BSS057-6 Corporate Innovation and Entrepreneurship Critical Evaluation of selected Vignettes Assignment Sample

 Executive summary 

Purpose of this report is to develop in-depth knowledge regarding the impact of COVID-19 pandemic on by providing understanding on the selected vignette. Concept of pandemic effects on the banking sector has been described throughout this resort to develop in-depth understanding regarding the matter. In addition, there is a presence of different theoretical frameworks regarding the topic such as Funnel Model and many more.  Moreover, the following report has met its requirements successfully in delivering knowledge about pandemic effects on the banking sector.

Introduction

Monzo bank limited is a registered company in England providing financial solutions to its customers. The company has been serving customers for more than 5 years and has been authorised in the UK by the government. It has been serving through online operations helping its customers access its services on the internet. Monzo has been one of the earliest banks in the UK with application-based services. Gary Hoffman is the chairman of this organisation while TS Anil is the chief executive officer. Customers can connect several bank accounts to Monzo such as Barclaycard, Barclays, American Express, HSBC and many others. It has no branch, yet provides fast, friendly, and useful services.

Figure 1: Financial figure of Monzo Bank

(Source: Statista.com, 2021)

The above figure illustrates that the revenue of Monzo Bank was 19.7 million British pounds in the fiscal year 2018/2019 which increased to 67.2 million British pounds in the fiscal year 2019/2020 (Statista.com, 2021). Moreover, the revenue of the organisation has increased to 79 million GBP in the present fiscal year (Statista.com, 2021). Additionally, the net operating income of Monzo Bank was 9.16 million GBP in the fiscal year 2018/19 that increased to 35.66 million GBP in the fiscal year 2019/20 (Statista.com, 2021). It further increased by 62.2 million GBP in the current year (Statista.com, 2021). It has been found that by the end of February 2021, this selected company had been able to gain around one million new customers that previous year (Statista.com, 2021). Customer deposits exceeded three billion British Pounds that year. However, financial and banking services among the first industries have incorporated technological advancement that has helped to enhance services significantly.

The study focuses on critically discussing selected vignettes for Monzo in recent years. Covid 19 has developed substantial challenges for businesses. These challenges have increased the capability of organizations for solving the same. The study sheds light on the challenges and issues that Monzo faced during selected vignettes. Moreover, the study also highlights effective measures that were taken by management teams to address that critical situation. This study includes the application of theories while responding to the crisis along with providing significant strategies that can improve the situation and help Monzo increase its productivity and profitability.

Assessment 1: Selecting a vignette

Description of Scenario

COVID 19 has generated a condition in which generation of revenue and regular business activities have become challenging. In this context, various small and medium enterprises along with large companies including Monzo have been facing issues in revenue generation and profitability. The outbreak of this pandemic has led the entire world to stop its operations and increase online operations. However, Monzo bank already provided online services that have helped this company to deal with the situation effectively. Monzo Bank reported that it has faced an issue of annual loss after-tax, of £113.8 million in 2020 accounts that is up from loss last year that was £47.1 million (Cnbc.com, 2021). The organization reported that the disruption from the pandemic has resulted in “significant doubt” regarding its ability to continue its operations “as a going concern”. The challenger bank has been found to recently launch a premium card named “Monzo Plus” in order to diversify the streams of revenue.

This small-medium enterprise reported that it expected credit losses to rise dramatically to £20.3 million from £3.9 million (Cnbc.com, 2021). Moreover, the organisation had a sum of £4.1 for risk assessment that was associated with this pandemic (Cnbc.com, 2021). The selected company has a huge challenge concerning figuring out how to make money from its 4.4 million users. Several customers of the bank have been found unable to access their money when they needed it the most. Despite a statement regarding the Financial Conduct Authority to help customers get through the critical situation, Monzo has been found to be freezing accounts without any kind of notice (Theguardian.com, 2021). It has been found that the company has been affected severely due to this pandemic outbreak. The crisis has unleashed this banking company and caused severe damage to the economy. Moreover, this company has been found to freeze the bank accounts of various customers, which has created issues for such customers during a critical pandemic situation.

Impact on organisation

The covid-19 pandemic has caused this organization to increase issues in productivity and profitability (Fu and Shen, 2020). Moreover, due to issues with revenue generation, the management has frozen the account of its customers which is unethical in every aspect. Monzo is one of the fastest-growing banks in the UK and has been criticized several times for this kind of activity. As reported by the Guardian, the company was freezing and closing accounts that had no apparent reason, yet, the problem seems to be growing. Monzo mostly uses automated systems for tracking the transaction of its 4.3 million customers and reports that this organization has a legal obligation for investigation of suspicious activities (Theguardian.com, 2021).

