exampleBank – Forces

By | June 16, 2014
This entry is part 3 of 8 in the series exampleBank Business Strategy

The exampleBank executive team is progressing through the strategy process for exampleBank and have identified some key trends to consider. They are in the middle of an environment scan which, according to how it all fits together, includes identifying the forces to be considered.

This post is a work-in-progress. It does not need to be exhaustive, but I want it to be complete enough to be a good example and make for an interesting strategy exercise.


    • Market Segments
      • There are a lot of business models and market segments to be addressed in banking. Consumers range in income and location, and belong to some set of archetypes including new worker, new career, family oriented, investor, traveler, expat, homeowner, business owner, retired, shopper (home, auto, other), and hobbyist.
      • Businesses break down by location, industry and size.
      • Potential for peripheral segments and innovative services.
  • Needs and Demands
    • Consumers need a basic set of retail banking services such as accounts for savings and transactions, payments, borrowing, investing, and foreign exchange.
    • Reduced demand for check processing services
    • Increased demand for electronic payments and, in particular, mobile payments
    • Demand for faster international payment processing.
  • Switching Costs
    • Consumer banking switching costs are low. Relationships become sticky as consumers appreciate improved convenience.
    • Corporate and business banking switching costs are higher
    • Both consumers and businesses tend to multi-bank. Customers of a bank will readily purchase products from competitive banks if the rates and/or fees are more attractive.
  • Revenue Attractiveness
    • Banking has become largely a commodity industry with scores of new entrants and heaping costs from legacy systems and regulations. Nonetheless, as much as 40% of revenues in the USA flow to the financial markets industry.


    • Global Market Conditions
      • Uncertain economic conditions make it risky to loan to businesses
      • High potential for real estate bubbles make personal and commercial real estate loans risky
      • Optimism is growing and the economy appears to be on the up-swing.
  • Capital Markets
    • Cost of funds might increase as the US Federal Reserve reduces stimulus measures.
  • Commodities and Other Resources
    • The cost is increasing for many high skilled resources in finance and IT
    • Savings from some outsourcing and off-shoring are failing to materialize or decreasing.
  • Economic Infrastructure
    • Taxes on corporate income and capital gains are attractive
    • Removal of restrictions on political donations might lead to more favorable treatment for financial institutions
    • Improved infrastructure for crowd sourcing provides new alternatives for engaging customers, suppliers, and employees.


  • Stakeholders
    • Voters and regulators are demanding changes to practices around lending, investing and executive compensation.
  • Competitors (Incumbents)
    • A saturated banking industry makes competition fierce
  • New Entrants (Insurgents)
    • Globalization and reduced protections are attracting increased foreign competition
    • Payment services such as PayPal
    • Lending platforms such as LendingClub
    • Crowd-funding platforms such as Kickstarter.
  • Substitute Products and Services


This is all I have for now. Comment on this post if you have a few more that should be considered. I say “a few” because there are hundreds of forces that could be considered. I only want to spend a limited amount of time considering the most important forces for banking.

Next on the agenda is to identify the opportunities and threats originating from the environment scan.

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