Shifting Strategy in the Financial Sector

I have worked at PNC bank for about 5 years now in a few different analytical areas. As the article Your strategy needs a Strategy notes, banks fall into the classical strategy. This makes sense since other than the great recession, the sector has been very stable. The banks that survived the crash were able to grow and gain more market share through acquisitions and mergers. The great recession caused some other challenges for banks such as heightened regulation, which is one external factor out of their control. Even with the large influence of the economy on their success, I do tend to agree with financial institutions historically fitting the build as a classic style since it is highly predictive and not very malleable.

After the great recession, the financial industry started to leverage the smart phone technology, which introduced mobile banking. Each bank created their own smart phone app that included different features, such as mobile check deposit. This caters to millennials who want to be able to access their bank accounts anytime to transfer funds, deposit checks, or pay bills. They especially do not want to have to go into a branch, fill out a form, wait in line, and talk to a teller every time they need to make a change to their account. Mobile banking was just the start of the technology boom, which began to shift bank’s strategies from classical to more of a blend with a visionary strategy, and in some cases, a shaping strategy.

The next strategic game-changer for banks are FinTech’s. These are small startup companies that build on a specific niche with new technology and innovation. They have been able to compete with the large banks in certain areas. For example, Rocket Mortgage was able to streamline the entire mortgage application and origination process through a web and app interface. This process improved the customer experience by providing a much easier process than the traditional bank and took some significant market share. Similarly, Venmo created a way for individuals to send money to other people through the internet instantaneously. It made the process of owing a friend a few dollars for splitting a case of beer unneeded. You just needed to open the app and send them money. With some generations rarely carrying cash, this feature became very popular fast. The large banks finally just responded by partnering to create Zelle, which provides a similar product but is built within the banking apps. These are just a few examples of technologies challenging the traditional banking model. Blockchain and Artificial Intelligence (e.g. Amazon’s Alexa) are creating additional opportunities. This current environment of innovation puts banks into more of a visionary strategic style, especially in retail banking. Perhaps, as the article notes toward the end, banking executives need to become flexible in their strategic plans as technology and customer expectations continue to evolve in this new age.