Critical Review: Marketing System Analysis of Commonwealth Bank

This report provides a critical analysis of the Commonwealth Bank (CBA) in the context of the Banking Royal Commission. It begins with an overview of the CBA and the Royal Banking Commission, which investigated misconduct within the Australian financial sector. The report identifies three key areas of wrongdoing by the CBA: issues with home lending through mortgage brokers, the charging of 'fees for no service,' and problems with Commonwealth Financial Planning. It then applies marketing systems theory to explain these issues, using elements such as Coleman's Boat theory to analyze how social conditions, individual frustrations, and economic structures contributed to the misconduct. Finally, the report offers recommendations for the CBA to improve its structure and functioning, emphasizing the importance of regulatory compliance, external auditing, and enhanced service implementation to prevent future scandals and maintain a positive brand image.

Running head: MARKETING SYSTEM
Marketing System
Name of the Student
Name of the University
Author Note

1MARKETING SYSTEM
Commonwealth Bank
It is noted that Commonwealth Bank of Australia is fundamentally known as an
Australian multinational bank with several businesses across New Zealand, Asia, US and
UK. The banking organization is known for its large variety of financial services with the
inclusion of retail, businesses and institutional banking, funds management, insurance, etc.
Furthermore, Commonwealth Bank is known to be the largest Australian listed company as
per Australian Security Exchange.
Description of the Royal Banking Commission
The Royal Banking Commission is also known as Banking Royal Commission which
is also known as royal commission. Royal Banking Commission was developed in 2017 on
14th December by Australian Government as per the principles of Royal Commission Act to
probe and report on the misconduct in banking system, superannuation and the financial
sector (Perraton 2015). It has also been identified that establishment of the commission
followed the revelation in the public media of greed within many Australian financial
institutions. According to Aalbers (2016) banking and the financial sector of Australia faced a
lack of regulatory intervention by Australian government Authorities which created the need
for developing a royal commission.
Identifying the wrong-doing of Commonwealth bank based on Royal Banking
Commission Report
Home lending through mortgage brokers
Mortgage brokers tend to work with a host of different kinds of lenders but it is highly
important for one to find out which products those lenders are most likely to offer. According
to Robles-Garcia (2019) brokers do not have direct access to products from different lenders.

2MARKETING SYSTEM
So, in the case of home lending, the products can be home loan and hence, brokers offer
home loan. However, the commonwealth Bank of Australia is not immune to financial
wrongdoings because there have been many headlines in relation to changes in the financial
services asked by Royal commission. It is particularly noted that large corporate banks like
Commonwealth Bank are charging additional fees when processing home loan for customers.
On the other side, the brokers also get two different types of commission from the lenders –
such as an upfront commission after the home loan even settled and a trail commission
calculated on the loan amount whole that home loan is operating (Atkins and Charlton 2019).
Every individual with home loan is already paying the bank in the form of interest repayment
on their loan and other fees and charges. As per Royal Commission also clarified in relation
to the investigation and reporting obligation of lenders and aggregators. This means when a
lender or the aggregator identifies that a broker is involved in the misconduct in relation to a
particular home loan, there should always be number of actions to particularly assess whether
the broker have taken poor actions in relation to the matter.
Fees for no service
It has been identified that despite the broad series of changed implications in the
recent financial schemes, some financial organizations tend to charge fees for the services.
However, it has been identified that customers or stakeholders groups to which the bank
provides the services do not provide the demanded services in return of the money being
charged. It has been identified that banking industry’s $850 million ‘fee for no service’
scandal has been a significant issue as per the changes made in Royal Commission Report
(Kerr and Robinson 2016). It has also been identified that Australian Commonwealth Bank
financial planning breached a court enforceable undertaking with respect to fees for no
service. As per the CBA’s financial planning businesses, Commonwealth Bank have
systematically charged ‘ongoing services’ fees to almost 31500 customers between 2007 and

