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

Service Quality and Customer Loyalty in a Post-Crisis Context. Prediction-Oriented Modeling to Enhance the Particular Importance of a Social and Sustainable Approach

Research into the influence of service quality on customer loyalty has typically focused on confirming isolated direct causal influences regarding particular dimensions of quality, usually undertaken in the context of positive, firm-customer relations. The present study extends analysis of these factors through a new lens. First, the study was undertaken in a market context following a crisis that has had far-reaching consequences for customers’ relational behaviors. We explore the case of the Spanish banking industry, a sector that accurately reflects these new relational conditions, including a rising demand for more socially responsible banking. Second, we propose a holistic model that combines the effects of four key factors associated with service quality (outcome, personnel, servicescape and social qualities). We also apply an innovative predictive methodological technique using partial least squares (PLS) and qualitative comparative analysis (QCA) that enables us not only to determine the direct causal effects among variables, but also to consider different scenarios in which to predict customer loyalty. The results highlight the role of outcome and social qualities. The novelty of the social qualities factor helps to underscore the importance of social, ethical and sustainable practices to customer loyalty, although personnel and servicescape qualities must also be present to improve the predictive capability of service quality on loyalty

An Empirical Study on Innovative Business Strategies - Key to Progress in the Emerging Economies with Special Reference to Yes Bank

AbstractToday competing successfully in emerging markets has become the key to a good and effective corporate strategy and to grow and sustain profitably in these markets it is essential to opt for a strategy based upon innovation blended with entirely new set of skills, organizational structures, new concepts, products and services that serves to the specific requirements of the market, keeping in mind the cost factor. The objectives of the present research were: (i) To understand how the various innovative strategies like knowledge banking initiated by Yes Bank is helping the bank to progress and sustain its position in the Indian Banking sector and (ii) The customer's perception about the innovative products and services offered by Yes Bank. All the constructs were measured using Multiple Item Rating Scales. To ensure content validity the measures were assessed by five academics so that the respondents would understand the question correctly. To measure the innovativeness of the bank 20 variables have been considered for Branch Banking Services and 25 variables for the Corporate and Commercial Banking. Two sets of different questionnaires have been framed respectively. Total of 150 customers have been contacted for the research purpose. The data collected has been analyzed using various statistical tools to check the validity of the proposed hypothesis. The paper will throw light on the various innovative strategies adopted by Yes bank to sustain itself and to attain growth profitably. The paper also give an insight towards the customers’ perception towards the Bank's new concepts, products and services which makes the bank an Innovative Success in an emerging economy like India

THE IMPACT OF MARKET ORIENTATION ON ORGANIZATIONAL PERFORMANCE: EMPIRICAL EVIDENCE FROM BANKING SECTOR OF PAKISTAN

The free market economy demands that organizations should be competitive. Achieving competitive advantage organization needs to adapt to the new environment and technological changes and also focus on strategies according to the market needs and wants. A dynamic organization should consider strategic orientation for achieving organizational goals. Therefore, the purpose of this study is to investigate the link between market orientation and organization performance in the banking sector of Pakistan. Total sample size consists of 200 branches of Commercial Banks of Pakistan located in Khyber Pakhtunkhwa province, was analyzed after collecting 171 questionnaires from the respondents. One questionnaire per branch from regional, senior and branch Manager is collected. Simple descriptive statistics, Pearson correlation coefficient, and regression are have been employed for the analysis. The results indicate that, association between market orientation and performance of the commercial banks of Pakistan is positive correlated and statistically significant. The Limitation is that convenience sampling is used for the selection of the sample; therefore future researchers may use randomized sampling techniques to have wider generalizability

Bank Efficiency and Share Prices in China: Empirical Evidence from a Three-Stage Banking Model

