Trends in Banking 2017 and onwards

The changing nature of the relationship between a retail bank and its customers is examined, particularly with respect to new financial concepts, debt and regulation. The traditional image of a bank is portrayed as a physical building a classical Doric portico. This image conveys concepts of service, soundness, strength, stability and security ("five-S"). That "five-S" concept is changing, and the evidence for changes that affect customers directly is considered. A fundamental legal problem associated with those changes is highlighted: a bank is no longer solely responsible for the safeguard of customer monies. A solution to this problem is proposed: banks should be jointly liable with perpetrators of criminal activity in the event of frauds as an encouragement to recognise and mitigate fraud.Comment: Proceedings 29th SASE Conference, Lyon France, June-July 201

The evolution of retail banking services in United Kingdom: a retrospective analysis

The purpose of this paper is to assess the sequence of technological changes occurred in the retail banking sector of the United Kingdom against the emergence of customer services by developing an evolutionary argument. The historical paradigm of Information Technology provides useful insights into the ‘learning opportunities’ that opened the way to endogenous changes in the banking activity such as the reconfiguration of its organizational structure and the diversification of the product line. The central idea of this paper is that innovation never occurs without simultaneous structural change. Thus, a defining property of the banking activity is the diachronic adaptation of formal and informal practices to an evolving technological dimension reflecting the extent to which the diffusion of innovation (re)generates variety of micro level processes and induces industry evolution.Information Technology; Retail Banking; History of Technology; Innovation Systems.

MACROECONOMIC DETERMINANTS OF RADICAL INNOVATIONS AND INTERNET BANKING IN EUROPE

Current technological development has various implications for the bankingsector. Especially, the banks prefer internet banking to keep up their customers, reducetransaction costs, enhance their customers’ portfolio, and accelerate financial transactions.In this regard, this study aims at finding out the use of intensity of internet banking. Extensivetechnological innovation boosts internet banking. Banks use internet services as anaggressive business strategy to gain market share rather than for making profits. Theimportance of the innovation for the banking sector is that the competition forces banks to beinnovative in order to survive in the market. In the macroeconomic level, R&D expenditures,education expenditures, skilled human capital, level of the information and communicationinfrastructure and the accessing the internet by the individuals, patent protection laws, thelevel of the competition in national and international markets, the cost of inputs such asenergy or wages can affect the innovation.Radical Innovation, Internet Banking, Macroeconomy

The Dynamics of Product and Process Innovation in UK Banking

Sustained competitive advantage depends heavily on the ability of organisations to internalise the benefits of innovative activities. While the vital importance of innovation in today’s competitive climate has been widely proclaimed, our understanding of innovative behaviour in service organisations is not yet fully developed. This article documents an interpretative approach (based on archival research and semi- structured interviews) of the main drivers of change in organisational function (process) and access to financial markets (service or product) in UK commercial banking. As a result, research in this article contributes the understanding of innovation in service organisations by exploring past and present perceptions of banks' senior managers and management consultants on the importance and factors stimulating and constraining the adoption of new technology in financial intermediaries.banks, innovation

Internet Banking in Europe: a comparative analysis.

A key strategic issue for banks is the implementation of internet banking. The ‘click and mortar’ model that complements classical branch banking with online facilities is competing with pure internet banks. The objective of this paper is to compare the performance of these two models across countries, so as to examine the role of differences in the banking system and technological progress. A fuzzy cluster analysis on the performance of banks in Finland, Spain, Italy and the UK shows that internet banks are hard to distinguish from banks that follow a click and mortar strategy; country borders are more important. We therefore explain bank performance by a group of selected bank features, country-specific economic and IT indicators over the period 1995-2004. We find that the strategy of banking groups to incorporate internet banks reflects some competitive edge that these banks have in their business models. Extensive technological innovation boosts internet banking.Banks, Internet, Innovation.

German banks - a declining industry?