3MARKETING SYSTEM
June 2015 and moreover, the bank has failed to provide the annual review (Hutchens 2020).
Therefore, it can be mentioned that Commonwealth Bank has failed to provide its financial
services as per the regular standards previously mentioned by Royal Commission. In addition
to this, it has also been identified that the organization had paid $119 million to its customers
who were charged for the services but were provided with mentioned services. It has also
been identified that Commonwealth Bank minimised an executive’s short-term remuneration
as the outcome of risk- associated with the issue that had not yet revealed publicly.
Commonwealth Financing Planning
It has been identified that the corporate regulator had banned the financial service
scheme planning of Commonwealth arm from charging the ongoing service fees. As per the
report of Royal Commission, Commonwealth Bank failed to satisfactorily complete the
homework as the most significant part of enforceable undertaking (Southurst 2015). The
other financial advice players have successfully met the criteria of financial services that are
being offered to banking customers in Australia. As per the chairman of Royal Commission,
the financial institutions are not supposed to charge its customers for the ongoing services. As
the consequence, Australian Financial Planning has been asked by Australian Securities and
Investment Commission to stop charging the ongoing services fees from the clients. This ban
has been put on the organisation because it has failed to identify the evidence about the
annual reviews which includes almost 31500 customers. As per the new claim, ASIC
included the requirement that Commonwealth Bank is not able to satisfy the basic
requirements set by the authority and thereby, the fees for –no service would not be resumed
until the further clarification. Consequently, the organization would have to stop charging the
ongoing service fees to particularly reduce further risks in the programs. ASIC made it
mandatory for the organization that if the process has to transform its ongoing service model.

4MARKETING SYSTEM
Role with the marketing system
According to Coleman boat’s theory, there is a macro-micro-macro linkage which is
called frustration theories of revolution. This means social conditions can result in frustration
among the individuals and even it could lead to aggression. The scenario in relation to service
fee for no service, lending through home mortgage, Commonwealth Bank breached the
program. The organisation has charged additional price for usual services that are already
charged before starting the service (Ramström 2018). Consequently, there can be a greater
level of aggression and frustration among the individuals. Another significant element in the
theory is the protestant ethic and the spirit of capitalism, which is a weaker point in Weber’s
argument for the movement of micro to macro (Raub and Voss 2017). Hence, even though
the macro range is an abstraction but it is highly important, as it is significantly related to or
linked to the economic structure of the market. Therefore, when it comes to applying the
marketing system theory, it can be mentioned that organizations need to consider both
external and internal environment whereas economy is a separate section. As marketing
system theory should consider changing market dynamics such as regulatory environment,
shift’s in customers’ demand and social capacities.
Recommendation
In order to enhance the performance and stay free from corruptions and all sort of
wrong doings, banking organizations need to comply with the standards and rules developed
by authorities. In such context, the organisations will also have to changing conditions and
rules made by authority. Compliance to regulation always enhances the brand image in the
market. When it comes to enhancing the brand image and services, banking organizations
needs to understand the fact that service quality is not the element that makes customers

5MARKETING SYSTEM
happy, rather it depends upon how the services are being implemented. Effective level of
compliance is most likely to help the brand to receive government’s support which is highly
necessary when the banks are performing their operation in a competitive market. In addition
to this, the organisation also needs to go for external auditing to ensure that its services are
free from corruption.

6MARKETING SYSTEM
References
Aalbers, M.B., 2016. The financialization of home and the mortgage market crisis. In The
Financialization of Housing (pp. 40-63). Routledge.
Atkins, S. and Charlton, P., 2019. Chartered secretary: The banking royal commission final
report: Culture and governance implications. Governance Directions, 71(2), p.65.
Hutchens, G. (2020). Fees-for-no-service is systemic in super industry, royal commission
told – as it happened. [online] the Guardian. Available at:
https://www.theguardian.com/australia-news/live/2018/nov/30/apra-chief-wayne-byres-faces-
banking-royal-commission-live [Accessed 25 Feb. 2020].
Kerr, R. and Robinson, S., 2016. Architecture, symbolic capital and elite mobilisations: The
case of the Royal Bank of Scotland corporate campus. Organization, 23(5), pp.699-721.
Perraton, H., 2015. Learning abroad: A history of the Commonwealth Scholarship and
Fellowship Plan. Cambridge Scholars Publishing.
Ramström, G., 2018. Coleman’s Boat Revisited: Causal Sequences and the Micro-macro
Link. Sociological Theory, 36(4), pp.368-391.
Raub, W. and Voss, T., 2017. Micro-macro models in sociology: Antecedents of Coleman’s
diagram. Social Dilemmas, Institutions and the Evolution of Cooperation. Festchrift for
Andreas Diekmann, pp.11-36.
Robles-Garcia, C. 2019. Competition and incentives in mortgage markets: The role of
brokers. Working paper.

7MARKETING SYSTEM
Southurst, J., 2015. Australia’s Commonwealth Bank Latest to Experiment With
Ripple. CoinDesk URL: http://www. coindesk. com/australia-commonwealth-bank-ripple-
experiment.