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Retail Banking Industry

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Introduction2 2. Industry Analysis3 2. 1 Industry Background3 2. 2 PEST (EL) analysis4 2. 2. 1 Political4 2. 2. 2 Economic5 2. 2. 3 Social-Cultural8 2. 2. 4 Technological10 2. 2. 5 Environmental11 2. 2. 6 Legal11 2. 3 Summary of the PESTEL analysis11 3. Porter’s Five Forces on retail banking industry. 12 3. 1 Rivalry among Existing Companies13 3. 2 Entry barrier14 3. 3 Supplier power16 3. 4 Buyer power17 3. 5 Availability of Substitute products19 3. 6 Summary of the Porter’s 5 Forces analysis20 4. Conclusion21 5. Method Evaluations and Writing Limitations22 . Reference23 B014351 Xin Li Msc. Finance and Management 2010 Is UK Retail banking industry still ‘charming’? A Report on the UK Retail Banking Industry 1. Introduction Imagine what life would be if there were no banks around us.

Corporations would fail to generate growth without banks financing supports, or the deals between sellers and buyers would all rely on in-person trading and the trust crisis is enlarged even more. Banks, to some extent, are holding the economic fate all around the world and also ensure the people’s daily life to last normally.

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As a learner of business and management, I always need insights into this issue and concern about the banking industry.

Especially, when retail banks come to life, which is an essential element we talk about every day, and when people enter their chosen banks back and forth to make their investing decisions, the retail banking became as my most concerned sector from the whole banking industry. After those ‘dramas’ that are going on the global economy, retail banks developed and survived till now and still are stepping into an unknown future.

Consequently, I believe it’s necessary to deliver a market report about this specified industry. In this report, the main aim is to make an analysis on the remote environment of retail banking and what made UK financial market an attraction for developing retail banks. This report is structured following the below flow chart, and some points which this report is trying to achieve: Part 3 Conclusion ·Industry power ·What future? Part 2 HSBC, Barclays, RBS ·Porter’s Five Forces ·competing strategies Comparison ·Effects on players in this industry Part 1 ·Industry background Remote Environment Analyzing Method ·PESTEL 2. Industry Analysis 2. 1 Industry Background After the establishment of the first bank in England, Bank of England in 1694, which started to play the role as the monetary manager and supply lendings. As time went by, the role was gradually shift to center on the national currency and the Bank of England became the core of British financial system. In the subsequent decades, derived financial services were needed by the customers, such as depositing service, and transaction payments began to rely on the banking system.

Bank didn’t make its appearance in a retail form until a century ago (Congdon, et. al. , 2009). A retail bank is a financial institution who deals with transactions directly with the individuals, servicing saving deposit, mortgage, and transaction among accounts, personal loans, and credit/debit card. Before the year of 2007, retail banks were surrounded in a booming mortgage market from the beginning of the 21st century. During this period, the CAGR (Compound Annual Growth Rate) of some mega countries was all over above 10 %( Figure 1) (Word Retail Banking Report 2009).

Figure 1: Mortgage Market Growth, 2001-2007 (CAGR) Resource from: EMF, Bank of England, US census Bureau etc. This trend drove retail banks to focus on this profitable mortgage products, and this era became a prosperous time for the financial market and the mortgage return were kept growing fast. Unfortunately, in 2007 the credit crisis attacked the world. The big recession started. Firstly, the crisis started from United States and spread to UK soon. During the same year, 2007, the Northern Rock which had run for a whole century demised.

Afterwards, the higher and higher inflation rate and the share prices’ shrinking that were impacted by the credit crisis disturbed the UK financial market, with many corporations’ bankruptcy. UK government had to take the responsibility as a salvation for this huge economic damage. Therefore in 2008, ‘The Banking Bill’ was first taken into account by the House of Commons, aim of which is to protect UK banks from continuously the depositors’ safety. (The Banking Bill 2008) Actions should be taken to change the form of banking system, and firstly ame to the retail banks. The deposit and saving amount have been increasing since 2007 till now, even if there was a little going up in recent years. Under the policy of banking reform, the UK Government still holds its basic principal on keeping the inflation rate stable at a certain normal section and tries to build the confidence of the depositors on the depositing. By last month, April 2011, the inflation reached to 4. 5% with the 2. 5% increase in average VAT (Bank of England).

