Banking Industry Post-2008 Financial Crisis


Banking Sector Background

The banking industry is considered to presently be in a better place compared to how it was during and after the 2008 financial crisis, with the Banker (2021) estimating the total global assets at $124 trillion as of 2018. In 2021, Ibisworld estimates that the market size of the UK banking industry when measured by revenue is £95.5 billion (IBISWorld, 2021). Commercial and retail banks generate revenue by way of charging interest on loans, while a second revenue source is represented by non-interest income from overdraft and card fees. The lingering effects of the 2008 financial crisis continuously influence the Banking industry. Over the past decade, the banking industry`s expansion has been hampered by tight lending criteria and stringent regulatory requirements. UK banks, have, however, as a result of these regulations strengthened their capital position in the recent years and built up liquidity buffers that are relatively solid and improved the quality of the assets in their balance sheets (BANK OF ENGLAND, 2021). The Covid-19 pandemic has also greatly affected the operation of banks as the pandemic froze the housing market and led operating costs within the industry to go up. Particularly, there were surges in credit impairment charges as banks made available reserves for purposes of absorbing possible loses in credit. There are anticipations that the industry will grow in the coming years (IBISWorld, 2021). With the gradual recovery of disposable incomes and consumer confidence slowly improves, there will be a rebound in the housing market that will be greatly supported by government policies.


It is evident that the banking industry has, over the years, undergone and continues to undergo notable transformations. Various forces have been attributed to these changes, including technological innovations, the deregulation of the financial and banking services, international and global competition as well as corporate behavior changes (Coelho and Henseler, 2012). Just like all other sectors, the banking sector is significantly affected by globalization and other structural, regulatory and technological factors that have resulted in noteworthy changes in the banking industry which have, in turn, brought about increased competition among banks (Grigoroudis, Politis and Siskos, 2012).

OakNorth Bank PLC Background; Issues and Challenges and Solutions

OakNorth Bank PLC is a UK bank that provides financial services, including deposits, business and property loans to small and medium sized companies as well as a range of personal savings accounts. The bank has its headquarters in London, UK and has branches in Manchester, Bristol, Birmingham, East Anglia and Leeds ( OakNorth Bank was established and gained regulatory approval (full banking license) from the Financial Conduct Authority and Prudential Regulatory Authority in March, 2015, before beginning deposit taking and lending services in September (Staff, 2021). The bank had, by the end of 2020, 175000 savings clients and had lent billions of pounds to UK businesses (Finextra Research, 2021).

Like all other banks, OakNorth is not free from the impacts of the transformations that the industry has experienced over the years. It is worth noting that that in the banking sector, globalization has played an important role as it brings about new technologies that go a long way in improving banking services and infrastructure and therefore reducing fraudulent activities, new risk management techniques which lead to reduction of costs, development of new products, reduced lead time during the delivery of services, and generally increased confidence in the sector (Potrafke, 2015). Increased globalization of the banking sector also minimizes the occurrence of crisis. On the downside, globalization also leads to increased competition. This competition is related to the costs of services and products, target market, adaptation of technologies, and quick responses (Bucur, 2012). The banking industry is not spared by this increase in competition. The consequence of this cut throat competition is that the bank has been faced with tremendous challenges in relation to its quality of service, customer satisfaction and customer retention. These challenges arise from competing banks regularly updating their services and introducing new products/features with the aim of attracting new clients and also retaining the existing ones (Wonglimpiyarat, 2014). This implies that competitors that release better products/features which clients deem more affordable and suitable for their needs will be able to better retain their clients, while also attracting new ones from those that do not provide features, services or products that effectively meet their needs.

Customer satisfaction is a critical aspect of business since the different customer satisfaction levels differentiate one bank from the other (Zopounidis, 2012). It is for this reason that banks pay close attention to the needs and complaints of their clients, since without customer satisfaction, it would be difficult, if not impossible, for banks to be profitable. Customer satisfaction has been identified as a driver for increased demand of a bank’s services or products and as a key business strategy (Coelho and Henseler, 2012). In addition, it is not only a requirement for success and competitiveness, but also a benchmark for many banks’ standards. OakNorth has experienced challenges ensuring and maintaining its customer satisfaction levels as the clients’ needs and preferences change and as its competitors introduce new innovative features that better address these changing needs and align with the technological innovations of the sector better that OakNorth’s. The evidence for the poor customer satisfaction is drawn from customers negative reviews posted on two different sites; (feefo, n.d.), and (Trustpilot, n.d.). There are complains in these sites of poor customer experiences, commonly mentioned being poor customer service.

