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The Royal Bank of Scotland Plc, headquartered in Edinburgh, UK, provides banking and financial services to consumers (Partridge, 2021). It is one of the largest chains of financial services providing mortgages, loans, investments, insurance, online banking services, and many other options. Thus, for the year 2021, it has been able to generate a revenue of £3,312 billion in the economy.
The Royal Bank of Scotland follows the banking structure of Oligopoly, which indicates few large banks present in the market-dominating the nation and barriers for others to enter the system. It indicates that the giant and trusted banks present in the market do not provide scope for start-ups to make lucrative survival (Farrell, 2019). Hence, the mentioned bank provides diversified services from a financial perspective, termed to follow the oligopoly structure.
The oligopoly–kinked demand curve indicates interdependency on the firms. Due to price inelastic (P), the price drops, and competitors might lose their market share (AR=D). Therefore, the graph, indicates that the chances of price rigidity are higher. Hence, for retaining its position in the market, the banking system following an oligopoly structure will be able to have Social Networking Potential (SNP) and spend it on R&D (Research and Development). Additionally, the curves indicating (MC) and (MC1) state growth in production and increase in internal economies of scale.
The Royal Bank of Scotland consists of providing financial services to its existing and potential consumers, in relationship with digital transformation. The mentioned banking business focuses on increasing its potentiality and helping people to grow (Beverley, 2022). Thereby, following the banking structure of oligopoly, it has become one of the largest operating banks in the UK.
(statista, 2021)
According to the graph, which has been derived from (statista, 2021), it indicated The Royal Bank of Scotland operated by NatWest Group has been able to make a huge amount of revenue by providing financial services to consumers. Additionally, for the year 2019, it has made £14,253 million which is the highest in the entire decade. Due to the impact of the pandemic situation, it has failed to sustain the revenue, still maintaining the protocol by generating £10,782 million for 2021.
The prime social factor which can be considered for the mentioned bank that it has been able to bind the trust of the consumers (Treanor, 2017). Educated and sophisticated consumers are associated with the bank and render diversified services. With a positive attitude, young to middle-aged consumers are associated with the bank for investing purposes. Additionally, the older demography focuses on having a savings account with reliable interest provided on it. Therefore, every generation availing services is the positive factor considered. Moreover, a lack of banking knowledge might impact the services provided by the bank to the consumers.
Technological factors since a decade in, The Royal Bank of Scotland has increased for providing digitally enhanced services. It has invested £100 million in getting the data analyst technology for banking services (Treanor, 2016). Since, the 1970s, the operative banking system has focused on implementing technology with the support of big data in order to provide services. For instance, the personology team of the banking system implementing technology from Chordiant, which is currently owned by Pegasystems. It focuses on developing the consumer care tool and provides beneficial recommendations to its client for short-term profit. Thus, the positive factor which has impacted banking services is the increased rate of consumers. On the same line, the complexity of the technical services has also impacted regular consumers.
The economic factor for The Royal Bank of Scotland is considered both from the perspective of micro and macro considerations (Fletcher, 2017). After the financial crisis took place in 2008, the bank lost more than 87% of its share value, which impacted the entire banking system. With slow and gradual steps, it has recovered from the situation and again withstands enhanced operations. A stable inflation rate and b monetary policy helped in developing the economic and financial system. Circulation of liquidity in the economy helped in generating employment. The positive aspect which was considered was gradual economic growth. On the other side, the discretionary income of individuals was falling due to increased expenses.
The Royal Bank of Scotland has contributed to promoting renewable resources for the safety and sustainability of the environment. If talking about the past performance of the bank toward the environment (2012- 2017), was recognised as a leading financial institution for contributing to developing the environmental condition (Carrington, 2016). According to reports, in 2020, the bank contributed £10 million to promoting and developing sustainable development. The positive factor which can be considered from such an initiative is that the environment is improving. On the contrary, it will consume a lot of time for developing with the situation, is the negative consideration counted.
