Learning Objectives:

  • Analyse the competitive landscape for banking services.

  • Understand the threats posed by disruptive new entrants.

  • Assess the influence of current and emerging technical developments.

2.1 The Evolving Competitive Landscape

The Macquarie University course requires students to “review the competitive landscape for banking services, including those provided by non-bank entities and ‘shadow banks'”. The University of Leeds module examines “the key business policies and strategies” undertaken by banks. The University of Genoa course covers “megatrend and drivers of change: globalisation, regulation, privatisation, technology, changing in customers’ behaviour, ESG”.

Key Drivers of Change:

  • Globalisation: The increasing interconnectedness of financial markets across borders.

  • Regulation: The impact of Basel III/IV, Dodd-Frank, and other regulatory frameworks on bank behaviour.

  • Privatisation: The shift from state-owned to privately-owned banking institutions in many countries.

  • Technology: The rise of digital banking, FinTech, and the influence of current and emerging technical developments.

  • Changing Customer Behaviour: The shift to digital channels and rising expectations for personalised service.

  • ESG: The growing importance of environmental, social, and governance factors.

2.2 Shadow Banking and Non-Bank Competition

Macquarie University includes “shadow banking” as a key topic. Western Sydney University examines “competition and entry barriers to the industry and the arising challenges and opportunities for existing financial services firms”. Shadow banking refers to non-bank financial intermediaries that perform bank-like functions outside the traditional regulatory framework. This competition requires banks to adapt and innovate.

Types of Shadow Banking Entities:

  • Money Market Funds: Provide short-term funding to financial institutions.

  • Hedge Funds: Engage in a wide range of investment activities.

  • Private Equity Firms: Invest in companies and may provide financing.

  • Peer-to-Peer Lenders: Connect borrowers directly with lenders.

  • FinTech Companies: Provide digital financial services.

2.3 Digital Transformation and FinTech

The University of Genoa course covers the “impact of technology” on bank performance. Glasgow Caledonian University includes the “effect of FinTech on conventional bank model” in its curriculum. Digital transformation and FinTech innovation present both threats and opportunities for traditional banks. The University of Milano-Bicocca course covers “The evolution of payment services” as part of its bank management curriculum.

Key Technology Trends:

  • Digital Banking: The shift from branch-based to digital-first banking.

  • AI and Machine Learning: Transforming customer service, risk management, and operations.

  • Open Banking: API-driven data sharing and integration.

  • Blockchain: Potential applications in payments and trade finance.

  • Cybersecurity: Managing technology risks in banking.

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