This paper is a draft for the chapter "German banks and banking structure" of the forthcoming book "The German financial system" edited by J.P. Krahnen and R.H. Schmidt (Oxford University Press). As such, the paper starts out with a description of past and present structural features of the German banking industry. Given the presented empirical evidence it then argues that great care has to be taken when generalising structural trends from one financial system to another. Whilst conventional commercial banking is clearly in decline in the US, it is far from clear whether the dominance of banks in the German financial system has been significantly eroded over the last decades. We interpret the immense stability in intermediation ratios and financing patterns of firms between 1970 and 2000 as strong evidence for our view that the way in which and the extent to which German banks fulfil the central functions for the financial system are still consistent with the overall logic of the German financial system. In spite of the current dire business environment for financial intermediaries we do not expect the German financial system and its banking industry as an integral part of this system to converge to the institutional arrangements typical for a market-oriented financial system

Critical success factors for preventing E-banking fraud

E-Banking fraud is an issue being experienced globally and is continuing to prove costly to both banks and customers. Frauds in e-banking services occur as a result of various compromises in security ranging from weak authentication systems to insufficient internal controls. Lack of research in this area is problematic for practitioners so there is need to conduct research to help improve security and prevent stakeholders from losing confidence in the system. The purpose of this paper is to understand factors that could be critical in strengthening fraud prevention systems in electronic banking. The paper reviews relevant literatures to help identify potential critical success factors of frauds prevention in e-banking. Our findings show that beyond technology, there are other factors that need to be considered such as internal controls, customer education and staff education etc. These findings will help assist banks and regulators with information on specific areas that should be addressed to build on their existing fraud prevention systems

Competition in financial services

In the financial services sector, the failure of a single institution can have a compounding effect on the sector, and on national and global economies. In particular, there is systemic risk from inter-institution lending, and this effect is more complex in Australia due to the small number of major players. In retail banking in Australia, following a similar practice in most developed countries, if an unsecured creditor is a retail depositor, their deposit is insured by the government. That is, if a retail bank fails, the Federal Government will make the depositors whole. The regulatory system, particularly the prudential regulatory system, is designed to protect depositors’ and borrowers’ interests, and this protects the interest of the government. The effect is that regulatory policy on banking has prioritised stability in consideration of the sovereign risk associated with the risk of retail bank failure. However, this approach also creates a policy dilemma. The dilemma concerns the extent to which the retail banking sector can attain the benefits of the vigorous rivalry from effective and efficient competition, without unduly risking stability and the potential of a devastating call on the public purse. Specifically, in the context of effective and efficient competition, there is limited competitiveness in retail banking in Australia. This is reflected in the static state of market share between the four major banks, and very slow and marginal improvements gains even by strong second tier competitors. Furthermore, the retail banking sector’s capacity for product and service innovation is limited. Although the absence of vigorous rivalry is conducive to stability within the retail banking sector, it is likely to detract from the welfare of retail banking consumers. Furthermore, the level of innovation may not be as high as is feasible and barriers, including prudential regulatory barriers to entry or expansion, mean that the extent of rivalry is unlikely to change without some form of promotion of competition. The paper consequently makes a four-point recommendation for the removal of the ‘four pillars’ policy:  The four major banks are protected by an implicit government guarantee that impacts market operation with little observable benefit to consumers, and may be a source of consumer disutility.  The four pillars policy has prompted increased vertical integration within the sector, particularly in the area of mortgage products.  There are sufficient merger protections provided by Part IV of the Competition and Consumer Act 2010 (Cth).  Competition and contestability arise when there are reasonably low barriers to entry and exit from the sector. It is not clear that low barriers to entry exist in Australia, and evidence to support this view comes from the failure of international banks to gain a significant toehold in the retail banking sector in Australia. One deterrent to entry is the regulatory focus on the four pillars. The authors recognise that this position is at odds with the view of the Financial System Inquiry. However, the rationale in the report of the Inquiry was to prevent mergers, and the current competition law achieves this objective. The paper recommends two specific policies to promote competition in retail banking without the structural intervention that would otherwise be required to improve the intensity of competition in the retail banking sector:  Introduce bank account number portability. This would use ‘know your customer’ and central database systems in a similar form to those that have been used for mobile number portability in Australia for the last decade and a half.  Introduce customer access to data held by banks to allow third parties to compare bank offerings across all banks.  Significantly, these two recommendations are consistent with the productivity proposals issued by the UK Government in July 2015. The research paper also examines crowd equity funding as a disruptive force in the banking sector, and recommends that crowd equity funding be permitted with the following safeguards:  ASIC should take an active role in monitoring crowd equity funding and be willing to sue in case of fraudulent action.  Any intermediary online platform should have a financial services licence with limited duty of care.  There should be a cap for business raisings through crowd equity funding of $2 million in a 12-month period.  Crowd equity funding is a social phenomenon. Through its use of social media, it has attracted people who have previously never been interested in investing in companies. Instead of being feared, this interest should be nurtured through the promotion of investors’ financial education