tiger. At that time, ANZ Bank, along with other Australian
banks, was undertaking a recalibration of channel strategies.
We note here that it was in Australia where the trend of branch closures across the region
started. In the late 1990s, Australian banks, saddled with high branch operating costs and low
utilization levels, decided to close hundreds of branches. This trend lasted for several years,
eventually spilling over to other Asia/Pacific markets. By 2002, however, Australian banks
realized that they may have abandoned the branch channel too much and too quickly. Branch
closures resulted in declining customer satisfaction and considerable customer churn. ANZ
Bank was the first of Australian banks to launch a large-scale branch opening initiative. The
Web channel received attention through Project Tiger.
The online channel was seen not only as a low-cost channel but also a channel that enhanced
the availability of the bank to customers, responded to self-service preferences of customers,
and extended the bank's customer experience motivations.
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To the bank, the Internet banking project also provided an opportunity for customer and
account integration. Harries remarked, "We had multiple legacy systems that have been built
up through time, and the
Internet banking system provided an opportunity to connect to a number of different systems
such as credit cards, mortgages, deposits, and others. So it actually provided an opportunity to
see everything through one portal." In the end, the new Internet banking solution allowed the
bank to streamline its technology architecture. Product sales was also an important business
driver, already seen out of the ANZ.com charter, but also coming from the belief that "active"
Internet banking users build deeper relationships with the bank not only through frequent
transactions and interactions, but also through higher product holdings. Harries commented
that "there are certainly quite aggressive differences between the active and nonnative
customers, in that, active Internet banking users have 20% higher cross-holdings."

Solution Description
ANZ Bank launched Project Tiger in 2004 to upgrade the bank's retail Internet banking
system to an Infosys Finacle platform. Since the implementation of the Finacle system in
2006, Infosys has come up with higher versions of the Internet banking product, the features
and functionalities of which are also being integrated into the ANZ Bank installation. The
bank continues to introduce new features into the current system, particularly those related to
security and integration with the bank's new cash management system for institutional and
corporate clients.

Selecting the Solution
As Edify came close to end-of-life, the bank decided that it had to be replaced by a more
scalable and function-rich solution. Project Tiger was envisioned to decommission Edify and
at the same time implement a new system, identified early on to ultimately be the online
platform not only for the Australian operations, but also for the rest of the region. Brian
Hartzer, then the group head of retail banking in
Australia (now group managing director) was the key stakeholder and chaired Project Tiger.
We also point out that there were discussions on whether the new solution was to be
developed in-house which ANZ acknowledged had been carried out with some degree of
success by some of its competitors or to buy and customize a package solution. The
decision was then made to acquire an existing vendor offering, that was, according to Harries,
"close enough to the Edify solution on a like-for-like basis and then customize from there."
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The bank went through a fairly thorough process of scoping and business requirement
definition, progressing steadily to a request for proposal (RFP), and then narrowing potential
vendors down through an elaborate selection methodology. The decision to go for the Infosys
Finacle platform was made in late-2004.
IT teams formed some of the core members of Hartzer's team. The selection and
implementation process necessitated a project director, who was, in Harries' terms, "the glue
between business, IT, and the vendor." The role of the project director was crucial, not only
because
IT and business had to come to an understanding of what was required of the Internet banking
solution, but also because ANZ Bank's specialist unit model meant that there were 16
business unit stakeholders that defined business and customer requirements.
In especially selecting the vendors to be shortlisted, the primary principle was that the
Internet banking application would be a group application. Thus, the system had to talk to a
range of core banking applications and core transaction monitoring systems. This was an
architectural decision made early, and a decision that was adhered to.
The selection criteria revolved around considerations for the following:
Functionality-Functionalities of the system had to be as close as possible (or "like-for-
like") to the Edify system. From the outset, therefore, another key requirement for
Project Tiger was struck migration to the new system would not impact the
customer's online experience. More importantly, the solution's functionalities set
needed to be as close as possible to the bank's "thoughts going forward"
functionalities defined by the business and technology teams. The most crucial
requirements revolved more around small business and business banking multiple-
payment functionalities, multiaccess capabilities, and security models.

