As this research has adopted a methodological research philosophy simultaneously believing that there is a reality "independent of the mind", assuming structural similarities, but also that us as researchers are only able to understand what is going on in the social world, if the social structures giving rise to the investigated phenomena are understood (Saunders et al., 2009, p. 114). This research, thus, assumes that social worlds may be largely similar and that generalisations may be made across organisational settings. The way in which to investigate a research phenomenon, however, may be reliant on a deeper understanding into phenomenology of the particulars, due to the complexity of any situation and perceptions around it being lost if simply reduced to generalisations (Saunders et al., 2009).
In practice, this led to our empirical data being primary qualitative data, predominantly collected through semi-structured qualitative interview with participants in the industry. As the resulting product of this explorative research is to generate a generic classification to be applicable for all incumbent banks in the Danish financial market, the number of selected participants and approach with data that has been gathered, may have created implications for the findings. Other approaches with regards to data collection and the target participant group could have been embraced, also potentially influencing the results of the paper. Hence, the number of selected participants and expert opinions in the primary data collection could introduce methodological constraints, albeit being in line with approaches relevant to explorative research studies. It should be recognised, we could have produced different results from other methodological approaches, whilst still adhering to the research question. As previously stated, this could be based on alternative approaches or expansion in data collection and analysis. It could furthermore be the case, when working largely within social constructivism as an interpretivist, that the analysis will always be a matter of subjectivism. This may be present at the level of collection from a semi structured interview and with a purpose to illuminate perceptions of the particulars in a given situation, but also as it arguably requires an extra layer of subjectivism from the researchers. This subjectivism has, however, been reduced due to our structured coding approach.
Overall, it should be recognised that our data collection is somewhat subjectivist in nature, whilst we are generating a generic conceptual framework, which means we could have relied on other types of data, scopes and scale of data collection and analysis, in order to accommodate some of the methodological limitations of this paper. For future research on this paper, it would be recommended that researchers adopt a more structured research approach and rely on multi-methods, as this may be more appropriate for fully exploring the selected research question.
8 Conclusion
Historically, the financial industry for banking services has been undergoing significant changes. Even more so, technology-driven innovations have caused more rapidly changing industry dynamics, due to increased digitalisation adopted by incumbent bank institutions, consumers, and different legislations demanded by European regulative institutions. Specifically, as a consequence, practice shows that the financial sector and the traditional retail bank immensely is being impacted by increased digitalisation, driven by the external environment. Technology is enabling start-up companies to enter the marketplace, and provide services substituting and/or complimenting that of the incumbent retail banks.
In addition to this, the newly implemented European PSD2 legislation with its related XS2A initiative, demands retail banks to partake in Open Banking prescribing a minimum level of data provisioning, allowing for third parties and competitors to access key banking data. This already is changing the incumbent banks monopolistic positioning by altering their strategic product offerings and services portfolio. Furthermore, new dominant players are showing an interest in the financial services industry, such as established companies like GAFA showing an interest in initiating their own payment services, effectively forcing the incumbent retail banks to reconsider their business model strategy in order to gain and/or sustain competitive advantage. As the financial industry is undergoing such dramatic changes caused by new regulations and increased adoption of digital technological innovations, how the traditional bank should appropriate its business model strategy to adapt and compete in the new reality drove the motivation for this research. In surveying the literary fields related to digitalisation in the financial industry and, in particular, the incumbent retail banks in Denmark, it was found that vast amounts of academic literature are effectively addressing the impacts on processes, competitive landscape, product offerings and distinct aspects of the retail banking business. However, a gap in the literature was identified regarding the direct impact of digitalisation on the incumbent retail banks’
business model strategy. This led to the overarching research question of how the business model strategy of the traditional bank is impacted by increased digitalisation in the financial sector.
Drawing on concepts from literature on digitalisation in the banking sector, this research sought to gain insight into the pitfalls of current literature failing to discourse specifically the impacts of digitalisation on the business model strategy of the incumbent retail banks, in this research termed “traditional banks”.
Through an explorative qualitative interview-based study approach, this research proposes a conceptual framework for the transformation of the business model strategies available to the Danish incumbent retail banks as they are impacted by key digitisation drivers in the European financial sector. Primary empirical data has been collected to explore the research question and bring forward the conceptual framework.
Based on the findings identified in the literature review, three overarching theoretical conceptualisations stood out as significantly appropriate for investigating the research question. Hence, the empirical data was analysed using the theoretical conceptualisations of respectively Andrioupoulos and Lewis (2009), Osterwalder, Pigneur & Clark (2010), and Iansiti and Levien (2014) in combination as this enabled analysing the business model, strategic intent, and industry dynamics of the incumbent retail bank in Denmark altogether, allowing a greater level of comprehensiveness for exploring the research question and providing representational findings for this. Thus, the complimentary design allowed for exploration of several key aspects influencing the business model strategy of the traditional bank. The initial insights from the findings showed that three overarching drivers of digitalisation, and two distinct dynamics of digitalisation in the industry already has, and further will be, changing the business model strategy of the incumbent retail banks in the Danish sector for financial services. The findings indicate that the basic value proposition towards its customer base will not change dramatically. However, the way in which this will be achieved may be highly impacted by the changing dynamics of the industry, making the incumbent retail banks’ direct customer segment the third-party providers and the current customer base their indirect customer segment. Hence, an increased disintermediation of the traditional bank in the direct customer interface activities is observed. This implies that the basic value proposition will not change, however, the way in which value is produced and delivered, will move from intra-organisationally driven to inter-intra-organisationally driven.
In addition to this, this thesis expects greater ecosystem participation, less monopoly on banking services, and disintermediation of the traditional banks as some of the key dynamics of digitalisation effectively impacting the business model strategy and subsequently the value proposition of the incumbent retail banks. For the incumbent retail banks this entails moving from creating, owning and distributing themselves their services and products into a future scenario prescribing more coopetition in upstream and downstream value chain activities. This further produced insights into a shift in business model strategy, where dual strategic intent geared towards an ambidextrous mode of balancing simultaneously efficiency (exploitation) and innovation (exploration), moving from this being operationalised intra-organisationally into occurring across organisational boundaries. Albeit, this
produces increasingly loose coupling on the direct customer relationship, it arguably produces increasingly tightly coupled unique customer product solutions.
In addition to this, findings revealed four greater areas of transformation for the business model components, activities, and processes. These implies that: (1) data will become ever more of a strategic resource for exploitation and exploration, changing simultaneously the form and function of the traditional bank business model. (2) The traditional bank will, to some extent, be allowed banking as a platform strategy, moving away from fully controlled production and distribution. (3) The customer loyalty and brand affiliation towards the traditional banks may be declining due to the identified dynamics. (4) The industry structure will change to be increasingly geared towards being built around ecosystem relations, cooperation and new value chain constellations further providing new streams of revenue.
Our framework, inferred from academic literature, as it was used to analyse the empirical data enabled us to bring forward a conceptual framework for, how business model strategy of the incumbent retail banks will be impacted, resulting in a classification along the dimensions of production and distribution of products and services and what this means for the traditional bank in terms of ecosystem relations and industry dynamics. This allowed us to identify four overarching business model strategy alternatives available to the incumbent retail banks, if they are to still partake in the marketplace. The classification is presented as a two-by-two matrix along the lines of respectively production and distribution, put in perspective to the industry dynamics and ecosystem relations. In conclusion, this provided the foundation for two overarching alterations serving as prerequisites for adopting either one of the four business model strategy quadrants as presented in the matrix, being that of external orientation and generative capacity in product portfolio offerings.