High street banking-Impacts of competition on producers and consumers

Economics Homework

High-street banking and the impact of competition on the producers and consumers

What are High-street banks?They are are large retail banks that offer daily banking services (e.g. deposit and checking accounts, cash deposits and withdrawals, and credit facilities) to the public and small to mid-sized businesses. They are banks with many branches spreading into multiple cities and towns.

Recent market trends according to CFIFor the last cou[ple of decades, high street banks have closed many branches following the growing poularity of online and mobile banking. Another trend of the high street banks market has been mergers and takeovers, which leads to market concentration and lack of competition which has resulted in the UK government supporting 'challenger' banks to create a more competitive market. The tecnological advancement of online banking is greatly beneficial to the challenger banks via down-cost savings. It helps to lower the barriers of entry to the market, as well as partially offset the competitive disadvantage to smaller banks due to the lack of EoS.

Economics Homework

Why is competition important in high-street banking? One reason why competition is important is because it leads to better interest and borowing rates for consumers as there is more pressure to attract customers from other banks in order to gain a greater market share and revenue or in many cases to survive as a high-street bank. This impacts most consumers positively as it means they can take advantage of schemes offering special benefits or diretly benefit from a better borrowing rates which will result in a higher standard of living. This will however means that many producers will have to cut costs which may mean increasing productivity as well as redundancies in order to maintain a stable level of productivty but with reduced labour costs. Alternatively, high-street banks can also compete over non-price factors, an example being offering a better customer experience - this may be more important for certain target markets, such as the elderly, in comparison with others as they may not be particulary tech savy and will therefore choose the bank which has local branch with better service. Some banks may also choose to specialise, for example by becoming a high-end bank targeting the wealthy by offering tailored wealth management services etc. Overall, competition is extremely important for the benefit of the consumer and the survival of the high-street bank but it does provide many more positive benefits for the consumer by increasing consumer sovereignty. This does, however, make survival increasingly difficult for high-street banks as they are struggling to compete with online banks which have much lower costs (as they don't have to pay for most rent and can employ less people or more at a lower wage by outsourcing employees to deal with customer service etc. from developing countries with employment laws which benefit the producers massively) and can therefore provide better deals attracting customers from their high-street counterparts.