Opinion Article Open Access

Impact of Regulation on Financial Services Providers

Abstract

Digital pundits and research analysts regularly gush about the slew of innovative financial products launched by nonbanking financial services providers almost daily. They’d have us believe that unless traditional banks match the new players with equal degree of innovation, they face extinction. In this paper, we present the counterview that banks have little to fear from these new kids on the block. We then explain how, contrary to popular misconception, most nonbanking players will vanish overnight if banks were to stop operating the rails on top of which most of these new products are built. We go on to examine how regulations restrain banks. In conclusion, we expose a graver threat to banks that’s unconnected to regulation. Good news is, banks can overcome this internal challenge without facing any roadblocks from regulators.

Ketharaman Swaminathan

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