With all the ups-and-downs to the retail banking market, hopefully this protection bill would work in the future and what on earth was acting as a drive to push this industry like this, it worth a PEST analysis. 2. 2 PEST (EL) analysis 2. 2. 1 Political As financial institutions, retail banks are supervised by the central bank; also known as the bank of England, which determines the economy of the UK. There are several monetary policies on the retail banking industry. First, the monetary supervisions in the last five years placed huge pressure on the UK retail banks’ operating.

Due to the rising of unfair practices, the Office of Fair Trading, and the Treasury, the Competition Commission and the FSA (Financial Service Authority) all keep eyes on this unfairness action. Therefore, these officers are obliged to regulate the transaction processes and provide a transparent service of the UK retail banks to the depositors. A regulation which was most concerned by the UK press was that the charges and the debt fees paid by customers who exceed the overdraft limit should be more public and transparent, because it’s hard for banks to submit evidence of not overcharging.

Next, the Inflation target. The main objective for the financial governance is to keep price stable and slow down the inflation rising. The target was set at 2% to control the price stability, and according to this standard the retail banks should support the government’s goal of 2% inflation rate and provide economic conditions for the outputting growth and the employment rate. And this monetary policy is announced annually as the reference for banks financial services. This policy is a macro economy measure to adjust he financial market, which is directly relevant to the retail banks for setting their interest rate for deposits and debts, and also the quantity of releasing money under quantative easing or shrinking. Another policy enacted by the UK government is the Windfall tax. This tax is levied by the UK government in restraint of the abnormal above-average profits generated in retail banks. Due to the weak market information efficiency, the mega corporations like real-estate, energy companies and of course the banks would gain abnormal considerable profits by taking advantage of the leak of regulations.

The windfall simultaneously tribute more monetary income to the government, which to some extend decrease the preference for UK market as an attractive one. On the other hand, this policy would stimulate the banks to give better customer service. 2. 2. 2 Economic Apparently the retail banking industry is a part of economic sector, and any economic factor could impact on this industry. First economic factor is the mortgage rate mentioned above. Mortgage is a main drive for the UK retail banks since 2001, especially UK market exceeded normal limits of the rate for mortgage debt to the UK GDP.

Under this booming mortgage market, retail banks adopted commercial strategies and economic ones as well. One of the main reasons for the growing mortgage rate is the rising house price which the retail banks provide lending to individuals for purchasing houses on high debts rate. This was profitable for banks but for people, the needs for lending would decrease gradually because of the high cost for the customers and the increasing inflation rate explained below. Second, it’s the inflation rate. With the rising inflation rate, the consuming habits changed.

The money at consumers’ hands valued lower and the products prices increased, which gave rise to the less deposit because depositors would not get as much interests as what they expected. See the inflation rate (CPI) of UK from 2000 to 2011 in Figure 2. Figure 2: Inflation 2000-2011 (UK) Source: ONS Form the Figure 2 we can see that from 2000 to 2005, the CPI were basically drifting nearby 2%. Unfortunately the CPI rocked up to historical 5% at the end of 2008,even followed by a sudden decline thanks to the government’s macroeconomic controlling in 2009. The inflation rate keep rising and almost reached to 4. % last month (2011). On one hand, the profits for retail banks actually shrunk because of the time value of money, and on the other hand the interests for depositors are just like bubble and it cost customers much more to purchasing investing products or they prefer to keep money in hand or spend the money out rather than keep it into the bank accounts. Another factor that affects retail banks market is the disappointed exchange rate. Under the world-wide recession since 2007, the depreciation of both US dollar (USD) and Great Britain Pound (GBP) affected the foreign exchange service of retail banks.

