How digitalisation is changing the competitive dynamics in banking

Swedish Bankers’ Association has asked Copenhagen Economics to analyse how digitalisation is changing the competitive dynamics in Swedish banking.

Up until now, we find that digitalisation has primarily focused on digitalising existing analogue processes, which has paved the way for lower costs, e.g. closing of branches, online switching processes, etc.

In these years, we see that the financial industry is starting to exploit the possibilities of new entirely digitalised processes, which gradually opens up the value chain in banking, changing the very structures of the financial sector. As a result, we expect increasing competitive pressure on the entire value chain and limited opportunities for cross-selling.

As such, the competition starts to move from being on an institutional level, i.e. “the choice of bank”, to being on each part of the value chain for each product.

The opening of the value chain also implies increasingly blurred lines in the financial sector as non-bank players to a greater extent will enter the banking market while banks more easily can offer products not within the traditional banking sphere.

The study is commissioned by the Swedish Bankers’ Association.