Closely related to customer satisfaction is quality of service and customer retention. Quality of service is an operational aspect that bank managers are greatly concerned about since it is a predictor of customer satisfaction and therefore customer loyalty and retention (Kuo, Wu and Deng, 2019; Lai, Griffin and Babin, 2019). Furthermore, quality of service has also been identified as a key contributor of success in any bank (Olorunniwo and Hsu, 2016). Customer satisfaction has also been demonstrated to significantly result in customer retention since clients who approve of the quality of service or products the bank offers are more likely to report customer satisfaction, which in turn influences their loyalty, thus the bank’s ability to retain them (Henning-Thurau and Hansen, 2013). Given the close and rather complex interactions between these variables, and in the face of the increasing transformation, innovations and competition in the industry, OakNorth faces challenges achieving and maintaining quality that meets the clients’ changing needs. This challenge has been compounded by the fact that whereas banks often offer nearly similar products or services, the emergence of tech startups with innovative technologies that gives them competitive advantage has seen some of its once loyal clients moving to these competitors.

As a solution to these challenges, OakNorth should develop or adopt new innovations and introduce innovative and quality products or services that will ensure customer satisfaction, and thus, customer retention (Sit et al., 2009; Wilson, Zeithaml and Bitner, 2018).

Critical Analysis of the Challenges and Solutions to the Challenges Facing OakNorth Bank PLC

2.1 SWOT Analysis

2.1.1 Strengths

OakNorth bank is quite safe. The bank is a member of the Financial Services Compensation Scheme (FSCS) and the first £75,000 one saves with them is entirely protected. FSCS is the United Kingdom`s deposit guarantee scheme (Seyfang and Gilbert-Squires, 2019).

Additionally, in 2017, OakNorth partnered with the British Business Bank in their Help to Grow program a partnership that supports up to £1 Billion of lending to fast growth businesses from any sectors.

2.1.2 Weaknesses

OakNorth`s market share is very low recorded at 0.03%. This denies them a competitive advantage (, 2020).

2.1.3 Opportunities

Currently, the bank only has a presence in the UK, and has the opportunity of expanding its operations to other countries, for example, the U.S, and China.

2.1.4 Threats

OakNorth faces considerable competition from their worthwhile competitors who include; Tandem Money, Judo Capital, Cambridge Counties Bank, Shawbrook Bank, Starling Bank, Atom Bank, Masthaven Bank, and Hampshire Trust Bank. These competitive forces have effects on OakNorth`s strategies as these multiple competitors always react to every other strategic action taken by OakNorth, subsequently forcing OakNorth to react to their strategic moves.

PESTEL Analysis

Political factors

Government laws have an effect on OakNorth and the government is always in a position to intervene in their operations, which makes them susceptible to political influence.

Economic factors

The economy and the banking industry are tied at the hip. The ways through which income flows, has an effect on the amount of capital that OakNorth can access at any given time. In addition, the spending habits of customers, and the reasons why they spend have effects on how they borrow and also their spending habits. Whenever there is inflation within a country, OakNorth would definitely receive the backlash.

Sociocultural factors

There are cultural factors like necessities and buying behaviors that have an effect on the ways through which people see and use banking options. There are always desires among customers for seamless banking experiences. To be

Technological factors

New technologies have been developing that are aimed at allowing customers to transact their banking operations with more ease, without necessarily requiring direct assistance from banks. OakNorth should always ensure that they continuously develop their economic capabilities.

Legal factors

There are relatively strict laws that OakNorth has to follow with regards to consumer laws, privacy, and trade structures.

Environmental factors

OakNorth has been embracing the use of technology in their operations, with their cloud banking services, which effectively translates to a decrease in the use of paper (Mambu, 2020). In effect, that reduces their environmental footprint which is quite positive.

2.2. Challenges

2.2.1. Quality of Service

Gronroos (2004) defines quality of service as an operational construct that comprises both technical aspect (what is delivered) and relational or functional aspect (the manner in which the service is delivered/performed. The main aim of quality of service is to effectively meet and satisfy the needs of clients and given that these needs or preferences vary from one client to another. OakNorth should therefore adopt different service quality strategies which can be tailored to the various needs of its target customers. However, following the regulatory, technological and structural factors that have impacted on the banking sector and resulted in increased competition, service quality which is a key measure of OakNorth’s just like any other organization’s performance has continued to be a key source of concern to the bank. Despite there being a large body of literature that banks could use to explore, modify and enhance their service quality concepts, this is not an easy process given the dynamism of the business environment and scenarios, as well as the shifting market demands, preferences and needs (Barnes, 2007).

