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Is Banking now a Commodity Service?

If you happen to notice of late, all banks now have been relegated to a commodity status.

It doesn't matter which bank you want to do business with, you will find that all of these banks offer very similar services, with very similar fees. 

We can use our ATM cards on the ATM machines of any bank. 

All banks offer internet banking, some easier to use, some not so. 

All banks offer loans for the same stuff  (Auto, home, personal, business). 

All banks offer trading accounts. 

The only differnce is in the service that they offer to their customer. This is the classic situation of a commodity market. 

What does this mean for these banks and more importantly for their customers? 

How can banks differntiate themselves on various other axes? What could potentially be these axes?


Comments: (3)

A Finextra member
A Finextra member 27 May, 2014, 12:471 like 1 like

Retail banking is pretty commoditised and yet in some countries trust in banks is low compared with the disruptive innovators creeping into the payments space. PayPal is a classic example of where the customer buys the payment -yes they pay a fee for using PayPal because they see value in the convenience it affords. So why don't we pay for our banking transactions? 

Mukesh Gupta
Mukesh Gupta - SAP India Pvt ltd - Singapore 27 May, 2014, 19:13Be the first to give this comment the thumbs up 0 likes

Totally agree. I am actually surprised at the number of banks still doing business, with no clear differentiators! 

Maybe one way to differentiate for banks could be to charge for transactions. What can they do to get their customers to pay for the transactions?

I think that the low trust for banks is due to their own mistake. Cost savings and improved efficiencies drove all banks to discourage their customers to visit their branches and hence driving banks to become the faceless, heartless corporate machinery. And once that happens, the trust level automatically goes down.

In my opinion, retail banking is in for an overhaul sometime soon in the future.  

Aravinda Lochanan
Aravinda Lochanan - Oracle Financial services - chennai 05 June, 2014, 08:11Be the first to give this comment the thumbs up 0 likes

Thanks to technology, bank's lined up good number of products on their shelves and somewhere down the line, compromised on human interface.

Clearly, technology channels reaches out to masses quicker and are efficient compared to branch service. I think, looking at technology as an enabler in mass banking and improvised human interface in class banking would be a decent mix of keeping the balance right.

I'd like to think that the current retail banking population is in transitional state and is divided between technology users and pure people relationships.

Not far from now, the future customers could only look at banking as a commodity service.

A couple of statements that I keep remembering from my banking days      " Banking is only mode of payment"  and "Banking is people's business"

Looking at mobile wallets and the increasing absence of human interface in banking, I've started doubting these statements.

Mukesh Gupta


SAP India Pvt ltd

Member since

20 Feb 2013



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