research paper on the banking sector

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• Published: 18 June 2021

Financial technology and the future of banking

• Daniel Broby   ORCID: orcid.org/0000-0001-5482-0766 1  

Financial Innovation volume  7 , Article number:  47 ( 2021 ) Cite this article

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This paper presents an analytical framework that describes the business model of banks. It draws on the classical theory of banking and the literature on digital transformation. It provides an explanation for existing trends and, by extending the theory of the banking firm, it illustrates how financial intermediation will be impacted by innovative financial technology applications. It further reviews the options that established banks will have to consider in order to mitigate the threat to their profitability. Deposit taking and lending are considered in the context of the challenge made from shadow banking and the all-digital banks. The paper contributes to an understanding of the future of banking, providing a framework for scholarly empirical investigation. In the discussion, four possible strategies are proposed for market participants, (1) customer retention, (2) customer acquisition, (3) banking as a service and (4) social media payment platforms. It is concluded that, in an increasingly digital world, trust will remain at the core of banking. That said, liquidity transformation will still have an important role to play. The nature of banking and financial services, however, will change dramatically.

Introduction

The bank of the future will have several different manifestations. This paper extends theory to explain the impact of financial technology and the Internet on the nature of banking. It provides an analytical framework for academic investigation, highlighting the trends that are shaping scholarly research into these dynamics. To do this, it re-examines the nature of financial intermediation and transactions. It explains how digital banking will be structurally, as well as physically, different from the banks described in the literature to date. It does this by extending the contribution of Klein ( 1971 ), on the theory of the banking firm. It presents suggested strategies for incumbent, and challenger banks, and how banking as a service and social media payment will reshape the competitive landscape.

The banking industry has been evolving since Banca Monte dei Paschi di Siena opened its doors in 1472. Its leveraged business model has proved very scalable over time, but it is now facing new challenges. Firstly, its book to capital ratios, as documented by Berger et al ( 1995 ), have been consistently falling since 1840. This trend continues as competition has increased. In the past decade, the industry has experienced declines in profitability as measured by return on tangible equity. This is partly the result of falling leverage and fee income and partly due to the net interest margin (connected to traditional lending activity). These trends accelerated following the 2008 financial crisis. At the same time, technology has made banks more competitive. Advances in digital technology are changing the very nature of banking. Banks are now distributing services via mobile technology. A prolonged period of very low interest rates is also having an impact. To sustain their profitability, Brei et al. ( 2020 ) note that many banks have increased their emphasis on fee-generating services.

As Fama ( 1980 ) explains, a bank is an intermediary. The Internet is, however, changing the way financial service providers conduct their role. It is fundamentally changing the nature of the banking. This in turn is changing the nature of banking services, and the way those services are delivered. As a consequence, in order to compete in the changing digital landscape, banks have to adapt. The banks of the future, both incumbents and challengers, need to address liquidity transformation, data, trust, competition, and the digitalization of financial services. Against this backdrop, incumbent banks are focused on reinventing themselves. The challenger banks are, however, starting with a blank canvas. The research questions that these dynamics pose need to be investigated within the context of the theory of banking, hence the need to revise the existing analytical framework.

Banks perform payment and transfer functions for an economy. The Internet can now facilitate and even perform these functions. It is changing the way that transactions are recorded on ledgers and is facilitating both public and private digital currencies. In the past, banks operated in a world of information asymmetry between themselves and their borrowers (clients), but this is changing. This differential gave one bank an advantage over another due to its knowledge about its clients. The digital transformation that financial technology brings reduces this advantage, as this information can be digitally analyzed.

Even the nature of deposits is being transformed. Banks in the future will have to accept deposits and process transactions made in digital form, either Central Bank Digital Currencies (CBDC) or cryptocurrencies. This presents a number of issues: (1) it changes the way financial services will be delivered, (2) it requires a discussion on resilience, security and competition in payments, (3) it provides a building block for better cross border money transfers and (4) it raises the question of private and public issuance of money. Braggion et al ( 2018 ) consider whether these represent a threat to financial stability.

The academic study of banking began with Edgeworth ( 1888 ). He postulated that it is based on probability. In this respect, the nature of the business model depends on the probability that a bank will not be called upon to meet all its liabilities at the same time. This allows banks to lend more than they have in deposits. Because of the resultant mismatch between long term assets and short-term liabilities, a bank’s capital structure is very sensitive to liquidity trade-offs. This is explained by Diamond and Rajan ( 2000 ). They explain that this makes a bank a’relationship lender’. In effect, they suggest a bank is an intermediary that has borrowed from other investors.

Diamond and Rajan ( 2000 ) argue a lender can negotiate repayment obligations and that a bank benefits from its knowledge of the customer. As shall be shown, the new generation of digital challenger banks do not have the same tradeoffs or knowledge of the customer. They operate more like a broker providing a platform for banking services. This suggests that there will be more than one type of bank in the future and several different payment protocols. It also suggests that banks will have to data mine customer information to improve their understanding of a client’s financial needs.