This paper examines for the first time the relationship between China banks’ efficiency and its share price performance. Our analysis consists of three parts. First, we calculate the annual share price returns of the banks for each year between 1997 and 2006. Then we employ Data Envelopment Analysis (DEA) Window Analysis method, first proposed by Charnes et al. (1985) to estimate the efficiency of the banks. Finally, we estimate the annual share price returns over the change in efficiency, while controlling for other bank specific traits. The empirical findings suggest that large China banks have exhibited higher technical and pure technical efficiency levels compared to their small and medium sized bank counterparts, while the medium sized banks have exhibited higher scale efficiency. The relationship between China banks’ efficiency and share price performance suggest that bank efficiency estimates derived from the DEA Window Analysis method contributes significant information towards share price returns beyond that provided by financial information.Bank Efficiency, Share Prices, DEA Window Analysis, China

Service quality measurement in the internet context: A proposed model

The survival of any organisation in a highly competitive environment depends on its ability to provide the best service quality to its existing customers as the quality of service is a key factor in the success of any organisation. It is well established that the measurement of service quality is an important procedure for the improvement of the success and performance of any organisation. Facts indicate that more attention is needed toward developing an industry-specific scale for measuring customer service quality within the still-developing sector of Internet-based self-service technologies. The main objectives of this research paper are two-fold; firstly, to review comprehensively previous and contemporary literature on service quality measurement and to discuss the key issues on the development of an industry-specific scale for measuring customer service quality in the specific context of Internet-based self-service technologies, secondly, to propose a conceptual model for service quality perceptions of Internet-based self-service technologies through identifying its key antecedents and consequences. The findings of this study will be significant for both scholars and practitioners in this area as it provides a deep understanding of the way customers evaluate services provided via self-service technologies

Performance of financial institutions in Bhutan

The Kingdom of Bhutan is a small landlocked country in South Asia, located in the eastern Himalayas, and bordered by India and China. Bhutan is a small and fragile economy with a population of about 687,000. Nevertheless, its banking system plays an essential role in the growth and development of the country. This paper analyzes the financial performance, the development and growth of bank and non-bank financial institutions of Bhutan for the period 1999-2008 using both traditional and data envelopment analysis (DEA). The DEA analysis shows that financial institutions in are efficient and Bhutan National Bank has been the most efficient one. Overall, the paper finds that the ROE of the financial institutions in Bhutan are comparable to the international banks.Bhutan, Financial institutions, Performance, Deposit, Net income

The Examination on Mobile Banking’s Use Behavior of Retired Chinese in Shaoxing

This study aims to determine the factors that affect how retired Chinese customers use mobile banking. The conceptual framework focuses on the relationship between perceived usefulness, trust, pricing value, user satisfaction, behavioral intention and use behavior of mobile banking applications. The researcher employed quantitative method to distribute questionnaires to 450 retired Chinese in Shaoxing, who have been using the Agricultural Bank of China (ABC), China Construction Bank (CCB), and Industrial and Commercial Bank of China (ICBC)’s mobile banking applications. The nonprobability sample includes judgmental, quota, convenience sampling. Confirmatory Factor Analysis (CFA) and Structural Equation Modelling (SEM) were used for data analysis, including model fit analysis, reliability and construct validity. The results show that perceived usefulness, pricing value, trust, and user satisfaction have significant impacts on behavioral intention, and perceived usefulness has a significant impact on user satisfaction, while behavioral intention has a significant impact on user behavior. Six hypotheses were accepted to fulfill research objectives. Therefore, mobile banking application development needs to pay more attention to the perceived usefulness, pricing value, trust, behavioral intention, and user satisfaction aspects of the research and development efforts

The impact of customer relationship management on enhancing the customers loan satisfaction in commercial banks in Cameroon.

CRM is a strategy and business process encompassing many technologies by which firms acquire, manage, and serve customers. The goal of a bank implementing a CRM strategy is to gather and organize both data and knowledge about customers in order to provide support to advisers, salesforce, customer service representatives, and probably end customers. Therefore, this research examined the impact of customer relationship management activities in the commercial banks in Cameroon, in order to evaluate the customer satisfaction on loan acquisition. CRM solutions are very much in high demand, especially since financial services institutions want to provide as much transparency and customized service to customer as possible in order to enhance their satisfaction. CRM systems automate critical sales, marketing, and client service activities at a financial institution. Keyword: banks, customer relationship management, customer satisfaction, loan acquisition DOI: 10.7176/EJBM/11-12-23 Publication date: April 30th 201