The Disintermediation of the Traditional Bank: Modelling a Conceptual Framework for the Incumbent Retail Bank Business Model Strategy, Post Open Banking.

Abstract

To fill out an identified gap in academic literature, this thesis demonstrates how increasing digitalisation in the financial sector will impact the business model strategy of the incumbent retail bank. In doing so, the thesis illuminates the transformation in the traditional banks’ business model strategy, currently and as it is impacted by key digitalisation drivers, to effectively bring forward strategic avenues the bank can pursue to remain competitive. Historically, the incumbent retail bank business model strategy has been characterised by having direct control of its entire value chain, pushing products and services to its customer segment(s), operationalised in a highly monopolistic industry. Guided by an explorative research design, this thesis adopts a qualitative interview-based methodological approach with primary data collected from industry experts. Based on a critical literature review of related academic research in combination with selected theoretical conceptualisations, the empirical data was coded and analysed to effectively bring forward a broad conceptual framework. The structure of the findings was based on the selected theoretical conceptualisations, altogether enabling a comprehensive overview of the current incumbent bank business model strategy, as well as the expected impacts from increased digitalisation, with primary reference to the business model canvas. In compliment to this, the notion of ambidexterity was used to portray the business model activities in relation to the bank’s strategic intent, customer orientation and drivers, enabling the canvas model activities to be put into a broader perspective. Four predominant facets of business model strategy transformation were identified, including 1) Data becoming a strategic resource, 2) Platform as a strategy, 3) Customer loyalty and brand affiliation and, 4) Industry structure. Resulting from the findings, the discussion brings forward a conceptual framework outlining four business model strategies available to the incumbent traditional bank, post Open Banking, enabling it to gain/sustain competitive advantage in the industry. These are represented on a two-by-two matrix consisting of four quadrants, based on the degree to which the bank is owning or outsourcing respectively its production and/or distribution of its products and services. Subsequently, the concept of ecosystems is relied upon to relate business model strategy findings in relation to external impacts and dynamics from the environment. This resulted in two identified pre-requisites for competing on either of the four strategies. Consequently, the thesis concludes by explicating the implications to the conceptual frameworks’ practical application, the contributions to academic literature, the methodological implications, and proposals for future research on the phenomenon