Business models, business strategy and innovation.

this paper has shown how the framing of retail banking can affect what is visible and open to debate.
The point is not to simply replace one frame with another, but to open up alternative ways of
looking at problems and to find points of intervention so that the field of stakeholder interests is
cranked open. The dominant framing of the UK retail banking sector as being insufficiently
competitive clearly points to key features of the market, namely, concentration and the
unwillingness or inability of customers to change their provider. The reframing of retail banking does
not mean that these features are irrelevant; rather it puts them into a context which offers a
different interrogation of the problem. Thus, it is not simply that the UK industry is highly
concentrated. Rather, the monoculture of shareholder-owned banks pursue mimetic behaviours
intended to improve return on equity, but these create the conditions for opacity, mis-selling and a
business model overly-dependent on property lending. Tackling this is likely to require not a more
competitive market but a different conception of the purpose of banking and of stakeholder
interests; and a willingness to keep a utility service out of the realm of financialization. In this
respect, introducing business model analysis into the debate about banking reform puts into practice
the calls by Willmott (2012) and others for knowledge that can make contributions to debates about
public interest.
The reform of retail banking requires political support and there are many reasons to be cautious
about the possibilities for change, given the interests around banking and finance (Engelen et al.
2011). Writing on a related problem, the reform of finance as a discipline in the wake of the global
financial crisis, Gendron and Smith-Lacroix (2015) argue that despite high stakes and the possibility
of paradigmatic diversity, mainstream thinking continues to resist change. This can be seen as part
of a wider resilience of global finance within a form of neoliberal capitalism that has been
reinvigorated by the crisis rather than stopped in its tracks (Chabrak and Gendron 2015). To
understand why, in a specific instance such as UK retail banking, the political appetite for reform has
been so weak, the concept of framing is helpful. As Entman (1993) notes (using the illustration of
debate that took place in the US before the first Iraq war) moving debate outside the established
frame can be difficult because it requires a challenge to ‘the bounds of acceptable discourse’ (p.55).
A ‘tacit consensus’ between elites serves to limit the options that can be discussed: in this case, the
tacit consent relates to the suitability of shareholder-value driven business models in the provision
of utility retail banking services. Pressure to deliver higher shareholder returns leads to nearcontinuous attempts to reduce costs and increase revenues. While banks deploy differentiated
marketing and other policies, the underlying business model has much in common: as a
consequence, customers have limited choice between banks whose mimetic models are
characterised by opacity, confusion, cross-subsidy and cross-selling (including mis-selling).
If the underlying problem of the business model is the expectations of shareholders, interpreted as
rate of return targets, an obvious response is to directly challenge the dominance of financialised
business models. However, while there are significant pockets of dissent about the ideology of
shareholder value, which variously challenge the legal basis for shareholder primacy and the
practices of financialised firms that are focused on share price or other short-term indicators (see for
example Stout 2012; Martin 2011), these remain non-mainstream views. Any major shift in
corporate behaviour is likely to be slow as shareholder value is so entrenched. A pragmatic response
could be to move some banking activity outside of the domain of shareholder value on the basis that
access to basic banking services is a pre-requisite for social and economic participation for citizens,
just as business customers require supportive banks. Different kinds of ownership and governance
could allow stakeholder interests to be rearranged and outcomes to be less detrimental to bank
The most obvious implication of shifting from a competition to a business model framing is to
challenge the assumption that having more banks would necessarily improve choice and outcomes
for customers. If the sectoral business model is mimetic, in that the players copy each other’s moves
and there is relatively little to distinguish between them, adding more players will make little
difference to customers. However, a competition between business models would be more
significant. This might include banks with a more distinct regional or local identity, banks that were
part of other organisations, like the Post Office, or a revival of mutuals. To be significant, such
alternatives need to have scale and political support. However, new business models could also be
made distinctive by creating and supporting banks serving a wider set of interests. Building capacity
and expertise in local business lending would be a distinctive approach for regionally-based banks; or,
creating links between the savings of citizens and the need for social investment in local and regional
projects so that savings are not simply channelled into the housing market but are put to a more
socially-productive use. Developing these or other ideas is a significant and complex task that
requires a political and organisational commitment to changing business models.
Even without a significant improvement in the choice of retail banks, there are certainly areas where
retail banking model changes would create customer benefits. For example, transparency about the
cost of bank accounts: this could include an explicit statement about charges and an unbundling of
services so consumers can choose which services they require and understand the associated
charges. Regressive cross-subsidy would be avoided, so that overdrafts are not an opportunity to
charge very high fees to subsidise in-credit customers. Fees and charges could reflect costs to the
banks of providing basic banking services (deposits, savings and transactions), with the provision of
simple accounts at low charges for those who wanted them. More radically, banks could be required
to adopt a progressive charging principle that allowed lower (or nil) fees on accounts for those with
lower balances. Such decisions clearly reflect the social importance of banking: a critical business
model analysis opens up a space for debate about retail banking.