Adaptability-This meant the ability to change functionalities depending on changing
business requirements.

Operating cost-Considerations were made regarding cost of implementation, rollout,
and maintenance.

Scalability-The system had to scale up to be a platform for ANZ's growing Australian
business and as a platform for the entire region. The Edify solution ably supported
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ANZ's businesses when there were a few hundred users, but had issues when it
reached close to three million at the start of Project Tiger.

Time to market-The system had to be delivered on time and at cost. The project team
had made delivery commitments to the board and had made public statements of a
new solution.

The bank brought together work groups that went through the requirements and their
recommendations came through to the steering committee chaired by Hartzer. Harries
admitted that the work groups "looked at all vendors across all five dimensions, but a lot of
them were ruled out because of cost and time to market considerations." Of course, the
shortlist went through the IT architecture group. Finally, and especially because this was a
significant project for the bank, vendor selection went all the way to the bank's board of
directors.

Implementing the Solution
The project implementation went through two phases. The focus in the first phase was like-
for-like migration. This meant that the functionalities of the new system had to mirror those
of the existing
Edify solution. The implementation took two years, and in this timeframe, new business
requirements were defined time and again this was expected because the bank aggressively
pursued growth opportunities. This meant that new functionalities and capabilities introduced
in those intervening two years were built twice. Harries remarked, "you had to build it in the
old and then in the new system."
The bank is now impressed at the extent of discipline and governance that was seen out of the
Internet banking project; requirements that were "sponsored by business units had to have a
strong case."
Harries recalls that when customers were migrated over to the new system, some of them
were asking when the system cutover would take place. "That was a success factor; we
moved people without them knowing it. That was our primary driver. We did not want the
customer to see an impact." The project had a total of 12 iterative migrations comprising
12 weekends, with up to three million registered customers. For the IT team, this meant that
they had to maintain the availability and reliability of two systems. The most difficult
customer segments were migrated last, specifically those from private banking "most
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sensitive about everything, and rightly so"; and small business and business banking
customers "while they were small in number of customers, the data was substantial in terms
of salary and multipayment records."
"Look and feel" was also a key element for ANZ Bank, especially that customer convenience
was an articulated objective from the get-go.
Harries recalled, " Look and feel was determined in-house. We had our own designer group
because we were looking at like-for-like, and we gave them a lot of guidance on what our
existing solution was. Our own design group and Infosys worked together to come up with
the end solution." The project's second phase involved building new business banking
functionalities around multiaccess and multipayment capabilities.
In 2006, after fully decommissioning Edify and after migration to the new system was
complete, the bank stated that the project budget, at about A$60 million, was on track. The
project was also sufficiently on time. This was, according to observers, commendable, given
higher budgets and longer timelines spent by peer banks in the launch of new Internet
banking capabilities.


Business Value
The responses of Australian banks when we asked them about the most important business
benefits for assessing the success of Internet banking projects. These were also reflected in
Project Tiger's experience.
ANZ Bank claims that the bank has been increasing active users by 250,000 per year since
the launch of Project Tiger, setting, according to Harries, "the ambitious target of doubling
that number by 2009." metrics for Internet banking "active users" in major
Australian banks, showing that like these banks, ANZ Bank has grown active customer
segments.
For this report, "active Internet banking customers" are defined as registered users who have
undertaken at least one transaction in the past six months. This is the typical definition that
Australian banks have used in our interviews, although we acknowledge that a stricter
criterionof activity (such as one transaction in the past 90 days) are increasingly being used.
Several Asia/Pacific banks have attained activity rates higher than
30% with effective marketing initiatives and strategies to push transactions to the online
channel, primarily through excellent Web site content and bill payment facilities (more on
this in the following sections). Indonesia's benchmark is at a still low 8.2%, revealing how
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Indonesian bank customers are not fully participating in current Internet banking offerings
and initiatives.