With the development and survival of China economy, the CNY/RMB (Chinese currency) gained not only appreciation but also the pressure of expansion of the bubble economy. The following diagram deals with the exchange rate ups-and-down for GBP to CNY. (Figure 3) Figure 3: GBP/CNY exchange rate since 2005 Apr(Frankfurt) Source: The Titi Tudorancea Bulletin In Figure 3, it dedicates how much CNY could you get for one british pound. We can see that the line descended from the beginning of 2008 and finally reached over 9. 3206 yuan at the end of 2009.

From then on the GBP is still in a depreciation till now and this seriously affect the foreign exchange market and customers prefer to hold other currency. Last but not least, the huge strick of credit crisis since 2007. The credit crunch(aka. Credit crisis) cause the reduction of the access to the loans or banks couldn’t provide lendings under an emergent and tightening situation,and failed to fix the bad debts that caused by the credit crisis. This crisis firstly came from US and finally effect the UK market. So the UK government should regulate the retail bank market and the UK government offer bailouts to the retail banks.

Before that, every retail bank suffered from the first ever hardship of the recession and the market share of each bank declined as its profits. For instance, the EPS and return of HSBC capital in 2008 explains this recession. (See Figure 4) The EPS of HSBC 2008 was 0. 47 dollar pershare, which decrease by 200% compared with the EPS of 2007, and the return on its capital 2008 was nearly one fourth of the one of 2007. In October 2008, the UK government announced to inject ? 200bn into the UK retail banks to aid them to stablise the damaged economic system,and the Treasury claimed to supply another ? 0bn bailouts for RBS,TSB and HBOS,and finally these banks received ? 37bn bailouts which to some extend slow down the fluctuations of banks profits. Figure 4: The Earnings Pershare and Return rate of HSBC in 2008 Source: Annual Report of HSBC 2008 2. 2. 3 Social-Cultural When it come to the Social-Cultural issue, one thing that didn’t fade out from the crowd was the continued high bonus for the bank CEOs,because under the depression of the economy, the banks want to delight the CEOs for their loyalty and hardwork for the banks.

What’s worse, these exuberant bonuses secretly came from the bail out fund supplied by the Bank of England. As a result, the other workers of the retail banks would feel absolutely unfair about this criminal action. This issue did damage the confidence and the belief between the different sector works and lost the trust from the their customers. Another factor that affects the retail banking is the employment rate. After the big recession, the problem of umemployed in UK society became more serious. (Figure 5)

Figure 5: The Unemployment in the UK (1992-2011) and Comparing recessions Source: ONS and http://www. bbc. co. uk/news/10604117 From Figure 5, the unemployment rose up since the 2008-09 recession,which means it’s more urgent for government offer more jobs. On the other hand , although the unemployment increased since the recession, the rate of this recession is lower than those in 1980 and 1990. And it is said that RBS keep the same employ rate as previous rate,they won’t worry about the new cost control because they received the government bailout.

The government is responsible for supplying jobs and works to reduce the unemployed rate,while in the mean time corporations like retail banks rather cut the cost by cutting the employees than generate new vacancies for the unemployed. That’s really a social conflict. Finally,what’s worth mentioning is the deposit quality,which differed by the social profile. As we know the aim for retail banks is to stimulate more and more savings, but the quality of these savings could build harmony relation between banks and customers and construct the trust in the financial transactions. (figure 6).

In figure 6, the customers of HSBC are classified by age profiles,and the line at the left hand represents the number of HSBC customers,and the right one is the average income by with the a certain age group earned. We can conclude that nearly 60% of HSBC’s customer are almose aged from 20 to 65, and most of these people in this age range have stable or maybe high level of average income. This would tribute to the retail banks not only large deposits,but also the good quality of savings. Figure 6: HSBC PFS customer age profile Source: HSBC UK retail banks Report 2009 2. 2. 4 Technological

Move on to the technological issue, there are a lot to discuss. But first remarkable forward moving is the online banking. Online banking’s appearance is for the need of online payments, and online banking became a large part of retail bank service and therefore brought more client for the banks since the internet was widely used. According to the annual report of HSBC 2008, the number of internet banking accounts increased by 16% compared to 2007 and the online transaction amount rised by 18%. Online banking improves the way of banking services, while the online bank is not as secure as customers expected.

