Question

The banking industry has converged in the past 50 years. What does convergence mean in the context of the banking industry? b) how has it affected the competition in the banking industry? c) what is one regulatory change that has accelerated convergence in the banking industry?

Answer 1

Convergence basically means that there has been a convergence of big names to come and explore and disrupt the banking space. The banking space is becoming digitized like never before. There are things that banks would not have done had competition / disruption had not forced them to do.

b) Competition in the banking system has only gotten stronger day by day. The fintech companies, major business houses, regulatory approvals and policy changes, payment banks, e-wallets, online banking has changed the world for competition. All cross currency, banking services, credit cards i.e. card segment the competition has only gotten tough.

c) The one regulatory change that has accelerated convergence in the banking system is the adoption of crypto-currencies and allowing the payment banks to operate in a level playing field as the normal big banks. This has prompted a large number of players to diversify in the banking space. Technology companies already have an edge in terms of the latest technology and thus their adoption and client onboard is way smoother than many behemoths. This helps them to get the customer easily and some are increasing customer acquisition at never before pace.