1.

Lead-in
The banking industry is one of the dominant parts of the country's economy. With the rise in population and
literacy rate, many people understood the importance of having financial education. Thus, the number of
people choosing to take banking services is also increasing, ensuring industry growth. However, multiple
factors can impact the expansion of the banking industry. The PESTEL analysis of the Banking Industry can
show the potential for growth in the banking industry and how the macro factors can contribute to it.

2. About Banking Industry

2.1 Introduction of Banking Industry
The banking industry is a worldwide organized sector that regulates the money flow in the nation's economy
to keep a stable system and act as the reservoir of money for the people. It also helps firms carry out their
business by offering them loans. The banking system in a country is usually regulated by government laws
(sometimes by both the federal and union government). Other than that, some financial bodies take care of the
money flow and risk associated with the banking system. Over the years, the banking industry has reached
magnificent customers and created millions of jobs. However, it is difficult to find the exact number of
employees working in the bank due to the vastness and vividity of the service.

The global assets the banking industry is dealing with are trillion dollars. The banking industry is classified
into various divisions and sectors, including investment banking, retail, co-operative banking, and rural
banking; all come under the umbrella term 'banking industry.' After technological advancement, the model of
banking is changing. In place of traditional banking, internet banking and mobile wallets are gaining high
popularity. The PESTEL analysis of the Banking Industry can show how external factors can affect the
banking industry. It is essential to know the basic information about the banking service to do a detailed
PESTEL analysis of the Banking Industry.
3. PESTEL analysis of the Banking Industry
Since the banking system is broad and serves an enormous customer base,
multiple macro factors impact its growth. The banking industry is very
much related to the economy of a country. Therefore, the overall progress
of a country is to some extent dependent on the growth of the banking
sector. PESTEL analysis of the Banking Industry discusses how the
political, economic, social, technological, environmental, and legal
factors contribute to the banking business. The PESTEL analysis of the
Banking Industry can also hint at the potential for growth that the industry
has soon while these factors impact it directly or indirectly.

Political Factors:

A nation's political condition and governmental decisions have a massive impact

on the banking industry. In some countries, the government controls the banking
sector to ensure a smooth monetary flow in the economy.

Public deposits their money in the bank to save or invest for the future. The government, therefore, has
strict regulations to control the bank business. The federal and state governments can have the power
to make decisions regarding the banking system. Therefore, if the government creates favourable laws
and conditions, that will be helpful for the banking business.
The government and financial bodies under government supervision make laws to make the banking
system less risky. It gives people the confidence to deposit their money or take loans from the bank.
 Political stability creates the perfect environment for the banking business expansion. Tariffs,
taxation, and business restrictions can impact the banking industry.

Economic Factors:
The country's economy is a decisive factor leading to the growth of this
banking industry. As banks act as loan providers and depositors, the rise and
fall in the economy directly impact the banking industry.

When the economy falls, the banking industry gets negatively impacted because economic conditions
like inflation and recession influence the individual's spending habits. The foreign investors may feel
reluctant to invest due to the change in currency conversion rate, thus, affecting the bank's business.
After the pandemic, many businesses have encouraged their customers to do online transactions.
Small organizations use payment methods like credits and debits, which is helpful for the banking
industry.

The banking sector is helping the small business and small-scale industries to grow. The banks provide
loans that the firms can use as capital or invest in the infrastructure. It becomes helpful for a country's
economy as the small-scale industries or businesses create enough jobs.\

Socio-cultural factors:
Social factors impact the banking industry as banking services involve public
dealings. The people and their buying habits and preferences influence the banking
industry. Here are some ways the socio-cultural factors affect the banking industry
-

Millennials and students prefer to carry their debit and credit cards. Thus, they conduct most of their
transactions online. This mindset of using less cash is helpful for the banking industry.
The rate of financial literacy is going up. Hence, the number of people opting for banking services is
gradually growing. Therefore, the number of banks is also increasing. For example, today, payment
and cooperative banks serve the varied sectors of society. It is creating a perfectly competitive
environment. Customers are getting attracted to better interest rates and customer service.
The lifestyle of people is changing rapidly. Instead of keeping money at home, many people are
choosing banking services to save it. The customers take loans for further investment or education.
They are also interested in investing in schemes through banks or have insurance.
Technological factors:
The banking industry is one of the sectors serving a high number of
customers. Online banking is gaining popularity, making the banking system
highly dependent on technology.

The banking sector needs an internet connection for their transactions. They use advanced technology
to have a secured system to avoid online theft or cons. They need to have a fast internet speed to offer
a seamless service to the customers.

The banks are willing to create a customer-friendly environment, and therefore, they target to offer
service anywhere and anytime. They have installed ATMs and opted for mobile banking services so
that the customers do not have to arrive at the branch for small transactions.
Technological advances have helped the bank to provide customers with a safe-and-secured service.
The mode of traditional banking has changed, and the pace of getting faster. The banks are using tools
like the internet and SMS to keep the customers aware of the transactions.

Environmental factors:
Though the banking industry does not impact the environment directly, there
are some indirect effects. The banking industry is changing with the help of
advanced technology, and they are concentrating on sustainable practices -

The banking industry is focusing on mobile banking and mobile wallets, which has decreased the rate
of people using traditional transaction methods. The use of credit cards and debit cards is increasing in
place of paper currency notes. Many banks have opted for paperless transactions to decrease the use of
paper.
The banking sector is not only looking to create a good brand image but trying to develop environment-
friendly habits. Many of them are looking to use renewable energy sources. The use of solar ATMs
with rechargeable lithium-polymer batteries is increasing rapidly.
The banking institutions have decreased the use of harmful chemicals on machines and as cleaning
agents. They are also taking part in environment-friendly projects and keeping their locality clean.
Legal factors:
Banks work in close contact with the government and can severely impact the
nation's economy. Therefore, several laws govern the operations of the banks.
Different countries have different laws, but they can affect the banking industry
-

There are laws to ensure the safety of the money of the general public. The financial organizations set
repo and reverse repo rates to keep the money flow steady. The laws see that NPA does not have an
enormous effect on the banking industry. For example, the US economy has laws like the Dodd-Frank
act, Glass Steagall act, etcetera.
The banks collect customer information and their details. However, they are tied to privacy and
consumer laws, which prevent them from sharing any such personal data of the customers. There are
strict laws for banking dealing with local and international customers.
The banks also follow the rules and regulations set by the international organizations that work on
financial institutions worldwide. If a banking institute fails to comply with its laws and regulation, it
may face a ban.

Reference:
1. Pratap, A., 2022. Pratap, A., 2022., [online]. osmatic. [online] notesmatic. Available
at: https://www.notesmatic.com/banking-industry-pestel-analysis// (Accessed 24 August 2022).
2. Shaw, A., 2022. PESTLE Analysis of Banking Industry | Marketing Tutor., [online]. Marketing Tutor.
Available at: https://www.marketingtutor.net/pestle-analysis-of-banking-industry/ (Accessed 24
August 2022).