Furthermore, Harries cites three other dimensions under which the business value of ANZ's
Internet banking offering can be assessed.
First, consideration has to be made with regard to customer experience. Here, ANZ Bank
could claim that its key objective for switching to the new system has been met. Independent
ratings for functionality and look and feel have won accolades for the bank's site.
Surveys of users since the switch also indicate a steady rise in customer satisfaction.

Second, the implications to the bank's efficiency have to be considered. Obviously, the online
banking channel provides a much-lower-cost alternative for undertaking transactions.Harries
states that he holds "a business goal of reducing cost-to-serve by 10% in the next few years,
measured by the total cost of running the business over total number of accounts." Taking out
costs from expensive channels will impact overall costs. Furthermore, the increase in the total
number accounts, already seen by ANZ Bank, will also impact cost-to-serve metrics.

Discussions with regard to the marketing benefits, the third dimension for assessment, have
to be more nuanced. We note the following:

We earlier cited that for ANZ Bank, product cross-holding metrics of active Internet
banking users are ten to 20% higher than nonactive customers. Other Australian banks also
report similar figures, although one bank reports a difference of more than 50%.
The industry, however, needs to understand whether the difference is a cause or an effect. On
one hand, do customers have a much wider array of products, and thus the appeal of Internet
banking having one screen listing all accounts? On the other hand, is
Internet banking a strong "hook" to users, that more the customers transact, the more they
consolidate products into the institution?

The effectiveness of cross-selling products depends on the products themselves. There are
products that are not sold effectively online (such as mortgages), but there are those that are
sold easily, such as insurance and cards. Here, ANZ Bank can cite the success of the launch
of its Visa debit product, which had people not only going online and inquiring about the
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product, but actually applying for the product itself. More than 60% of applications were all
done over the Web site. The bank exceeded expectations of the product and increased product
sales four-fold in the first six months. Other Australian banks have also been reporting lower
cost of rolling out new products, especially because of the growing willingness of customers
to avail of products online.


Overall, it is customer experience that Harries claims to be the major factor for an increase
in product sales online. "If you get the customer experience framework and bank pieces right
in terms of being able to process applications efficiently," cross-sell and upsell "will flow
more naturally."

Future outlook

We expect ANZ Bank to continue to roll out new functionalities in its Internet banking
offering, resulting in a much-hoped-for increase in sign-ups and activity rates. Better cross-
sell metrics are also expected, especially out of the bank's active Internet banking user base.
As was envisioned from the very beginning, the Finacle platform will be used as group
infrastructure and will be deployed in the bank's retail Internet banking offerings across ANZ.
We believe that the three technology initiatives will be a key focus for
Australian banks vis-a-vis their Internet banking strategies. We discuss these in this section:

Dual factor authentication usage will expand.
Incidences of fraud in the Internet banking channel continue to be reported time and again,
although the extent of the losses and the vulnerabilities that allowed them remain vague.
Banks will focus on securing the
Internet banking channel, and spending on these technologies is expected to be strong moving
forward. ANZ Bank has not rolled out a dual factor authentication program (although a dual
factor system is planned for its Web-based offering for business banking), focusing instead
on building robust back-end capabilities in fraud detection and vulnerability resolution.
However, some banks here, we cite all Four Pillar banks along with HSBC,Suncorp, and
Bendigo Bank have made headway in the adoption of dual factor authentication. We
anticipate more prevalent use of dual factor authentication in the medium term. Banks will
have to examine more thoroughly implications on sign-ups to Internet banking, additional
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costs for this supposedly lower-cost channel, customer convenience, and transaction
frequency

