Approaches and Practices of Royal Bank of Canada (RBC) in FinTech Innovation

This study takes an in-depth look at the approaches and practices of Royal Bank of Canada (RBC) in FinTech innovation. The author presents RBC's current state and compares it with the ideal future state while demonstrating detailed steps of closing these gaps mainly via STAR model. The organization design and redesign process will be unfolded from six aspects: cash, people, product development capability, operations capability, marketing capability, and global reach.

Running head: FINAL ASSIGNMENT 1
Final Assignment
Anqi Li (Angie)
595004
MA in Leadership Program
Trinity Western University
June 10, 2018

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Abstract
In the financial and banking industry, RBC is renowned for its focus on FinTech innovation and
has contributed tremendous efforts and investments to sharpen its edge to successfully stay as an
industry leader. Throughout this study, the author is taking an in-depth look at approaches and
practices of Royal Bank of Canada (RBC) in an era of unprecedented challenges and changes.
This study combines both qualitative and quantitative methods with an overall purpose to build a
tool that one can apply and thus becoming more effective with greater Transformation Servant
Leadership (TSL) influence. The author will present RBC’s current state and compare with ideal
future state while demonstrating detailed steps of closing these gaps mainly via STAR model
(Galbraith, 2014). The organization design and redesign process will be unfolded from six
aspects: cash, people, product development capability, operations capability, marketing
capability and global reach.

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Background Information
New waves of technologies have changed customer’s expectations on products
and services provided in different fields. In contemporary society, traditional banks including
RBC encounter an increasing customer needs for technology enhancements. In financial
industry, Canada’s big five banks are inevitably challenged by online banks who provides user-
friendly platforms, low costs as well as higher returns, for instance, EQ Bank, which is backed
by Equitable Bank, and Zag Bank, which is supported by Desjardins Group (The Canadian Press,
2016).
“Having initially viewed the fledgling fintech industry as a threat, banks are now looking
to embrace innovations and work with technology companies rather than be left behind as
platforms such as blockchain, on which digital currency bitcoin is built, change the financial
landscape” (The Canadian Press, 2016). Faced by disruptive technology like Artificial
Intelligence, cybercurrency and blockchain, RBC’s senior management decided to invest in
FinTech in order to serve the needs of future customers. Such proactive radical change reveals
RBC’s determination on projects which seek the reinvention of company strategy towards major
transformation of business operations (Dawson & Andriopoulos, 2014).
RBC’s Current State
(Movement from current to ideal future state - theory)
According to the Perceived organizational innovativeness scales exercise, RBC is an
organization that is classified as “innovative”. (List the reasons)
Strategic Effectiveness Analysis on RBC
Royal Bank of Canada (RBC) is a premier Canadian bank providing expertise in banking,
finance and capital markets to corporations, institutional investors, asset managers and

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governments around the world (Wikipedia, 2018). Its headquarter is located in financial district
of Downtown Toronto. RBC has 17 million clients and more than 80,000 employees worldwide.
In terms of scope, RBC was the largest Canadian company by revenue and market capitalization
in 2011 with US$673.2 billion of assets under management in 2014 (Wikipedia, 2018). Below
would be the author’s overall analysis on RBC’s current status while break-down of each aspects
will be observed in later paragraphs.
Strategy
RBC has “a focused strategy that targets high-growth client segments within the priority
markets of Canada, the U.S., and in select global financial centers” (Annual Report, 2017). It
takes massive efforts to build a Digitally Enabled Relationship Bank to enhance exceptional
client experience. As talent management is essential to supporting RBC’s strategic objectives,
RBC takes a comprehensive approach to identify and select talented human capital as well as
invest massively in building innovation labs in North America. Research firm International Data
Corp (IDC) has ranked RBC as the top Canadian bank which focuses on embracing FinTech
strategies and initiatives (Zubairi, 2017). RBC has been spared no efforts in “acquiring expertise,
funding external research, establishing a research organization, and focusing on artificial
intelligence and big data”, while its CEO announced to spend 40 percent of overall technology
budget on innovations such as AI and blockchain.at the same time (Zubairi, 2017).
Structure
RBC’s organizational structure is tall in terms of hierarchical structure which guarantees
consistency, quality, stability, and is easy to control under regulatory requirements. Like most
banks, RBC is grouped by functions. RBC is trying to “simplifying the structure, redefining its

