Transformation of Banks and Bank Services

This paper analyzes the transformation of banks driven by innovations in financial products and in information technology, the liberalization of financial markets, and changes in bank regulation. A bank faces various strategic choices including its positioning in the life cycle of financial products and the range of products to be supplied. A peculiarity of the life cycle of a financial product is its demystification, characterized by its unbundling and private bundling of customers, and the marketization, characterized by the development of liquid and efficient markets for product components. Diversity in bank strategies is explained by differences in exogenous factors and in banks' abilities to manage demand-side economies and supply-side diseconomies of scope.