Calin Alina-Alexandra

954D

A brief analysis of Michael Poter’s Five Forces on the banking industry and Revolut

The Five Forces model developed by Michael Porter is a helpful framework for
examining the factors that contribute to competition in a given market. Applying the Five
Forces approach to the banking sector and Revolut allows us to better understand the
competitive environment and the obstacles that it must overcome, as the company’s
success will depend on its ability to continue to innovate and differentiate itself from
competitors.

1. Threat of substitute products or services

The financial industry confronts a substantial threat from alternative products

and services, such as those offered by fintech companies. Revolut provides financial
services comparable to those provided by conventional institutions but with reduced
fees and greater convenience. As more customers embrace digital banking and seek
alternatives to traditional banks, this threat is likely to continue to evolve.

2. Threat of entry

Due to significant regulatory barriers to entry, the threat of introduction into the
banking sector is relatively low. Due to the high costs and stringent regulatory
requirements associated with running a bank, it is challenging for prospective
competitors to enter the market. However, Revolut has broken into the market by
partnering with existing institutions and leveraging technology to provide innovative
financial products and services.

3. Intra-industry competition

Numerous established banks and fintech companies compete for market share in
the financial industry, which is highly competitive. Revolut confronts intense competition
from other digital banks and fintech companies, in addition to traditional banks that are
investing in technology to enhance their offerings, by providing low fees, flexible
currency exchange rates, and an easy-to-use mobile app.

4. Bargaining power of suppliers

 In the finance industry, the bargaining power of suppliers is relatively weak and
banks rely on a variety of service and product providers, including those for IT
infrastructure, regulatory compliance, and marketing. While some suppliers may have
considerable market power in certain areas, the aggregate bargaining power of suppliers
is low. However, by leveraging their customer base and technology, fintech ventures
such as Revolut have been able to negotiate lower fees with their suppliers.

5. Bargaining power of buyers

As consumers have greater access to information and more options for financial
products and services, their bargaining power is growing in the banking industry. Revolut
has been able to attract consumers by providing lower fees and greater convenience,
giving consumers greater bargaining power compared to conventional institutions.