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leadership model and tapping into the strengths and talent of its employees” (Annual Report,
2017).
Process and Lateral Capability
RBC focuses on various business segments according to geographic locations. In Canada,
RBC expanded its insurance types, enhances wealth management franchise and “sees
opportunities for further growth within Personal & Commercial Banking”. In the U.S., RBC
bought LA’s City National Bank and successfully benefit from such cross-selling strategy
(Almazora, 2016). To integrate into its customers’ digital lives, RBC has worked with various
technology partners to “design and build products, processes, technology and services in a faster,
simpler, more adaptable and cost effective way”, including transformational technologies of
blockchain and artificial intelligence (AI). (Annual Report, 2017). RBC Future Launch, one of
its most famous program, has invested $500-million in 2017 to empower Canadian youth for the
jobs of tomorrow. As a transformational servant leader in the financial industry, RBC
occasionally holds philanthropic events to enhance the growth of the local community, including
fundraising marathon for breast cancer, etc.
Reward System
(Communication between managers and staffs;
How are staffs engaged with mission/vision/core values of company especially in
technology innovation?
Position types offered to IT staffs; burnout and retention rate)
People Practices
RBC has a culture that enhances diversity & inclusion and encourages innovation.
(Values employees as assets - RBC Launch – hires and encourages top talents to return). (HR

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efforts in recruiting technology top talents) However, as it is expending the business, RBC hires
a large number of contractors mostly for the back office jobs, with some receive insufficient
trainings, work overtime thus turnover rate can be quite high. There was also an outsourcing
scandal reported by CBC which “replaces Canadian staff with foreign workers” (Tomlinson,
2013).
Closing the Gaps on Six Innovation Aspects
To give the readers a clear picture of evaluation on RBC’s performance, the author would
rate each of its aspects regarding innovativeness on a scale of 1 to 5 with 1 rated as excellent and
5 as poor. With an overall opinion comes first the author will provide in-depth analysis based on
five criteria of STAR model.
(Why TSL instead of management)
Cash
RBC concentrates on the fact that the cash flow in the company is more than the cash
flow out of the company. They make sure that the cash is unlocked with their daily operations
and that the clients are made aware of the expected payment dates and continuous follow up is
done. Attention must be given to the most productive and efficient service must be targeted to
get the desired cash flow (Kroes & Manikas, 2014). RBC deals with various financial services
such as deposit certificates, term deposits, commercial papers and others which can help them to
increase the cash flow in their bank and hence design a concrete cash flow management structure
for future profit. There are certain existing cash management strategies that help RBC to manage
their cash flow and business. They have an automated system for direct credit where users can
submit their payments to any third party or to the bank at their convenient time. RBC also has an
automated system for direct debit where the business management can collect their recurring

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payments in their local currency from their customers. They have a bill payment collection
service which enables the various business which are linked to the bank to enroll as biller on the
Digital Banking Solution of RBC and this makes the name of the business to appear on the list of
the acceptable payees. This helps the customers of the business to make payments easily to the
biller. These strategies helps RBC to manage their cash operations smoothly.
People
RBC targets those individuals who show signs of real potential to work with the
institution. They should also show that they are capable of earning promotions within the
timeframe that RBC has set for different designations such as senior managers, executives and
others. The individuals should also be consistent about their tenure in RBC and should show long
term commitment to the organization. There are 13 members in the board of directors followed
by several others on different positions. The CEO of RBC is Dave McKay, with the chairman of
the board being Kathleen Taylor. The board of directors along with the other influential
managers of the company aim to retain their employees and give them promotion according to
their performance and involvement in the organization (McShane & Von Glinow, 2013). RBC
concentrates on certain policies and principles in the workplace which ensures that the
employees succeed in their work and experience a good working environment. RBC promotes
employment equity where equal opportunity is given to every employee to showcase their talent
and develop themselves. They make sure that the employee are able to manage both their work
life and personal life by arranging for flexible working hours without creating any impact on the
organization. RBC has compensations plans according to the performance of the employees and
aim to create an enhancing workplace for them. RBC also has many development programs

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which gives proper training to the employees so that they can expose themselves to more areas of
work and can expand their talent horizon.
Product Development Capacity
Product development is a major part of any organization to retain their existing customers
and to gain new ones. The new product or service should by all means be better than the existing
product for the customer to purchase it. RBC conducts a thorough research and development
before bringing any new service into the market (Rogojanu & Badea, 2014). The R&D consists
of four steps such as researching the target market segment extensively, designing the perfect
solution to the new service, develop a sample service and test it among a few consumers and
finally test the service among a large crowd and note the response. Internet is the best way to
find out the occurring in the industry such as banking or any other. RBC has a stipulated social
media person who takes care and informs about the position of the banking industry and the
condition. It is necessary to understand the wants and demands of the customers and to provide
such services which will make their experience more convenient and easy. RBC have been
continually making all its services online so that consumers do not always have to physically
visit the bank for minute jobs such as transactions. Consumers also gets their financial statements
in their email id for which they do not have to continuously contact the bank to receive their
statements. RBC makes sure that all information that could be shared with the consumers
without any legal obligation is shared with them so that a transparency is maintained with the
consumers.
Operations Capacity
Royal Bank of Canada along with its many subsidiaries operate under the brand name of
RBC. They are one of the largest banks in Canada and also in the world based on market

