Detailed PESTEL Analysis of Banking Industry
Banking Industry is directly related to the growth of the economy. In EdrawMax’s Pestle Analysis of the banking industry we will find out how political, social, economic, technological & legal factors affect the banking sector.
1. Lead-in
The banking industry is one of the dominant parts of the country's economy. With the rise in population and literacy rate, many people understood the importance of having financial education. Thus, the number of people choosing to take banking services is also increasing, ensuring industry growth. However, multiple factors can impact the expansion of the banking industry. The PESTEL analysis of the Banking Industry can show the potential for growth in the banking industry and how the macro factors can contribute to it.
2. About Banking Industry
2.1 Introduction of Banking Industry
The banking industry is a worldwide organized sector that regulates the money flow in the nation's economy to keep a stable system and act as the reservoir of money for the people. It also helps firms carry out their business by offering them loans. The banking system in a country is usually regulated by government laws (sometimes by both the federal and union government). Other than that, some financial bodies take care of the money flow and risk associated with the banking system. Over the years, the banking industry has reached magnificent customers and created millions of jobs. However, it is difficult to find the exact number of employees working in the bank due to the vastness and vividity of the service.
The global assets the banking industry is dealing with are trillion dollars. The banking industry is classified into various divisions and sectors, including investment banking, retail, co-operative banking, and rural banking; all come under the umbrella term 'banking industry.' After technological advancement, the model of banking is changing. In place of traditional banking, internet banking and mobile wallets are gaining high popularity. The PESTEL analysis of the Banking Industry can show how external factors can affect the banking industry. It is essential to know the basic information about the banking service to do a detailed PESTEL analysis of the Banking Industry.
2.2 Overview of Nintendo
| Company Name: | Bank Industry |
| Number of Employees | 2,027,667 (commercial banking industry in the USA) |
| Area Served | Area Served |
| Assets | $124 trillion (in 2018) |
3. PESTEL analysis of the Banking Industry
Since the banking system is broad and serves an enormous customer base, multiple macro factors impact its growth. The banking industry is very much related to the economy of a country. Therefore, the overall progress of a country is to some extent dependent on the growth of the banking sector. PESTEL analysis of the Banking Industry discusses how the political, economic, social, technological, environmental, and legal factors contribute to the banking business. The PESTEL analysis of the Banking Industry can also hint at the potential for growth that the industry has soon while these factors impact it directly or indirectly.
Political Factors:
A nation's political condition and governmental decisions have a massive impact on the banking industry. In some countries, the government controls the banking sector to ensure a smooth monetary flow in the economy.
- Public deposits their money in the bank to save or invest for the future. The government, therefore, has strict regulations to control the bank business. The federal and state governments can have the power to make decisions regarding the banking system. Therefore, if the government creates favorable laws and conditions, that will be helpful for the banking business.
- The government and financial bodies under government supervision make laws to make the banking system less risky. It gives people the confidence to deposit their money or take loans from the bank.
- Political stability creates the perfect environment for the banking business expansion. Tariffs, taxation, and business restrictions can impact the banking industry.
Economic Factors:
The country's economy is a decisive factor leading to the growth of this banking industry. As banks act as loan providers and depositors, the rise and fall in the economy directly impact the banking industry.
- When the economy falls, the banking industry gets negatively impacted because economic conditions like inflation and recession influence the individual's spending habits. The foreign investors may feel reluctant to invest due to the change in currency conversion rate, thus, affecting the bank's business.
- After the pandemic, many businesses have encouraged their customers to do online transactions. Small organizations use payment methods like credits and debits, which is helpful for the banking industry.
- The banking sector is helping the small business and small-scale industries to grow. The banks provide loans that the firms can use as capital or invest in the infrastructure. It becomes helpful for a country's economy as the small-scale industries or businesses create enough jobs.
Socio-cultural factors:
Social factors impact the banking industry as banking services involve public dealings. The people and their buying habits and preferences influence the banking industry. Here are some ways the socio-cultural factors affect the banking industry -
- Millennials and students prefer to carry their debit and credit cards. Thus, they conduct most of their transactions online. This mindset of using less cash is helpful for the banking industry.
- The rate of financial literacy is going up. Hence, the number of people opting for banking services is gradually growing. Therefore, the number of banks is also increasing. For example, today, payment and cooperative banks serve the varied sectors of society. It is creating a perfectly competitive environment. Customers are getting attracted to better interest rates and customer service.
- The lifestyle of people is changing rapidly. Instead of keeping money at home, many people are choosing banking services to save it. The customers take loans for further investment or education. They are also interested in investing in schemes through banks or have insurance.
Technological factors:
The banking industry is one of the sectors serving a high number of customers. Online banking is gaining popularity, making the banking system highly dependent on technology.
- The banking sector needs an internet connection for their transactions. They use advanced technology to have a secured system to avoid online theft or cons. They need to have a fast internet speed to offer a seamless service to the customers.
- The banks are willing to create a customer-friendly environment, and therefore, they target to offer service anywhere and anytime. They have installed ATMs and opted for mobile banking services so that the customers do not have to arrive at the branch for small transactions.
