Pestle analysis of Financial services industry. The financial services industry offers a vast number of financial services to the government, businesses, companies, and individuals. Some of the main products and services of the financial services industry are as follows;
- Business Loan
- Capital raising
- Revolving credit
- Risk management
- Term loan
- Cash management
- Saving accounts
- Recurring deposit account
- Money market accounts
- Mortgage
- Personal loan
- Time deposits
- Current accounts
- Cheque books
- NEFT
- ATM card
According to an estimate, the market size of the financial services industry was 22.5 trillion dollars by the end of 2022. It is generating employment worth 19.7 million dollars; its growth rate is 6.2%.
Some of the top brands in the financial services industry are as follows;
- China construction bank
- World bank
- International monetary fund (IMF)
- Bank of America
- CitiBank
- Wells Fargo
- JPMorgan Chase
- Standard Charter Bank
- Royal Bank of Scotland
- HSBC
Today, we’ll discuss the pestle analysis of financial services industry. It is going to analyze the external political, economic, social, technological, legal, and environmental factors. Here’s the pestle analysis of financial services industry;
Political Factors Impacting Financial Services Industry
Some of the key political factors in the pestle analysis of Financial Services Industry are as follows;
Government Regulations
Banks and financial institutions operate under the pre-described rules and regulations of the government like interest rate, trade deficit, deposit policy, etc. I understand the role of government in the regularization of the banking industry. But the extra and holistic involvement of the government and other institutions would disrupt the flow of the financial services industry.
Interference
The British government introduced a new policy of issuing immediate loans to businesses impacted by the pandemic crisis. Such policies are good for businesses, but not for the financial industry; because financial institutions have to analyze various factors before issuing a loan.
Economical Factors Affecting Financial Services Industry
Some of the key economical factors in the pestle analysis of Financial Services Industry are as follows;
Economic Recession
Economic recession directly impacts the growth and development of the financial industry. A high unemployment rate, lower purchasing power, high-interest rate, and high saving would decrease spending in the country. Ultimately, the financial services industry would suffer due to limited transactions, low-profit rates, and various other factors.
Monopoly
The banking and financial industry comprises a great number of wealthy partners and investors, and they lay the foundation of financial institutions. They are too big to fall, and they have a monopoly in the global financial industry. However, when any of the banks falls or goes bankrupt, then other banks jump in and save it from falling. The monopoly of the financial services industry has made it nearly impossible for other small financial companies to get a hold of the market.
Social Factors Impacting Financial Services Industry
Some of the main social factors in the pestle analysis of Financial Services Industry are as follows;
Demographic & Lifestyle
The needs, wishes, and lifestyles of the different demographic of people are different. For instance, the elderly population is increasing in the US and they demand healthcare, pension, retirement, and other financial services. On the other hand, young people don’t want these things; rather their needs and demands are different. The financial industry should offer different types of services for the young demographic.
Cultural
Cultural factors play a significant role in the demand and sale of the financial service industry. For instance, the usage of credit cards and online shopping cards is increasing. Some people are willing to accept debt and other financial services, and others won’t because their faith, belief, and circumstances won’t allow it.
Bank Accounts
It means the total number of people has got their bank accounts in a specific country, and it would suggest the growth and proliferation of the financial industry. According to an estimate, approximately 99% of the people have got their bank accounts in countries like Germany, Australia, New Zealand, Netherlands, Canada, Sweden, Norway, Finland, and Denmark. They all use financial services now and then.
On the other hand, approximately 10% of the people have got their bank accounts in countries like the Philippines, Egypt, Vietnam, Morocco, Chad, Niger, and Madagascar. When a few people have got their bank accounts, then they would use limited financial services.
Technological Factors Affecting Financial Services Industry
Some of the key technological factors in the pestle analysis of Financial Services Industry are as follows;
Digitalization
We are living in a world of internet and technology. The tech era has also transformed the financial services industry in terms of net banking, digital application, mobile banking, automated tools, card payment, and so many other transaction features. It is no doubt tech features are highly beneficial, but they require a huge investment.
Tech Issues
Tech features are good but they carry a lot of risk of cybersecurity and tech glitches. For the smooth running of financial institutions, companies need to hire tech staff for maintenance. AI allows them to make accurate predictions and the right financial decision that is beneficial for the company.
Legal Factors Impacting Financial Services Industry
Some of the main legal factors in the pestle analysis of Financial Services Industry are as follows;
Legalities
The legalities and regulations of different countries are different for the financial industry. Usually, the central bank regulates the banks and financial institutions and they need to follow their rules like taxation, transaction fee, and other regulations. If the central bank finds them guilty of fraud and other violations, they would have to pay a huge amount of fines and penalties.
Environmental Factors Affecting Financial Services Industry
Some of the key environmental factors in the pestle analysis of Financial Services Industry are as follows;
Paperless Banking
Many banks and financial institutions are moving towards paperless banking, and they are shifting their operations online. It is a great step towards the reduction of environmental pollution, and they don’t have to invest a lot of resources in the physical infrastructure.
Conclusion: Financial Services Industry PESTLE Analysis Example Company
After an in-depth study of pestle analysis of financial services industry; we have realized that financial services play a significant role in our daily lives. If you are learning about the external environmental impact on the financial industry, then you should keep in mind the abovementioned macro-environmental external political, economical, social, technological, legal, and environmental factors impacting the company.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.
