NATIONAL UNIVERSITY OF SCIENCE AND TECHNOLOGY

FACULTY OF COMMERCE

DEPARTMENT OF BANKING

MASTER OF SCIENCE IN BANKING AND FINANCIAL ECONOMICS

NAME: MOREBLESSING BANDA

STUDENT NUMBER: N02018951Y

MARKETING OF FINANCIAL SERVICES CBU5106

INDIVIDUAL ASSIGNMENTS DUE DATE 30 MAY 2021

QUESTION: IMAGINE YOU ARE A BANK MANAGER, OUTLINE 5 WAYS IN

WHICH NEW TECHNOLOGY LIKE MOBILE PHONE BANKING HAS AFFECTED

BANK’S MARKETING STRATEGIES. [10 MARKS]

Rivalry from existing firms

When a market is made up of a large number of fairly evenly matched competitors, the
industry's overall competitiveness heats up (Masocha, Chiliya and Zindiye, 2011).
Competitors will use price-cutting, enhanced service delivery, and quality-control techniques
prominently. In today's competitive environment, focusing and focussing on the firm's
internal activities as well as its competitors' plans is critical to success. Market competition is
unavoidably heightened when big competitors' strategies are paired with technology
developments in production and product offers. As a result, increased competition in the
financial sector is undeniably fueled by a dynamic interplay between massive technological
adoption by banks. Many see technology as a bank's primary means of decreasing its high-
cost "bricks and mortar" infrastructure.

As a result, banks are always looking for new ideas or better methods to run their companies.
There are a number of new trends in the banking industry that are likely to acquire traction in
the near future. Banks, for example, are almost surely deploying new and more user-friendly
technologies as part of their improved push into retail banking (Proença, Silva and Fernandes,
2010).

Threat of substitute goods/services

When high-quality replacements are available in sufficient quantities and at competitive or

comparable prices, competition increases. Consumers benefit from new goods and services,
improved existing products, enhanced customer service, and often lower prices as a result of
new technologies (Vives, 2020). This is due to the advancement of more cost-effective
manufacturing and distribution technologies. The speed of business has improved due to
rapid advancements in technology, particularly the internet and other speedier
communication and transportation techniques. Banks must consistently accept that
competition is shifting away from physical locations and toward computer-mediated
surroundings.

Industry margins are blurring as channel disintermediation increases, and as a result, products
and services are becoming transferable across industries. In reality, since the substitutability
of financial services has expanded, technology has enlarged the platform on which financial
institutions should compete in the financial industry.

Bargaining power of customers

The amount to which customers wield power through purchasing power has a clear impact on
a market's competitiveness. Customers are likely to compete fiercely when a banking market
is dominated by a small number of clients or when the client consumes a big part of the
bank's services (Dangolani, 2011). Furthermore, when buyers threaten to integrate backwards
in a sector, competition heats up. This has been particularly noticeable among conventional
financial sector clients who are now engaged in certain banking activities.

Customers are ahead of marketers thanks to the rise in mobile phone ownership. The new
client, according to Baker and Bass (2003), is a complicated and challenging creature to
service. Customers have a greater variety of channels through which to communicate with a
brand, which is worsening consumer switching and mobility, resulting in enhanced customer
bargaining power. Because banking is rapidly going online, the impact of technology on bank
customers is becoming more established and pronounced. This same customer has been
exposed to empowering technical breakthroughs on a continuous basis, hence expanding the
customer's reach.

Threat of new entrance

When rivalry arises from sources other than the conventional industry, many industries
become more competitive. New entrants enter the market with the intention of posing a
challenge to existing clientele. Customers have relegated themselves to becoming merely
consumers of services and goods. Customers collaborate with producers in the production of
services/goods in order to achieve higher levels of customer satisfaction. Customers are
increasingly choosing different variants of the same product or service. Modern technologies
benefit from customization, and it is vital for businesses to recognize client needs on an
individual basis (Dangolani, 2011).

The internet allows marketers to view customers on a more personal level, allowing
customers to receive things according to their orders from all over the world (Sonono and
Ortstad, 2017). Customers can co-create value through online services by sharing their
knowledge, interactions, and experiences. Banks should increasingly customise products to
different clients at varying prices and introduce new competitive options to the market. Banks
that fail to adopt technology in a timely manner are suffering and haemorrhaging as a result
of internet-enabled mobile devices. Apart from internet banking, cell phone banking is the
way of the future, with a huge percentage of South Africans owning cell phones and the
opportunity for expanded marketing options. Customers are demanding more and more quick
gratification, which is being reinforced by the usage of new technology.

Bargaining power of suppliers

When suppliers are concentrated or contribute a higher portion of the products purchased by
the client, their bargaining power increases (Anna Arbussa Reixach, 2001). They can bargain
for higher pricing, which affects the bank's profitability. In their competitive contexts, all
firms play the roles of supplier and customer, and each firm must manage its position as both
a customer and a provider. When suppliers threaten to integrate forward, competition from
them increases as well. Fortunately, banks operate in oligopolistic markets and have strong
bargaining power with their suppliers as customers (Masocha, Chiliya and Zindiye, 2011).
REFERENCES

Anna Arbussa Reixach (2001) The Effects of Information and Communication Technologies
on the Banking Sector and the Payments System.

Dangolani, S. K. (2011) ‘The impact of information technology in banking system (a case

study in Bank Keshavarzi IRAN)’, Procedia - Social and Behavioral Sciences, 30, pp. 13–16.
doi: 10.1016/j.sbspro.2011.10.003.

Masocha, R., Chiliya, N. and Zindiye, S. (2011) ‘The impact of technology on competitive
marketing by banks : A case study approach’, African Journal of Marketing Management,
3(March), pp. 68–77.

Proença, J. F., Silva, M. M. and Fernandes, T. (2010) ‘The impact of the Internet upon bank
marketing’, Journal of Financial Services Marketing, 15(2), pp. 160–175. doi:
10.1057/fsm.2010.12.

Sonono, B. and Ortstad, R. (2017) ‘The Effects of the Digital Transformation Process on
Banks ’ Relationship with Customers: Case Study of a Large Swedish Bank’, Uppsala
Universitet Master’s Thesis, p. 62. Available at: http://www.diva-
portal.org/smash/get/diva2:1115984/FULLTEXT01.pdf.

Vives, X. (2020) ‘Digital Disruption in Banking and its Impact on Competition’, Oecd, pp.
1–50. Available at: http://www.oecd.org/daf/competition/digital-disruption-in-financial-
markets.htm.