An investigation conducted by watchdog BBC has demonstrated that only online bank Monzo has been causing its customers to be denied access to their money for several weeks after freezing their accounts and creating financial difficulty (Bbc.co.uk, 2021). Apart from these, UK tech news reported that the company has been found to have increased losses to 130 million pounds at the end of February 2021 and is more than that of the year 2020 (Uktech.news, 2021). Further, this company is viewed as a partially ethical bank due to its unclear interests in investment. The losses occurring in this company have resulted from facing money laundering probability. Potential breaches concerning financial crime rules money laundering. The challenger bank has become one of the banks to which the financial watchdog has sent letters this year that is a warning to fail in anti-money laundering control.

Assessment 2:

Response to crisis

Monzo has developed several activities and techniques for addressing the issues of Covid 19. The company has been continuing its operation through work from home and all the activities are controlled online over the internet. Yet, the employees have been told to come to the office in case of urgency. However, it has been found that covid-19 has impacted the entire globe and the economy of the world has deteriorated due to the outbreak as mentioned by Polemis and Soursou (2020). Moreover, this company has helped its customers to stay safe and go cashless by stopping the spread of covid-19. Contactless payments were already developed by this organisation that has been effective enough during the pandemic situation. Regarding this, the company has made it easier to do contactless payments and avoid touching “card machines” while making payments. “Contactless” developed by this organisation is effective for payment on purchase up to £45. Additionally, up to £100 can be paid with the help of contactless on the Monzo card prior to entering the pin.

Applying theories

Funnel Model deals with the marketing strategies involving tailoring the messages at a particular stage for purchasing in the current situation. This is a customer-based model that helps management teams to conduct their operations according to customer requirements. This model is used effectively by the management teams and attracts customers by providing services and products based on their requirements. This model is effective enough for organisations to actively engage customers with services and products. Regarding this, brand loyalty can also be achieved with the help of this model. In order to develop core banking applications, Monzo has been using the “Go microservices framework” which is a distributed programming toolkit that is used for microservices. Using the programming language of Go microservices, Monzo builds libraries regarding “Remote Procedure Call (RPC)”. This has positively impacted this organisation to build a reputation reliably and quickly.

The value creation proposition is used by Monzo to address the critical situation of this company. Moreover, it has been identified that this company has been practising several business models simultaneously to improve its function and financial performance. A “matchmaking model” is also used by Monzo that is effective for connecting with institutional service providers and individuals. However, the value creation proposition model has benefited this company to attract more customers by resolving their issues regarding making payments through their mobile phones (Businessmodelzoo.com, 2021). This company has launched an industry-first gambling block that helps people exclude themselves by making gambling payments through Monzo. Monzo has released the public beta application that has helped this company to run the fastest crowd fund with the help of supporters pledging £1 million in 96 seconds only. The business models used by this selected company have been effective for increasing its revenue and helped to grow substantially. However, due to issues of the pandemic, this company has been facing challenges in operations. Additionally, the freezing of accounts has negatively impacted the reputation of this company.

The entrepreneurial mindset that has been used by this company has helped to attract more customers. Moreover, its investment in an entrepreneurial mindset has helped to establish this organisational culture. This mindset needs the involvement of every staff member to achieve the objectives of the organisation. The staff members need to exude the entrepreneurial mindset that can move nimbly. Achievement of an entrepreneurial mindset is beneficial for pushing beyond barriers. This is also effective while making recruitments for organisations in achieving the most talented employees. Entrepreneurs constantly need to understand an insatiable desire for seeing the entire picture of organisations. Regarding this, seeking significant information is effective for obtaining the most comprehensive view.

Due to its financial parameters-based organisations providing customers with better and marginal financial services, the company used several strategies and some of them mentioned earlier. It has been noticed that during lockdown periods, people were not able to go outside for any reason in order to prevent Covid-19 pandemic situations except in emergencies; financial sectors are including online segmentations to provide people with betterment. In such a manner, the company has also utilised some digital technologies namely fintech services, online banking and others.

It has been noticed that due to encouraging people to not gather or limitedly socialising to prevent the epidemic from spreading, the online banking system has been one of the major activities to be counted (Craven et al. 2020). It has also been understood that the company has gained huge profits by the application of fintech services which provide its potential d loyal customers with the benefits of digitalisation. The company has also become more encouraged in the context of competitiveness and trying to beat competitions by the application of more online factors such as international payments and others.

Recommendation

Several financial institutions like Monzo bank has immensely suffered due to the massive outbreak of the pandemic and thereby measured some necessary recommendation to emerge from the condition.

