The Effect of the Emergence of the Internet on the Competitive Landscape of the Banking Industry
Without question, the internet has had a profound effect on a number of fields and the banking industry is no exception. It is equally without doubt that the rise of the use of the internet will arguably affect the competitive outlook of the banking industry in tremendous ways. This article thus seeks to make a lucid exposition and luminous illustration of these profound effects that the internet is likely to have on the competitive outlook of the banking industry.
As aptly put by Irene Siaw and Alec Yu, one of the most profound effects of the rise of internet use in the global commercial sector is the avalanche of information that is available just at the click of a button. Availability of information especially to customers introduces new dynamics to the competitive outlook of the banking industry. To start with, for banks to remain competitive, they must ensure that information on their products is easily and readily available in the internet. Indeed, the era of going to seek for information from customer service officers or bank agents in the banks is on its deathbed if not already dead and buried due to the advent of the internet.
The concept of E-commerce also gives the customer a lot of power as compared to pre-internet times when customers were at the mercy of banks in carrying out their transactions. What does this portend for the competitive outlook of the banking industry? First and foremost, the banks that will have a competitive edge in this new competitive landscape are those that will be able to best respond to the increasing bargaining power of customers as a result of the rise of internet use which has enhanced accessibility to information. Customers will have more information from various banks in a fast, cheap and efficient way thus banks will be forced to look for new innovative ways to attract and retain customers in such a competitive landscape.
A further dimension in which the rise of internet use has affected the competitive banking landscape is due to the fact that it has greatly reduced and in some instances totally eliminated the need for physical banking facilities. Indeed, all one needs to access internet banking is a working computer installed with the requisite software and access to the internet. This has changed the competitive landscape completely as banks can no longer claim to have a competitive edge by reason of having the largest asset base in terms of physical assets. The nature of the competitive landscape then is such that it is the bank which will adopt best to the opportunities presented by the internet for attracting new customers that will have the competitive edge. In the era of internet, physical assets no longer become a factor when considering the competitive outlook of the banking industry.
The rise of internet use will also likely affect the competitive advantage of the banking industry as it will tremendously reduce the need and number of personnel required to provide services in the banking industry. It must be remembered that for any bank to have a competitive advantage over its competitors, it must have a lean staff as this will translate to lower wage costs and thus higher savings and profitability. This is what internet banking brings to the competitive banking landscape as internet banking requires much less staff to operationalize. Additionally, internet banking eliminates most of the bureaucratic processes associated with physical banking thus enabling a seamless banking process for the customer. Certainly, customers will prefer a seamless banking experience as compared to one with numerous bottlenecks in the name of bureaucracy which characterize the traditional physical banking experience.
References
Great Britain: Parliament:House of Commons: Treasury Commitee, 2011. Competition and Choice in Retail Banking:Ninth Report of Session 2010-2011. London: The Stationery Office.
Ian, S., 2009. Online Banking and the Role of Crm. Munich: GRIN Verlag.
Oyungerel, P., 2008. Online Banking: The Effect of Prior Experience on Online Banking Acceptance in Mongolia. Saarbucken: VDM Publishing.
Siaw , I. & Yu, A., 2004. An Analysis of the Impact of the Internet on Competition in the Banking Industry, using Porter""?s Five Forces Model. International Journal of Management, 21(4), pp. 514-523.