Efforts were made by the retail banks to improve the internet banking. HSBC,for example,after so many years of research and development, they launch the security key applied for online bank trascation when you make an online payment, you are asked to submit the PIN number which has already been set on the security key. And this technology is widely used in every kind of online banking to assure the customers’ safety online. Another progress is the credit card PIN number, which is one and only customized for customers,as well as the autographic recognisation of credit card payment.

In addition, with the ‘app’ softwares on smart phone devices like iphone or google Andriod become as a part of our life, many banks release their own app software run on different mobilephone system and provide online service and investing information. Although online banking is the trend for banks to developed in the high scientific technology environment, there are still problems on the online safety to be solved and customers still are victims from the hacker attack and the anti-virus software need to be improved in the future. 2. . 5 Environmental There are barely environmental issue that drive the retail banking industry because the products of retail banks are intangible. But one thing I can relate banks to is the Corporate Social Responsibility. As a coproration, bank take the responsibility to preserve the environment. Many banks cooperate with charity institutions like WWF or some other environmental protection office to contribute themselves on the ecological,educational charity for poverty child,relief aid for earthquake and other natural disasters.

In doing this, retail banks could gain great reputation and this would stimulate the portential clients to choose their services. 2. 2. 6 Legal The most documented financial scandal which happened in US like Enron was take as an impossibility to even take place in UK, because the widely emulation of UK’s Governance model is considered as the best monetary policy and retail banks have confidence in these policy frame. But there is also potential risk like financial crime would similarly happen in UK retail banks.

Retail banking regulators should be aware of this risk, or there would be no turning tables for a huge damage by the rising financial crimes. To cope with this situation, the OFT (Office of Fair trading) suggested that the investment activities should be separated from the retail activities for all the bank industry, which would keep a healthy competition among banks (Murphy 2010). 2. 3 Summary of the PESTEL analysis From above, the PESTEL analysis listed the factors that have tremendous effects on the retail banking industry. These remote environmental issues drive and limit the industry development.

In the political issue, monetary policies rely on the retail banks to stabilize the inflation rate and levier banks for windfall tax which is against the PEAD (post-earning Announcement Drift) or the above-average profits. These policies are proved to the efficient methods for retail banks to aid for. Particularly, after the big recession of 08-09, the financial institutions like retail banks did help the government to pull through this hardship, but at the same time retail banks’ profits and return on capital was the victim under this depression.

In 2011, the Independent Commission suggested the retail banks should be ‘ring-fenced’, followed by the introducing of the Bill of Bank Reforming. In other word, the UK retail bank industry is under the protection of the government, but it turns out there are still some macroeconomic barriers on the way. For instance the high mortgage rate which was arose by the exuberant housing prices where lies a risk of the crush or collapse to the whole financial market; on the other hand , the rising of economic criminal actions like unfair CEO salaries which would destroy the trust between ectors. In addition, it’s necessary for the regulator to reconsider a developed and more mature constitution to supervise nowadays retail banks. The famous economist Huertas (2007) gave his advice about how to regulate the retail banks in the new vision: Regulations that are wide accepted by the consumers, the entry capital should reach a certain level and should be risk-based, and also the whole industry should be more transparent, providing useful information to create a high efficient market. 3. Porter’s Five Forces on retail banking industry.

In this section a deep analysis on the Operating Environment would be expanded and the ultimate explanation about how the profitability of these competitors can be sustainable. Also the comparisons of the competing strategies among the chosen competitors: HSBC, RBS and Barclays, etc. New Entrace Treat According to the Porter’s 5 Forces, the following 5 factors are what shaped into the competing strategies: The Entry barriers, The Supplier Power, The Buyer power, The Potential Substitute Products, and finally the Existing Competitors.