2.2.2. Customer Satisfaction and Customer Retention

Customer satisfaction is one aspect of banking operations that cannot be adequately defined without quality of service, given that they co-exist (quality precedes and predicts satisfaction), and a deterioration of quality often results in a deterioration of customer satisfaction (Cronin and Taylor, 1992). This is because clients take into account both functional and technical aspects of quality, instead of each independently, when asked about their satisfaction (Lassar, Manolis and Winsor, 2000). OakNorth, despite having among the best quality standards, faces a challenge ensuring the satisfaction of its customers.

Customer satisfaction is significantly linked to customer loyalty, which is in turn a key contributor to customer retention. According to Reichheld and Sasser (1990), if customers are highly satisfied with the services offered by a bank, the bank will be able to achieve higher customer retention levels.

2.3. Solutions

2.3.1. Quality of Service

In order to address their quality of service challenges, OakNorth should devise strategies that strengthen the customers’ behavioral and attitudinal beliefs that the quality of service they offer is superior to and more competitive than the competitors’. The bank should also develop and introduce new features and service delivery methods that will cement the belief of quality in the customers’ minds (Barnes, 2007).

2.3.2. Customer Satisfaction

As a way of solving its customer satisfaction challenges, OakNorth should consider segmenting its client base and further personalizing customer experience. With extensive competition in the banking industry, it is a fact that customer have choices. It is therefore important for OakNorth to consider personalization and segmentation of services and messaging so that they can stay competitive and even build the trust of their customers. Banks have massive amounts of customer data and should therefore tap into opportunities for personalization. Through the personalization of messaging and services, customers will end up feeling increasingly valued and their engagements with the bank will also, most probably, increase (Solimun and Fernandes, 2018). Through personalization technologies, it also becomes possible for customers to gain immediate access to whatever information they could need, without necessarily having to call the customer service line. In addition, OakNorth becomes better placed to proactively view and manage the journeys of their customers enabling better targeting of individual customers and at individual levels with those services and products that they need.

2.3.3. Customer Retention

Customer loyalty and thus, retention is often predicted by the clients’ belief that they are receiving high value and quality service that is also competitive compared to the competitors’ (Reichheld, 2013). Research has also demonstrated that the adoption of new innovative technology by banks contributes to improving the relationship with their clients and thus facilitating their retention (Barnes, 2007). Banks should also develop and maintain strong relationships with their customers as this is a strategic way of achieving customer loyalty, hence retention (Damke and Pereira, 2004; Perin et al., 2004). OakNorth can achieve customer retention by establishing and maintaining strong and amicable relationships with their clients, availing to them easily accessible and low-interest loans, and improving convenience by minimizing the stress and time spent as customers seek services. It is worth noting that OakNorth has put efforts to improve the experiences of its customers and has in place a customer-self-service solution whose roles include centralizing, managing and deploying support answers and product content across different web, mobile and online banking platforms. As a result of this, they are able to provide quick and timely responses on issues raised by customers, which goes a long way in improving their experiences. The experiences that customers have are key and if not the key, they are competitive differentiators.

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Increased competition in the banking industry has resulted in banks including OakNorth being faced with various challenges, especially with regard to its quality of service, customer satisfaction and customer retention. To fully address these challenges OakNorth will need to take into account its strengths, weaknesses, opportunities and threats. Currently, the banks strengths include its skilled and talented workforce, strong integration of complementary business processes, strong and reliable free cash flow and the diversity and strength of its products and services. Through these, the bank can undertake new and enhanced processes that will improve the quality of its products/services and thus, customer satisfaction and retention. However, OakNorth’s key weaknesses relate to its high employee attrition rates and limited uptake of more advanced technologies. These could limit the effectiveness and success rates of the solutions developed to address the challenges. In relation to opportunities, OakNorth has the opportunity to adopt new and enhanced technologies as well as further diversify and enhance the quality of its products/services. The most notable threat posed to OakNorth in relation to its present challenges include the ever-increasing competition, its competitors development and/or adoption of new innovative technologies that give them a competitive advantage, and the threat to its profitability due to their customers switching to competitors.


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