The advent of new Web-based offerings for business banking.
As activities to scale up online banking for retail customers continue, banks are also looking
to enhance their Internet banking offerings for business/corporate customers. The focus here
is a shift away from traditional, PC-based approach, toward offering cash management and
payment capabilities for businesses over the Internet. ANZ Bank looks to roll out its Web-
based cash management offering as efficiently as possible, following the sharp uptake of
CommBank's CommBiz offering and St. George Bank's first-mover successes in this space.
NAB will bring to market its own business banking solution in the near term. Westpac and
Bankwest have launched similar services as well. Moving forward, we expect banks to bring
to light their roadmaps for more sophisticated solutions that link up cash management,
working capital management, trade, payments, investments, and treasury.
This will not only touch on the important technology issues, but also bring together future
business objectives and customer requirements. Currently, there is no single vendor that can
offer a complete solution. However, with the pace of industry consolidation and the move by
leading vendors to offer an integrated solution, the landscape could look quite different in a
year or two.
We believe, however, that while platform integration is possible between retail Internet
banking and these made-for-businesses, Web-based solutions, there will still be, at least in the
medium term, a delineation between these two offerings, particularly in the aspects of
strategic intent, marketing, and management.

Mobile banking proposition revisited.
Revealing the bank's drive to be a dominant player in consumer banking, ANZ Bank has
launched two mobile banking offerings: an SMS banking capability that is primarily for
informational bank interactions (checking account balances); and a more sophisticated "M-
Banking" offering (developed by M-Com under partnership with
Microsoft) that requires mobile users to download applications on their phones, and allowing
transactions such as bill payments (BPay) and funds transfers. This follows the relative
success of mobile banking in the New Zealand market. NAB and Bank of
Queensland have also detailed mobile banking projects although other Four Pillarplayerssuch
as CommBank and Westpac remain tentative. Whether mobile banking will take off in
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Australia remains to be seen. However, the launch of banking services over yet another
channel pushes further the agenda for effective integration of channel capabilities, better
articulation of channel-specific customer strategies, and a better understanding of return on
investments of channel investments. A lot of focus will also be given by banks in improving
the customer experience over their online channels. These will involve improvements to the
customer pages, especially focusing on intuitive use, interactivity, and the removal of clutter
(to the extent of cutting pages and setting lower limits for the number of clicks). We note
several new functionalities around chat, linkage to superannuation, as well as branch and
ATM locator tools.
We also point out that competition from direct banks has continued.
Competition for bank deposits and other banking products has of course been seen from
Internet-only account offerings, particularly from ING Direct, the leading player in this
space. It is estimated that since its launch in
1999, ING Direct has amassed a significant share of household deposits to become the
country's sixth largest retail bank.
Other players such as RaboPlus have gone into this space as well, with the "more traditional"
banks launching Internet-only accounts for their customers. In a way, improvements made by
the traditional players to current Internet banking offerings is a defensive move against the
inroads made by the likes of ING Direct. They also, however, confront the direct banks'
model head-on. Now, traditional banks can convincingly declare that their advantage is on a
more complete customer experience richer, more meaningful interactions across many
channels, including the online channel.

Key Learnings

There are key learnings that ANZ Bank has seen out of Project Tiger, which will also be
instructive to banks as they seek to enhance their online banking offerings. We cite some of
these learnings in this section, along with points that other banks have raised in the course of
our research:

Customer experience has to be prioritized above everything else. It will be excellent
customer service that will impact customer activity rates and other benefits such as higher
product cross-holdings.

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The online banking proposition has to be crafted in the context of the bank's multichannel
strategies. The online channel is meant to extend and complement the capabilities of other
channels, especially the branch. Its capabilities have to be extended to other channels as well
(branch, ATM, call center, mobile banking).