To start this analysis, the main industry/company is the target that was forced by the outer forces around it. Through the comparison of each aspect of the advantages and disadvantages, we could draw a conclusion about how attractive is a market that is suitable for the retail banking industry growing. To illustrate this process of Porter’s 5 forces analysis, see the chart flow below. New entry Rivalry among Existing companies Customers Suppliers Potential Substitutes 3. 1 Rivalry among Existing Companies

It’s an intensive competition market of UK retail banking industry, although there are only a few of big banks competing against each other. The main section they place emphasis on is the price sensitivity and the interest which can at most create for the customers. First Let’s compare the market share of each powerful banks in the UK market: See the Figure 7 below: Figure7. 1: Market value of the main banks of UK (2010) Banks| Market Value (? bn)| HSBC| ? 122. 29 bn market value| Lloyds Banking Group| ? 36. 26 bn market value| Barclays| ? 35. 51 bn market value|

Standard Chartered| ? 31. 42 bn market value| RBS| ? 20. 71 bn market value| Co-operative Bank| ? 39bn| Source: Yahoo Finance UK 2011 I made a pie chart to illustrate further about the portion of each bank’s value in the UK market. (Figure 7. 2) Figure 7. 2: Portion of Market Value From 7. 1 and 7. 2, HSBC apparently shares a half of this pie chare which means ,compared to other existing rivalries, HSBC has the most number of accounts and most share value of this retail banks market. Next to HSBC is Co-operate banks ranked in second portion of this industry.

Because this market value is computed based on a serious of co-operate banks, so the second independent bank of this industry is the Lloyds Banking Group, because the branches of this group consist of TSB, Bank of Scotland etc. RBS is only 7% of share value. 3. 2 Entry barrier According to a review submitted by the OFT UK (OFT1282), the review found out some entry barriers for new entrants to overcome: First, the capital requirements. The high capital requirements for the retail banks to entry UK market would be the first barrier. Although there are few rivalries in this arket, the most of them have significant assets to play this game. The minimum of the capital requirements are determined by the OFT in the UK and the OFT would often goes over the competing conditions and adjust the regulations to stimulate more intensive competition. The capital requirement standard is decided and set by the Basel II. After the discussion of the most recent Basel meeting, the regulator tended to change the weighted-capital requirement ratio from 2% to 7%, which represents the portion of the ordinary equity on the assets.

That means a bank should hold at or above 7% of its asset in common shares to entry the UK retail banking industry. But what I believe is that any bank would entry the UK market it has already reached the requirements set by OFT. The OFT Review also found that there should be adequate source and inputs to service in the retail banking industry, because the new entrants always find it difficult to expand their market shares and to attract more customers. The reason why the individual customers neglect the new banks is their loyalty to the local high street banks is built and hard to switch to a new one.

Therefore, the threat from the new entrants is ranked ‘moderate’. On the other hand, it’s difficult for retail banks to quit the banking market because most of the existing banks that are the high street banks will prepare plenty of money to close their branches, not to mention quit the market. So, in a word, it’s easier to enter the UK retail banking industry than exiting from it. The branding identity also is involved in the Entry barriers. As what has been explained above, customers have more confidence in the local high street banks, because the branding of each bank has deeply bare in their mind.

Let’s compare the branding healthy index of some mainstream banks in UK. The statistics are computed by HSBC and recorded in the HSBC 2009 UK retail banking overview. (Figure 8 and 9) Figure 8: Brand Health Index 2009 Figure 9: Customer Recommendation Index 2009 Source of Figure 8 and 9: HSBC UK retail banks overview 2009 What can be concluded from the diagram that HSBC enjoys high branding identity and the brand healthy index is greater than other banks. HSBC has the majority of the bank accounts held by customers?

Customers prefer to recommend the HSBC to receive financial services. 3. 3 Supplier power The Bank of England is the supplier to the retail banks in UK, because retail banks finances from the Bank of England and at the same time are regulated by it. Although the Bank of England is able to impact and limit the interest rates and regulate the fee charged for customers’ service of retail banks, the retail banks is still having power to determine their interest rates drift a little with the reasonable section.

The reason is that under these monetary regulations, there is just a few of retail bank in UK and this freedom enable these banks to compete with each other by ‘Price war’. Therefore, the supplier power of the Bank of England is ranked ‘medium/moderate’ too. Another supplier is the customers or here they are called depositors. Banks supply loan to the individual investors and a part of bank’s profits is from the charge fee of transaction like foreign exchange and money transferring services and ultimately from the debt interests from the loans.