• The bank should assess the environment of the workplace and need to find out the impact of it on several institutions and clients. The institution should realise the new environment of the workplace and make several strategies how to overcome the situation. Such as they need to build a segmented approach to recover works better, develop digitalized technologies and measure the role of the government. The bank must need to assess the financial structure, evaluate the funding capacity and also investigate capital adequacy (Ichsan, 2021). The bank also needs to focus on the employees and how they have been impacted during Covid and need to retrain them to perform several additional tasks.
• The bank needs to make a team of management who can access the crisis and make effective and quick decisions. The team need to deliver several various proactive decisions about the investment and productivity of the bank. As per the view of Kulińska-Sadłocha, Marcinkowska and Szambelańczyk (2020), the bank has been heavily affected by pandemics therefore the risk management team should make quick institutional and strategic responses to manage short term and immediate risks. The executive team needs to build a continuity plan to decide on the long term and immediate plans to overcome such adverse conditions. As a part of this, the company need to reduce cost, optimize expenses and revise the product prices to emerge from such adverse conditions.
• The company also needs to provide priority to all the clients, staff members and employees of the company as the company can be again exposed to the risk of infection. The bank needs to create awareness among all its staff members and clients to reduce the risk of infection. All the staff and clients have handled cash in the hand so the bank needs to create awareness to minimize the risk of infection. The bank has also recruited several health advisors to create awareness in between the staff and the clients as to take various preventive measures during the working hour. They also need to implement an automatic sanitization tunnel through the entry and exit gate as it can reduce the transmission of the disease (Ichsan, 2021).
• The bank needs to make several meetings with their investors and stakeholders along with their employees that how to control costs and increase productivity. The company needs to restructure and revise their plans towards the economic growth of the bank as it can increase the productivity of the bank. The bank needs to look into the portfolio scenarios of the bank and make a plan accordingly with a mix of segmentation, stress testing scenarios and risk analysis (Notteboom, Pallis and Rodrigue, 2021).
• The bank needs to be fully digitized as the pandemic adversely affects all the offline offerings massively. The bank needs to develop its own business app where customers and clients can easily access the service and make deposits, withdrawals and fund transfers smoothly. The bank also needs to find several sources of funding to enhance several recovery initiatives. The bank needs to implement several build resilience and government funds to recapitalize the funding and the economic growth.

Conclusion

The above discussion concludes that Monzo bank has been serving for the past six years in the UK and it has introduced several technologies and mobile applications by which customers can make transactions. Moreover, this was the first company to introduce application-based banking operations. Regarding this, the company has improved significantly in terms of generating revenue. However, the outbreak of this pandemic has remarkably created challenges for this company. Additionally, severe challenges have been faced by Monzo during the outbreak of the pandemic (Notteboom, Pallis and Rodrigue, 2021). It has led this company to decrease its revenue substantially. The study has highlighted issues developed in this company along with the impact on the revenue due to the pandemic situation. The study has discussed various strategies that were used by this company to address the situation of the pandemic. Moreover, some recommendations have also been provided to enhance organisational operations along with financial performance.

References

Cnbc.com, 2021, Monzo’s losses double as popular UK digital bank warns of pandemic uncertainty, viewed on 04/12/2021, from https://www.cnbc.com/2020/07/31/monzo-losses-double-as-uk-digital-bank-warns-of-pandemic-uncertainty.html

Craven, M., Liu, L., Mysore, M. and Wilson, M., 2020. COVID-19: Implications for business. McKinsey & Company, pp.1-8.

Fu, M. and Shen, H., 2020. COVID-19 and corporate performance in the energy industry. Energy Research Letters, 1(1), p.12967.

Ichsan, R.N., Suparmin, S., Yusuf, M., Ismal, R. and Sitompul, S., 2021. Determinant of Sharia Bank’s Financial Performance during the Covid-19 Pandemic. Budapest International Research and Critics Institute (BIRCI-Journal): Humanities and Social Sciences, 4(1), pp.298-309.

Kulińska-Sadłocha, E., Marcinkowska, M. and Szambelańczyk, J., 2020. The impact of pandemic risk on the activity of banks based on the Polish banking sector in the face of COVID-19. Bezpieczny Bank, 2(79), pp.31-59.

Notteboom, T., Pallis, T. and Rodrigue, J.P., 2021. Disruptions and resilience in global container shipping and ports: the COVID-19 pandemic versus the 2008–2009 financial crisis. Maritime Economics & Logistics, 23(2), pp.179-210.

Polemis, M. and Soursou, S., 2020. Assessing the impact of the COVID-19 pandemic on the Greek energy firms: an event study analysis. Energy Research Letters, 1(3), p.17238.

Statista.com, 2021, Key-financial-figures-for-Monzo-bank-United-Kingdom, Viewed on 04/12/2021, from https://www.statista.com/statistics/1089605/key-financial-figures-for-monzo-bank-united-kingdom/#statisticContainer

Theguardian.com, 2021, Monzo Customers Shut out of Accounts in Lockdown, viewed on 04/12/2021, from https://www.theguardian.com/money/2020/jun/06/monzo-customers-shut-out-of-accounts-in-lockdown

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