Internal and External Assessment for CIBC Case
One opportunity in the banking sector is open innovation. According to William Chesbrough, open innovation is the use of inflows and outflows of knowledge to accelerate internal innovation and expand markets for external use of innovation, respectively. Open innovation has the potential for bringing in new technologies and ideas from firms’ external environments. At the same time, embracing this opportunity would support the growth of the banking sector as it would allow for the proliferation of ideas and technologies used within firms so that they may be used in the innovation processes of other firms.
Another prospect for the banking industry is the broad market for banking services that the widespread use of smartphones provides. As evidenced by the case study, millennials have a negative attitude towards traditional banks. In contrast, they are inclined towards online banking services. About 73% of millennials were more excited by the financial products that corporations such as Google and PayPal created than the prospect of using traditional banking services.
A major threat that Canadian banks face is the increasing presence of fintechs. These are financial service providers that operate online without supervision or regulation by the superintendents of financial institutions. By offering the range of financial services that banks traditionally provide, all at the convenience of customers, fintechs are successfully taking up the roles conventionally held by banks. Compared to banks, fintechs have a better understanding of mobile technology. Given that they operate online, they do not incur the costs of operating branch networks. Therefore, they have the liberty to concentrate on enhancing customer experience, thereby giving themselves a further edge over traditional banks.
The other threat is that the banking industry is regulated by the government, which requires banks to play by the rules. In the event that these rules impact negatively on the ability by banks to invest in risky ventures, the margins for profits are automatically narrowed.
One of the strengths of the banking sector is a high rate of growth, particularly that recorded in 2016.Essentially, Canadian banks not only experienced record profits in 2016 but were also recording high rates of growth. The trend points to a growing demand for banking services in spite of the rise of fintechs. It is worth noting that although millennials are not attracted to traditional banking, baby boomers and Generation Xers still prefer traditional banking to the financial service that fintechs provide. Although fintechs may eventually overshadow traditional banks, the market for old-style banking services is booming at the moment.
Another strength that places CIBC at an advantage is the large and dependable clientele. The bank is the fifth largest in Canada, with its revenues originating from activities in North America. The bank’s 11 million clients include individuals, small enterprises, corporations, and institutions. Having such a large and dependable clientele is helpful in keeping the bank afloat in situations of economic uncertainty.
The other strength associable with the banking sector is the ability to secure collaboration with competing companies. The concept of “coopetition” gives banks the liberty to collaborate with other banks as well as fintechs. Association gives banks the ability to exploit all the opportunities that are available in the market, thus ensuring that they do not miss out on a particular segment of customers. Due to the possibilities that coopetition provides, banks can invest minimally in research and development and reap the benefits of formidable technologies. Coopetition in the Canadian banking sector may not provide permanent solutions for the banks that seek to meet the needs of every segment of the market it serves, but it is a viable option for an evolving industry. The range of strengths discussed here are all feasible in cementing the bank’s position in the market. It is imperative that the bank takes advantage of each in order to grow its revenues.
A major weakness of the industry is that legacy systems govern transactional processes of banks at the back end, in spite of efforts to move core banking functions to the cloud. Consequently, while customers would prefer exploiting the convenience of their smartphones to do transactions, banks require them to visit branches and ATMs to access funds. Banks could transform this weakness to a strength in future by giving customers the liberty to open bank accounts and perform all banking services without visiting branches.