Here I compared the See Figure 10: Figure 10: the UK retail deposit market share 2009 Source: Tax payers’ alliance We can see that the HBOS had the most deposit which is nearly 16% of the whole market. This means HBOS is more powerful in this supplier input contributions. HBOS therefore has the advantage of high quantity of savings from the depositors and more competitive than other banks. So the customers as suppliers are essential to the retail banking supplying chains. The supplier’s power is strong here. 3. 4 Buyer power

Buyers to the retail banking industry are definitely the individual customers or investors. They would prefer better deals after comparing the different banks and to receive the certain services. Here is a comparison of the mortgage service to illustrate (Figure 11) the customers’ bargain power and the price sensitivity of the RBS (upper), HSBC (Lower Left), and the Barclays (Lower right). Figure 11: Mortgage Products Options from RBS, HSBC and Barclays. Source: Main sectional Web page of each bank. (Links see reference)

We can see from the 3 diagrams, the 3 high street banks offers so many options only for 2 year Fixed Mortgage deals based on different initial interest rate, follow on rate and rated different in the APR the comparison of overall cost. In HSBC, the mortgage deals is classified by the Maximum loan to the valuation to divide the 2 year fixed deals, and offers discount or special offer to the premier customers which is slightly distinguished from the new customers. Apparently, Barclays notice the competitive factor of price sensitivity and then lists the application fees for customers’ reference.

While the other two banks divided the deals by the minimum of the deposits, which enable the customers to easily reach the standard condition when applying for a loan to purchase houses. So this evidence proves that the bargain power for the customers in retail banking industry is strong. From the buyers’ profits angle, these retail banks have focused on the price sensitivity issue as well. For example, HSBC have a fixed saving plan for the savers: An 8% of interest rate for an initial month saving of ? 250, and subsequent ? 250 each month for the rest of the year, i. e. n total of 12*250=3000 pound in the fixed accounts for a year. At the end of the year, you would get a gross interest of 8% on this investment, which would be nicer than an investment of 3000 pound into the account at one time and get lower interest rate. HSBC does encourage every kind of investing for customers’ financing plan. Overviewed all the other banks’ interest rates and other investment tools, there is barely too much difference among each other on the profits. After all these profits are limited not only by the service form, but also depend on the macroeconomic surroundings.

To conclude in this section, since the bargain power of customers is strong and the profits of buyers don’t differ too much, the power of buyers is ‘moderate to strong’. 3. 5 Availability of Substitute products As we all know, there are other financial institutions that investor can resort to like Stock market and the bonds market. But this would not become potential substitute products for the retail banking service. Firstly, it is because the stocks and bonds market are mostly faced with the higher class or the middle class of the society. This social group is only counted as a small part of the population.

In addition, the functions of different banks are separate. For instance the investment banking places the focus on the corporation lending and bond issuing, which are under both very high risk and high return. However, the retail banking industry mainly mission is to absorbing deposits and providing mortgage loans for individuals, which is at a low availability of substation. In other word, every kind of banks does their own jobs separately, offering different services to meet the customers’ needs. One thing occurs to me is that online payment like PayPal is a rising star and gradually comes into our daily life.

PayPal don’t own ‘concrete’ branches like HSBC or Barclays do. Its service is only engaged in online security payment. I doubt whether this fantastic online payment system would get stronger enough to replace the internet banking accounts services of HSBC or Barclays. So the conclusion of the availability of substitute products is marked ‘Low’ 3. 6 Summary of the Porter’s 5 Forces analysis To sum up, whatever the existing banks, HSBC, Barclays, RBS, or other co-operate banks, they have already enjoyed market shares themselves.

The price battle is still on, and these banks strive for gaining more market share and delivering better services for the customer, but what could be told from the rivalry arena, HSBC has the most accounts all around the UK, enjoying highest recommendation in this retail banking industry. HSBC uses its own secret weapon of high quality service and various investment deals to attract customers, which always enhances the intention of the competition. As Huertas suggested, the industry should be open to the public and what is concluded above is the modest entry barrier effect.

