Question

Some factors that impact the functionality of the banking industry like; political, economic, social, technical, legal, and environmental. Political influence has a great role in the banking and financial services. Banks used to have great influence and power. But the government has launched a high level of regulations to scrutinize the financial institutions. It is because they acquire a great amount of savings of the public. Therefore, banks should obey the laws of the state. In 2020, the regulatory pressure on the banks and financial institutions is changing because of many factors like less globalization, more trade tension, social, and technological concerns. Banks would have to focus on the customers’ related activities. Banks and economy of the country have interrelated relations with each other. A healthy economy of the country is good for the financial and banking industry, vice versa. Local or foreign investments are also good for the economy because it would create many job opportunities. In the case of a mixed economy; where the governments and corporations collaborate to raise funds. But in the 21st century, banks play a very important role in providing loans to businesses and companies. It won’t be wrong if we say that the banks andthe economy of the country can be a good partner. It is because a healthy economy would depend on the smooth running of the banking industry. Banks can’t run their operations if the economy ofthe country isn’t working. In today’s world of technology, most of the businesses are going online. They do most of their personal and business transactions through credit/debit cards of banks. On the other hand, if we look at the growth and performance of the developing countries like India, Malaysia, Nigeria, Hong Kong, and Singapore, then banks have played a huge role in the development. Besides creating many job opportunities, banks in such developing countries also support the small businesses. As we know the socio-cultural factors have a great impact on thefinancial industry.The Changing preferences and choices of the people would make businesses and banks to change their planning and brand strategies. If we look at the attitude and behavior of the people in a certain demographic, then you would see that it has changed a lot in recent times. For instance, millennials (people from the 80s and 90s) tend to use debit/credit cards for transactions. Their businesses would prefer to contact for financial assistance and guidance. That’s how the whole picture of the banking sector is changed in the 21st century, where customer satisfaction and orientation have become a major focus. The technological revolution of the 21st century has brought online banking. Now, almost all financial transactions are carried out through online banking. Not only transactions, but customers can also choose and avail various banking services like insurance, cards, and loans through online. Technology and online banking has made theservices much easier for the customers’ reach. Every bank has a mobile application, which you can use it either to transfer funds or pay your bills. Online banking and technological development have raised some serious issues like privacy, security, trust, and confidentiality. Personal data has become more fragile than ever before in history. If you know the user name and password of someone, then you can transfer all of their money. Double security and checking systems have reduced the risks to a great extent. Factors like eco-friendly and sustainability have become a matter of great significance for the business industry as well. Some banks are also investing a great capital in the development of renewable energy sources. Many banks have taken the step of goingwithout paper transaction, and solar ATMs with rechargeable lithium-polymer battery. The purpose is to clean the environment, and more efficient use of energy. Some of the banks now publish their annual report in the soft form. It also conveys a good brand images, because it reduces the population in many areas. Different countries have different laws and regulations for the banking industry, and they impact the financial industry differently. Even though banks contribute a lot towards employment, and they have to face the labor laws.

1. Summarize the above case study in your view with not more than 300 words?

2. Do the PESTLE analysis of the above case studies as per your understanding?

Answer 1

1)Role of Banking sector

                                   

                                    The above case study describes the role of banking sector in an economy and how it is being influenced by the external factors. It states that a healthy economy is always backed by a stable financial mechanism and banking system and vice versa. Banks plays a major role in providing credit for business and other financial activities. Although banks play a major role in sustaining the stability of an economy, the government imposes various restrictions as they deal with the public wealth. With the advent of 21st century, most of the banking operations have gone online. The use of debit and credit card in transactions have also improved. With the technological revolution that has occurred in the 21st century, most of the banking transactions like insurance, loans etc can be availed online today. The transfer of funds through mobile banking applications have also become a reality. The introduction of such online systems has introduced various privacy and security issues also. The banks are also taking earnest steps today to contribute for better environment. Thus, we can say that banking operations have been revolutionised over the years and it has almost reached its peak in the 21st century. With various laws governing various banking operations across the globe, their operations play a very crucial role today in an economy.

2) A PESTEL analysis is an economical framework that is used to analyse the various effects of Political, Social, Economic, Technological, Environmental and Legal effects on an organisation. As discussed in the case mentioned, the PESTEL analysis and conclusions on the banking sector are as follows

· Political - The banking sector is always influenced by political decisions that are made in the nation and the political developments of a country. Most of the fiscal measures gets affected by the political thoughts of the party in rule and hence affects various functionalities like provision of credit, attracting savings etc

· Economical – As known, the economic changes affect a banking operation. The factors like inflationary and deflationary trends, external exigencies etc affects the functionality of a banking sector like variations in the interest rates, credit disbursement etc.

· Social – Social factors are sum of responses of the society as a whole. The investment patterns of a society, the expenditure trends, saving tendencies etc influences the banking system. For example, increased expenditure in an economy may lead to inflation and thus forces the banks to increase the interest rate and absorb the excess money in the economy.

· Technological – As discussed in the case, the technological progress has helped the banking sector to provide many of its functions like loans, transfers etc through online mechanisms which has helped to revolutionise the banking sector

· Environmental – With disadvantageous environmental practices, the society tends to lose much amount of wealth and has forced the banking sector to provide credit for environmental restructuring. This has reduced the reserve of banks to be made available to many other sectors of the economy.

· Legal – The legal system of nations varies from country to country and the fiscal and monetary mechanisms functions within this legal framework. Thus, legal mechanism of a nation influences the fiscal and monetary policies and hence affects the banking operations of an economy