As is the nature of time, industrieschange and adapt to the current business conditions. So too has the bankingindustry. One of the oldest surviving forms of financial institution banks havebeen around for a pretty long time.
Banks were initially started as a place where people couldstore their riches comfortably and safely. Today, banks have developed intodigital entities that offer financial services and products from the comfort ofyour couch. Yet, the industry still languishes in certain respects.
In this SWOT analysis, we are going to take a peek at the strengths and opportunities that the banking industry can take advantage of. We’ll also look at the weaknesses that the industry suffers from, and the threats that may seek to spend it in the near future.
So, without further ado, let’s dive in and take a close look at the swot analysis of the banking industry.
Table of Contents
Strengths
Following are the key strengths of the banking industry.
One of The Oldest Surviving Industries
With the advent of new technology,whole industries are often wiped out. The banking industry, however, has notbeen so susceptible. It has stood the test of time and helped the human racefor a very long period. As life has evolved, banking has morphed and modifieditself to meet the recent needs. From inculcating the habit of savings tohelping people with financial instruments, banks today play a vital andindispensable role in society.
The Pillar of Financial Stability
The banking industry takes a vitalrole in ensuring the economic prosperity and financial stability of a nation. Bankscontribute to the economy by fostering growth. They help the masses managetheir wealth and become meaningful contributors to the national as well as theinternational economy.
Provider of Financial Instruments
Banks provide their customers with a large number of financial instruments. Some of the various products offered by banks are stocks, bonds, insurance and savings accounts. Further, banks have also adopted and integrated digital technology to provide online banking solutions.
Weaknesses
Below are the 3 major weaknesses of the banking industry.
Susceptibility to Global Economics
The global banking industry isskewed. Europe has cornered over 50% of the worldwide market, making thingspretty unbalanced. Even small changes in the currency exchange rates orspending and borrowing habits of the people of one major nation can cause theentire banking industry to take a hit. Such volatility is not desirable.
High Levels of NPAs
NPAs (Non-Performing Assets) are thebane of the banking industry. NPAs usually denote bad loans that cannot berecovered. This naturally leads to financial losses for the bank. NPAs can havea crippling effect on the banking sector, and the economy as a whole.Developing countries such as India face instances of high NPAs which have dealta severe blow to the banking industry of the nation.
Lack of Rural Coverage
It has been observed that in mostcountries the banking industry focuses mostly on the urban areas, while ruralregions are left neglected. This is a significant weakness in the bankingindustry.
A large percentage of the world’s population still lives invillages. This is more so in developing nations. By not catering to thisdemographic the banks are leaving a significant portion of the world populationout of the ambit of their services.
Opportunities
Here are the opportunities of the banking industry.
Technological Advancements
The banking industry has always been dependent on technology. This is evident in the slew of digital services being offered by banks today. However, instead of resting on their laurels, banks should continue to adopt the latest technological innovations. They should concentrate on bringing out newer products and services in order to attract future generations.
Rural Expansion Opportunities
The limitedpresence in rural areas is one of the weak points of the banking industry. Butit can actually convert this weakness into an opportunity. By expanding intovillages and offering their services to the rural population, banks can expandtheir customer base considerably.
Social Evolution
Human society is evolving both economically and culturally. In this dynamic landscape, the needs and demands of customers with rising income levels are bound to change. Banks need to adapt to this changing society. By providing better services the industry can solidify its place in the future.
Threats
Following are the threats of the banking industry.
Lack of Proper Cyber Security
The modern banking industry isentirely dependent on the cyber-world. Everything is stored digitally whetherit be data storage, monetary transactions or personal information. This makesthe banking industry a prime target for hackers who seek to gain financially byexploiting weaknesses in the digital infrastructure of the banks. Unless thebanks take proper cybersecurity measures to protect their data, they can face aserious threat from cyberspace.
Stiff Competition
Banks worldwide face stiffcompetition. Not only from other banks but also institutions such asNon-Banking Financial Corporations which offer a number of financial productsthat all banks do not. This has led to a shifting of the customer base from thebanks to NBFCs which find greater acceptance among the new breed ofprofessionals.
Global Economic Instability
Currently, the world is goingthrough tough economic times. Trade wars, protectionist policies, and globaldownturns have all had an effect on the international banking system. Unlessthe world economic conditions improve, banks can be facing a dire future.
Conclusion of Swot Analysis of the Banking Industry
The banking industry is a reliableone. It has certainly stood tall against the vagaries of time. When others havedisappeared, banks have adapted themselves to keep up. They have alsocontributed to the economic development of the world in general.
But they have to contend with their own weaknesses such asNPAs and lack of a sufficient rural presence. The good news is that they canwork towards converting these weaknesses into opportunities by ensuring betterservice and expanding into untapped areas.
This will help them to deal better with the global threatsof recessions and intense competition. Another facet that banks must look afteris ensuring that their digital infrastructure is up to date and workingproperly. By doing so the banking industry can guarantee that it continues onits march of prosperity.