The political factor of the UK in terms of business transactions and relations with other countries is quite stable. After the impact of BREXIT, the banking industry has been impacted by £900 billion to the European Union. According to a published report in 2019, BREXIT has impacted about 269 firms including the financial sector (Makortoff, 2019). Therefore, since then the political aspect has helped in growing the CBR (Cross Broader Payment) for meeting the standards of the banking facilities beyond the nation. b and friendly relation has supported the banking system to regulate without any inconvenience, this is the positive aspect considered. Additionally, due to intense political pressure, the banking operations have the chances of getting affected which is the negative factor considered.
The legality of conducting banking and financial services has changed in the last ten years. Structural changes have been identified for introducing different financial products to consumers. Liberalisation is followed for conducting the banking business of The Royal Bank of Scotland (Makortoff, 2019). For illustration, the intellectual copyright and data protection law have been revised according to the growing security reasons in the economy. Therefore, such immense support from the government is considered a positive aspect. On the other side, following and abiding by the legal process has been termed a negative consideration for the banking process.
The ethical factor of the mentioned banking system has been followed for safe keeping the consumers. It has always focused on conducting financial services with the utmost integrity with leading institutions to deal with. The MSP (Merchant Service Provider) has voted for the following legal amendment in order to make the business run more ethically as per the baking systems and scenario. Hence, in such a situation, the possibilities of banking fraud are less, thus creating positivity for consumers. On the other side, avoiding such rules negatively impacts the consumers and the banking services.
Financial leverage:
One of the microeconomic factors which impact, The Royal Bank of Scotland in terms of demand is a fall in the “financial leverage”. Financial leverage is termed as the contribution of banks and people’s money. Therefore, in such cases, if consumers stop making deposits and withdrawing money from the bank, it will affect the growing demand for banking services (Hogan and Pope, 2019).
(Hogan and Pope, 2019)
According to the graph, the demand curve increases with the fall in the price of the products and services, which increases the purchasing power of the consumers. Hence, the vice-versa situation takes place in case of rising in the demand curve.
The determinants of supply which can be considered for the mentioned banking services are improved automation and technology, the expectation of suppliers (bankers), and the cost of the related products (Goyal and Kumar, 2021). All these determinants of supply for the banking services must be maintained for analysing better facilities provided to the consumers. On the other side, for illustration, if the technical automation gets impacted due to any circumstances, the banking business will face a fall in terms of consumers, those who are availing of online services majorly.
(Goyal and Kumar, 2021)
The derived diagram states that the supply curve increases with an increase in demand and cost of the commodities or services. Hence, a fall in the supply indicates the price of certain services or products has fallen in the current market situation.
The competitiveness of the banking business in the UK market is constantly increasing and innovative fintech start-ups taking place. They are focusing on providing effective and timely services to the consumers by charging base prices of interest from the consumers. If considering the technical terms, the rise of fintech and similar financial institutions is increasing the rate of competition for the future and setting higher standards in the competitive market (Giaretta and Chesini, 2021). Therefore, the chances of getting impacted by such flourished banking business in the future are higher to present financial providers.
One of the random economic shocks which are considered is the slow circulation of cash flow in the market due to growing interest rates (Lockwood, Porcelli and Rockey, 2022). Consumers get impacted by the increased rate of expenses in the market. Thus, implementing the fiscal policy of taxation can control the impact on the consumers getting exploited.
Constant change or fluctuation in terms of monetary and fiscal policies impacts the external affairs of The Royal Bank of Scotland. Therefore, the existing consumers also get impacted due to the fluctuation or changes in the rate of interest. This challenge can be eradicated by Monetary Policy Committee (MPC) maintaining stability for the banking consumers on regular basis (Lockwood, Porcelli and Rockey, 2022).
Conclusion
The report has discussed, The Royal Bank of Scotland and its services. STEEPLE Analysis has been demonstrated in the discussion for concluding the changes in the factors. Additionally, a fall in the demand and supply of financial services has been identified in the discussion. Random shocks in the economy and increasing competition have been evaluated effectively in the discussion above.
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