Although the required capital standard rose, there is still a slight chance of the new entrant jump into this market and get a market share. This reminds me of the Chinese ICBC and BOC that are the high street retail banks in China residence into the UK banking industry, but they are targeting at most of the Chinese customers in UK. At the aspect of Supplier, the Bank of England still have power over the retail banks. However, due to the few number of the player in this industry, the supplier power should be weakened to create more space for their flexible internal financial operating.

Nevertheless, the depositors as the supplier for retail banks are holding more power on the supply chains. The strong bargain power and the sensitivity of the prices push the retail banks more buyer controlling. Whatever the dazzling saving interests or the variety mortgage loans deal provided by the retail banks, they give more options to the customers to choose the best deal, which would also push the intention of competition in this industry. Finally, there is barely treat of substitute in this retail banking industry because of the derived and separate functions of different banks like investment banks and wholesale banks. . Conclusion It was the golden time for retail banking industry from the beginning of new century and before 2007 crisis’s coming and crush this glory. The retail banking industry grown up and came into maturity within the last several decades, and the structure of this industry we see today was gradually built from then on. Banks have survived from the previous two recessions in history, and the monetary policies are kept being improved to fit the developing pace. After 2007, the global credit crisis disturbed the retail banking industry again.

The higher and higher inflation rate, the depreciation of GBP, the profits and share prices of these retail banks fluctuated tremendously. The government is aware of the necessary banking reform and building a fence to protect the depositors’ benefits from the attack of the crisis. Despite the politic drives, the retail banking regulators should be warned the potential financial crime, regardless of the ‘widely-appreciated’ governance policies. If not, the consequence is the damage to the image of retail banks and what’s worse is losing the confidence and trust from the customers.

However, it’s glad to see the advanced technology has been applied to retail banks and it did reclaimed the new market for every retail bank, and it keeps getting better and one day the informational economy would rule the world. As an very open market, UK retail banking industry swept the obstacles for the new entrants to stimulate the competition intention. The high street banks that already enjoyed market share and delighted the customers by their high quality services, though they still highly regulated by the OFT and Bank of England.

In the short term, there is no threat of replacement for this unique retailing service in the financial services. We can see the efforts made by the government to resume the loss generated during the global recession. The retail banking industry is in its maturity and still is a promising market to focus on. The future of retail banks depends on how the banking reform policy would work and whether the fence could be build to protect the retail banking industry. But in a word, I still feel that the UK retail banking industry is an attractive market and the economists are glad to see more competitors ‘battle around’ on stage. . Method Evaluations and Writing Limitations Two methods were applied in this report, one is the PEST (EL)-the remove environmental analysis and the other is Porter’s 5 Forces-the operating environment. PEST analysis put insights in the retail banking industry from 4 different angles, which are combined together to evaluate the macroeconomic market where the players/competitors operate. In my opinion, the PEST is the first step of researching the retail banking market; actually the remote environment is not as ideal as expected.

More actions should be taken to look over the practical market and make further analysis. As for the Porter’s 5 forces, it’s a simple methodology but the utility of it is wide. It gives suggestions on the new entrants, supplying advices and reference for retail banks to expand their services and make financial decisions. It also dedicates the competition conditions in this market to give directions for the competing activities. Most importantly, the two industry analysis method should be combined together when researching the attraction of an industry. I would work when they are used together.