- Technological advances have helped the bank to provide customers with a safe-and-secured service. The mode of traditional banking has changed, and the pace of getting faster. The banks are using tools like the internet and SMS to keep the customers aware of the transactions.
Environmental factors:
Though the banking industry does not impact the environment directly, there are some indirect effects. The banking industry is changing with the help of advanced technology, and they are concentrating on sustainable practices -
- The banking industry is focusing on mobile banking and mobile wallets, which has decreased the rate of people using traditional transaction methods. The use of credit cards and debit cards is increasing in place of paper currency notes. Many banks have opted for paperless transactions to decrease the use of paper.
- The banking sector is not only looking to create a good brand image but trying to develop environment-friendly habits. Many of them are looking to use renewable energy sources. The use of solar ATMs with rechargeable lithium-polymer batteries is increasing rapidly.
- The banking institutions have decreased the use of harmful chemicals on machines and as cleaning agents. They are also taking part in environment-friendly projects and keeping their locality clean.
Legal factors:
Banks work in close contact with the government and can severely impact the nation's economy. Therefore, several laws govern the operations of the banks. Different countries have different laws, but they can affect the banking industry -
- There are laws to ensure the safety of the money of the general public. The financial organizations set repo and reverse repo rates to keep the money flow steady. The laws see that NPA does not have an enormous effect on the banking industry. For example, the US economy has laws like the Dodd-Frank act, Glass Steagall act, etcetera.
- The banks collect customer information and their details. However, they are tied to privacy and consumer laws, which prevent them from sharing any such personal data of the customers. There are strict laws for banking dealing with local and international customers.
- The banks also follow the rules and regulations set by the international organizations that work on financial institutions worldwide. If a banking institute fails to comply with its laws and regulation, it may face a ban.
4. How to Do a PESTEL Analysis in EdrawMax
- Step - 1: Preparation
- Step - 2: Template Selection
- Step - 3: Add Textual Information
- Step - 4: Customize
- Step - 5: Export & Share
If you are using the offline version of EdrawMax, open the tool in your system. If you wish to access remote files, head to https://www.edrawmax.com/online/ and log in using your registered email address. If this is your first time using the tool, you can register with your personal or professional email address. Go to 'Marketing' diagrams under Business diagram type and click on 'PEST Analysis.'
EdrawMax has thousands of free templates. Head to the Template section on the left and type 'PESTEL Analysis' to see all the pre-built PESTEL Analysis templates like Netflix PESTEL Analysis, Amazon PESTEL Analysis, IKEA PESTEL Analysis, and more. Check the template that resonates closely with your business model. Click on 'Use Immediately' to import the template's contents to the EdrawMax canvas. You can start customizing the PESTEL analysis diagram as per your requirements. If you want to draw the PESTEL analysis diagram from scratch, you can click '+.' It will open up the user-friendly canvas of EdrawMax that has several features that ease your efforts in making PESTEL analysis diagrams.
PESTEL Analysis diagram requires you to add Political, Economic, Sociological, Technological, Legal, and Environmental content so that the reader will understand what influences an organization. Use the PEST symbols from the left side and add the content to your PESTEL analysis diagram.
EdrawMax gives you ample options to customize your PESTEL Analysis diagram. From changing the background to adding content, you can customize the diagram in any way you desire. In addition to this, you can go ahead and change the background color, modify the text, add hyperlinks, add multiple pages, add images, and even add vector-enabled texts to your PESTEL analysis diagram.
Once satisfied with your PESTEL Analysis diagram, you can export it into multiple formats, including Microsoft, JPEG, PNG, Visio, HTML, and more. EdrawMax lets you share your PESTEL Analysis diagram on social media platforms, like Facebook, Twitter, Line, etc.
EdrawMax Online
5. Key Takeaways
PESTEL analysis of the Banking Industry gives an insight into its present condition and future potential to grow. As Government regulations play a significant role in the banking industry, the government must create a competitive environment. The banks should also concentrate on providing top-level customer service. It will help to encourage more customer engagement. The banking sector and economy are tied to each other intricately. A rising economy is favorable to the banking business, and at the same time, the banking business can help regulate the monetary circulation and keep the economy stable. Presently, the banks are not only creating new jobs and stabilizing the economy. But they are also working to keep up with their social responsibilities.
In this guide to analysis of the PESTEL, we saw how easy, effective, and efficient it is to work on a PESTEL analysis once we use EdrawMax templates. This PESTEL Analysis diagram software comes with a free template and customization options that help create wonderful diagrams and ensure your analysis diagrams stand out from the rest. Go ahead EdrawMax Online today to create an amazing PESTEL Analysis diagram for different companies.
Reference
-
Pratap, A., 2022. Pratap, A., 2022., [online]. otesmatic. [online] notesmatic. Available at: https://www.notesmatic.com/banking-industry-pestel-analysis// (Accessed 24 August 2022).
-
Shaw, A., 2022. PESTLE Analysis of Banking Industry | Marketing Tutor., [online]. Marketing Tutor. Available at: https://www.marketingtutor.net/pestle-analysis-of-banking-industry/ (Accessed 24 August 2022).