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capitalization and assets. RBC provides a diverse selection of financial services which includes
commercial banking as well as personal banking, management of wealth, insurance, investment
and corporate banking and transactional services on a global concept. There are over 70,000
employees who are appointed ta RBC who offer services to more than 15 million clients across
the world. RBC is divided into five segments of business namely Canadian banking, insurance,
capital markets, wealth management and international banking. Canadian banking concentrates
on the operations regarding the business banking and domestic personal and also on certain
investments made by retail businesses (Beyhaghi, D’Souza & Roberts, 2014). It is operated
mainly through three lines of business namely business financial services, cards and payment
solutions and personal financial services. Wealth management consists of the US and
International wealth management, the Canadian Wealth Management and Global Asset
Management. Insurance comprises of the Canadian Insurance and various other insurance
services that are offers through different channels which includes retail branches of insurance,
call centers, career sales force and also through independent travel agencies and insurance
advisors. International banking consist of the joint venture made by RBC and also banking in the
Caribbean which offers a wide range of products and services to different individuals, business
and institutions. The joint venture, on the other hand, which is RBC Dexia Investor services,
offers integrated capacity of products to worldwide institutional investors. Finally, capital market
consists of the global banking business which provides private as well as public companies,
central banks, government and institutional investors a huge range of products and services.
Marketing Capacity
The marketing capacity of RBC depends on the marketing mix that it adopts and follows
to spread its products and services into the market. RBC has a wide range of attractive and

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quality products and services which makes it easy for the individuals and the institutions to
invest, save and acquire loans from the international bank which serves more than 15 million
people. RBC has been continually on the growth and have been able to provide the institutions
and their clients with proper services so that they can get capital help from the bank and stipulate
their own growth. Certain services provided by RBC are investment accounts, savings accounts,
future and retirement planning services and personal, business and education loans (Devereux &
Yetman, 2014). The spread of the Royal Bank of Canada is global which has made it easier for
the bank to grow slowly and cater to a wide audience and share their services with them. They
are present in both developed and developing countries and operates in almost 41 countries. RBC
abides by the rates that are set by the central bank of each country especially for developing
countries. The taxes, loans rates, savings interest rates and investment rates are all decided
according to the rates that are set by the central bank if every different country. RBC like every
other banks, depends on the word of mouth promotional strategy and entrepreneurial
collaboration.
Global Reach
RBC is a global bank which operates in Canada, the United States and 56 other countries
like Argentina, India, Chile, New Zealand, Panama, Vietnam and others. RBC has concentrated
on an excellent growth strategy which is realized from its presence in many different locations
around the globe. In the year 1882, RBC opened its first ever international branch in Hamilton,
in Bermuda. They sold the branch in 1889 to The Bank of Bermuda. They next opened a branch
in Havana, Cuba in the year 1899 and by the year 1925 have already established 121 branches in
the area. In the year 1907, they opened its first branch in Puerto Rico to participate in the existing
sugar trade which was occurring between US and Puerto Rico. They opened several other

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branches in many areas throughout the years such as in London, Jamaica, Barbados, Dominican
Republic, Grenada, Antigua, Dominica, St. Kitts, Nevis, Montserrat, Tobago and many others. In
the year 2000, RBC added North America as the key to their strategic expansion. They became
one of the largest international trust companies in the Channel Islands. In the year 2006, the Life
Insurance Company of RBC opened a representative office in Beijing, China. Their latest
venture had been to acquire thePrivate banking business of Coutts of Latin America, Caribbean
and Africa.
Key Transformational Servant Leadership Competency
S
Concluding Remarks
S

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References
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Dawson, P., & Andriopoulos, C. (2014). Managing change, creativity et innovation. 2nd ed. Los
Angeles: SAGE.
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RBC Global Asset Management invests $20 million to establish in-house Innovation Lab. (2017,
June 28). Retrieved from http://www.rbc.com/newsroom/news/2017/20170628-gam-
innovation-lab.html

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Rogojanu, A., & Badea, L. (2014). The issue of competing currencies.
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http://www.rbc.com/investorrelations/pdf/ar_2017_e.pdf
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