The limitation of this report I think is that at some point, like social-culture issue in the PEST analysis, there is nearly very few factors that occurs to me, which makes the social or such as environmental explanation a little bit pale. The reason is the implications of the retail banks’ products; they are more abstract and intangible. It’s very hard to even generate ideas about it. And I would do more horizontal contrasts among the existing rivalries factor with high comparability if I didn’t struggle with the page count. 6. Reference Bank of England, Monetary Policy Framework, ttp://www. bankofengland. co. uk/monetarypolicy/framework. htm accessed on 12th May, 2011. Banking Act 2009 http://www. legislation. gov. uk/ukpga/2009/1/pdfs/ukpga_20090001_en. pdf accessed on 12th May, 2011. Banking reform – protecting depositors: a discussion paper October 2007 http://www. fsa. gov. uk/pubs/discussion/banking_reform. pdf accessed on 16th May, 2011. BBC News, UK set to reform bank regulation http://news. bbc. co. uk/1/hi/business/8139752. stm accessed on 21st May, 2011. BBC News, Retail banks should be ring-fenced, says commission http://www. bbc. co. k/news/business-13032403 accessed on 12th May, 2011. Be Investors,Bonuses justified or exuberant http://www. beinvestors. com/bonuses-justified-or-exuberant/ accessed on 20th May, 2011. Capital Requirements http://en. wikipedia. org/wiki/Capital_requirement accessed on 12th April, 2011. Congdon, T. , Goodhart, C. a. E. , Eisenbeis, R. A. , Kaufman, G. G. , Hamalainen, P. , Lastra, R. M. , Llewellyn, D. T. , Mayes, D. G. , Wood, G. , Milne, A. & Onado, M. , 2009. The Failure of Northern Rock-A Multidimensional Case Study. Ed. ,SUERF-The European Money and Finance Forum.

Financial Advice, Bank regulators agree new capital requirements http://www. financialadvice. co. uk/news/tax/89922-bank-regulators-agree-new-capital-requirements. html accessed on 12th May, 2011. History of the Bank of England http://www. bankofengland. co. uk/about/history/index. htm#1 accessed on 16th April, 2011. HSBC, MARCH 2010 HSBC UK Retail Banking2009 Annual Results http://www. hsbc. com/1/content/assets/investor_relations/100317_ukretail. pdf accessed on 20th May, 2011. HSBC Holdings plc Annual Report and Accounts 2008 http://www. hsbc. com/1/content/assets/investor_relations/hsbc2008ara0. df accessed on 20th April, 2011. HSBC, Regular saving http://www. hsbc. co. uk/1/2/personal/savings/regular-saver accessed on 20 April, 2011. HSBC, Retail Banking and Wealth Management. Investor Day. 11 May 2011 http://www. hsbc. com/1/content/assets/investor_relations/strategy_day/2011/110511_strategy_day_thurston. pdf accessed on 20th May, 2011. Huertas, T. 2007. The Future of Retail Banking in the UK. The Institute of Economic Affairs’ 10th Anniversary Conference. Investopedia, Windfall Tax http://www. investopedia. com/terms/w/windfalltax. asp accessed on 20th April, 2011.

Llewellyn, D. T. (2005), “Trust and Confidence in financial services: a strategic challenge”, Journal of Financial Regulation and Compliance, Vol. 13, No. 4, pp. 333-46. Mortgage Rate Of RBS, HSBC and Barclays http://www. rbs. co. uk/personal/mortgages/g2/fixed-rate. ashx https://mortgages. hsbc. co. uk/mortgage-products http://barclays. co. uk/Mortgages/Fixedratemortgages/P1242557963470 All accessed on 20th May, 2011. Murphy, M. & Jenkins, P. 2010. Retail banks face radical shake-up. Financial Times. http://www. ft. com/cms/s/0/6127becc-c7c0-11df-8683-00144feab49a,s01=1. tml accessed on 20th April, 2011. OFT, Review of barriers to entry expansion and exit in retail banking http://www. oft. gov. uk/shared_oft/personal-current-accounts/oft1282 accessed on 21st May, 2011. Tax Payers’ Alliance, Crock Escape Plans http://www. taxpayersalliance. com/2007/12/10 accessed on 20th May, 2011. United Kingdom Parliament, The Banking Bill http://www. publications. parliament. uk/pa/cm200708/cmbills/147/2008147. pdf accessed on 12th May, 2011. world retail banking report 09 http://www. keieiken. co. jp/services/financial/WRBR09/img/WRBR2009_English. pdf accessed on 12th April, 2011.

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Retail Banking Industry. (2016, Nov 13). Retrieved from https://graduateway.com/retail-banking-industry/

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