Technology doesn't always boost banks' competitiveness

Cyrus Daruwala, managing director, IDC Financial Insights

Canadian international bank, Scotiabank, says every business needs to have an edge over rivals and that “a competitive advantage that creates greater value for your business is vital.” It goes on further to lists three kinds of core competitive advantage:

  • Comparative advantage also known as cost advantage, it’s a business’s ability to sell a product or service at a lower price than its competitors.
  • Differential advantage when a business’s products or services differ from its competitors to the point where customers see them as the better choice.
  • Focus or niche advantage where a business is known for a particular skill or expertise which they are the very best at.

Let’s lay down the cards for a bit. Traditionally there is a high barrier to entry in the spaces where large, global banks have played historically. High capital cost, stringent (almost anti-entrepreneur) regulatory requirements, as well as deep and wide knowledge of products and markets make it difficult for new players to come in.

Ergo, financial institutions like JP Morgan, Goldman Sachs and Wells Fargo of the world, invests tactically and strategically on its resources – compute, people, brand and reach – to corner the world’s wealth.

The advent of the Internet and cloud computing was thought to level the playing field a little more evenly by giving smaller players access to the nearly the same computing technology as the big players can afford.

That’s the theory.

While’s success may have spurred the growth of the Internet and the lowering of technology costs, the reality is that global banks continue to wield enormous clout over wealth creating, management and distribution at least until the entry of a new breed of players – non-financial companies that use technology to deliver what the customer wants – value differentiation.

Some may argue that global brands are losing their clout. The arrival of China’s BAT – Baidu, Alibaba and Tencent may have altered the thinking behind what constitutes competitive advantage. But their success may also be a factor of regulator’s strategy to let new market players shakes things up.

But in the world of evolving regulation, everyone, including smaller players, have unique competitive advantages they can take to the next level to play the big boy’s game.

In this exclusive interview with Cyrus Daruwala, managing director, IDC Financial Insights, he explains why technology is NOT the true competitive advantage. It’s a short video so popcorn not required but you can enjoy a sip of your favorite drink.