It is important to complete an Internet banking project in as short a period of time as
possible, especially because business units, responding to changing market opportunities, will
continue to define new functionality requirements even amidst ongoing project
implementation. ANZ Bank's intention to keep to like-for-like functionality meant that two
systems had to be maintained at the same time, a task that might be too difficult to manage
for any bank's support and development resources. We note that six
Internet banking projects that we have looked at in the region have on average run for
14 months.

New metrics have to be used by banks as they look at the online banking channel. These
include not only more traditional metrics around activity rates, cross-product holdings, and
cost-to-serve, but also new customer-centric measures around loyalty, as well as metrics to
identify advocates and dissenters.

A focus on increasing sign-ups (penetration rates) is an essential first step. This implies the
effort to bring more sign-ups from the bank's non-online customer segment (here, sign-ups
from older segments of the customer base are welcome), and ultimately, competing for (or
grabbing) Internet banking users of other banks.
However, banks have to realize that this is a short-term objective, especially for those in
saturated markets, as they would in time reach the base of total banking customers in the
market. Increasing activity rates and having customers do more transactions and activities
online have to be run alongside the effort to get more sign-ups.

The drivers of cross-sell in the online channel have to be understood. Banks will continue to
thresh out whether higher product holdings is a cause or an effect of activity rates online.
There is no easy answer, indicating the tricky nature of increasing bank loyalty. There are
products that are not sold effectively online, but there are others that are sold easily. The push
for cross-sell has to be a well-crafted effort that leaves nothing to chance.

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Banks need to look for opportunities to consolidate resources. ANZ Bank's push to have
Internet banking as group infrastructure is an inspired decision, allowing the bank to
maximize development and support resources, and also ensuring a coherent online banking
strategy across different geographic operations.


RECOMMENDATION

Internet banking will continue to be a key initiative for banks in the Asia/Pacific region. In
previous research, we cited growth potentials in India, Australia, Thailand, Indonesia, the
Philippines, and China.
Banks and vendors will be wise to keep to the following essential guidance points:

There are many valid motivations for pursuing enhancements to the Internet banking
channel, ranging from lower cost-to-serve to opportunities for product sales. Core to these
objectives should be the improvement in the customer experience. The right customer
experience framework will create the virtuous dynamics of higher activity rates, improved
product take-ups, higher customer loyalty, and lower cost-to-serve.

The most successful Internet banking initiatives are contextualized to the bank's overall
channel strategy. This would allow the banking organization to map out effective
multichannel integration (technology and platform integration, along with organizational
integration), better articulation of channel-specific customer strategies, and a more insightful
understanding of return on investments of channel investments.

A focus on increasing sign-ups is an essential first step for banks.
However, this should just be a short-term objective, especially for banks in saturated markets.
The long-term goal should be to increase activity rates and activity frequency. The key
activities undertaken online continue to be account balance checking, bill payments, and fund
transfers. These capabilities should be the base capabilities on which other capabilities, tools,
and differentiators can be built on top.

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Internet banking offerings of vendors are expected to become more and more standard.
However, key vendor differentiators such as capacity to scale, time to market, and operating
cost will become more important.

Banks will use new metrics as they look at the online banking channel. These include not
only more traditional metrics around activity rates, cross-product holdings, and cost-to-serve,
but also new customer-centric measures around loyalty, as well as metrics to identify
advocates and dissenters. Vendors should be prepared to talk about how their solutions
support these new metrics and key performance indicator (KPI) requirements.

Alongside dual factor authentication, other measures to harden the
Internet banking system will receive much attention from Internet banking project managers.
Security for Internet banking is as much a loss-of-face issue as it is a loss-of-funds issue.

The opportunity for more sophisticated Web-based solutions for businesses has emerged.
These solutions link up cash management, working capital management, trade, payments,
investments, and treasury. Vendors should be prepared to articulate their view on this
opportunity, alongside their proposition for consumer banking type Internet banking.












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BIBILIOGRAPHY

www.wikipedia.com
www.aunzbk.com
www.google.com
www.aubank.com