The key focus of Diamond and Rajan ( 2000 ), however, was to position a traditional bank is an intermediary. Gurley and Shaw ( 1956 ) describe how the customer relationship means a bank can borrow funds by way of deposits (liabilities) and subsequently use them to lend or invest (assets). In facilitating this mediation, they provide a service whereby they store money and provide a mechanism to transmit money. With improvements in financial technology, however, money can be stored digitally, lenders and investors can source funds directly over the internet, and money transfer can be done digitally.

A review of financial technology and banking literature is provided by Thakor ( 2020 ). He highlights that financial service companies are now being provided by non-deposit taking contenders. This paper addresses one of the four research questions raised by his review, namely how theories of financial intermediation can be modified to accommodate banks, shadow banks, and non-intermediated solutions.

To be a bank, an entity must be authorized to accept retail deposits. A challenger bank is, therefore, still a bank in the traditional sense. It does not, however, have the costs of a branch network. A peer-to-peer lender, meanwhile, does not have a deposit base and therefore acts more like a broker. This leads to the issue that this paper addresses, namely how the banks of the future will conduct their intermediation.

In order to understand what the bank of the future will look like, it is necessary to understand the nature of the aforementioned intermediation, and the way it is changing. In this respect, there are two key types of intermediation. These are (1) quantitative asset transformation and, (2) brokerage. The latter is a common model adopted by challenger banks. Figure  1 depicts how these two types of financial intermediation match savers with borrowers. To avoid nuanced distinction between these two types of intermediation, it is common to classify banks by the services they perform. These can be grouped as either private, investment, or commercial banking. The service sub-groupings include payments, settlements, fund management, trading, treasury management, brokerage, and other agency services.

How banks act as intermediaries between lenders and borrowers. This function call also be conducted by intermediaries as brokers, for example by shadow banks. Disintermediation occurs over the internet where peer-to-peer lenders match savers to lenders

Financial technology has the ability to disintermediate the banking sector. The competitive pressures this results in will shape the banks of the future. The channels that will facilitate this are shown in Fig.  2 , namely the Internet and/or mobile devices. Challengers can participate in this by, (1) directly matching borrows with savers over the Internet and, (2) distributing white labels products. The later enables banking as a service and avoids the aforementioned liquidity mismatch.

The strategic options banks have to match lenders with borrowers. The traditional and challenger banks are in the same space, competing for business. The distributed banks use the traditional and challenger banks to white label banking services. These banks compete with payment platforms on social media. The Internet heralds an era of banking as a service

There are also physical changes that are being made in the delivery of services. Bricks and mortar branches are in decline. Mobile banking, or m-banking as Liu et al ( 2020 ) describe it, is an increasingly important distribution channel. Robotics are increasingly being used to automate customer interaction. As explained by Vishnu et al ( 2017 ), these improve efficiency and the quality of execution. They allow for increased oversight and can be built on legacy systems as well as from a blank canvas. Application programming interfaces (APIs) are bringing the same type of functionality to m-banking. They can be used to authorize third party use of banking data. How banks evolve over time is important because, according to the OECD, the activity in the financial sector represents between 20 and 30 percent of developed countries Gross Domestic Product.

In summary, financial technology has evolved to a level where online banks and banking as a service are challenging incumbents and the nature of banking mediation. Banking is rapidly transforming because of changes in such technology. At the same time, the solving of the double spending problem, whereby digital money can be cryptographically protected, has led to the possibility that paper money will become redundant at some point in the future. A theoretical framework is required to understand this evolving landscape. This is discussed next.

The theory of the banking firm: a revision

In financial theory, as eloquently explained by Fama ( 1980 ), banking provides an accounting system for transactions and a portfolio system for the storage of assets. That will not change for the banks of the future. Fama ( 1980 ) explains that their activities, in an unregulated state, fulfil the Modigliani–Miller ( 1959 ) theorem of the irrelevance of the financing decision. In practice, traditional banks compete for deposits through the interest rate they offer. This makes the transactional element dependent on the resulting debits and credits that they process, essentially making banks into bookkeeping entities fulfilling the intermediation function. Since this is done in response to competitive forces, the general equilibrium is a passive one. As such, the banking business model is vulnerable to disruption, particularly by innovation in financial technology.

A bank is an idiosyncratic corporate entity due to its ability to generate credit by leveraging its balance sheet. That balance sheet has assets on one side and liabilities on the other, like any corporate entity. The assets consist of cash, lending, financial and fixed assets. On the other side of the balance sheet are its liabilities, deposits, and debt. In this respect, a bank’s equity and its liabilities are its source of funds, and its assets are its use of funds. This is explained by Klein ( 1971 ), who notes that a bank’s equity W , borrowed funds and its deposits B is equal to its total funds F . This is the same for incumbents and challengers. This can be depicted algebraically if we let incumbents be represented by Φ and challengers represented by Γ:

Klein ( 1971 ) further explains that a bank’s equity is therefore made up of its share capital and unimpaired reserves. The latter are held by a bank to protect the bank’s deposit clients. This part is also mandated by regulation, so as to protect customers and indeed the entire banking system from systemic failure. These protective measures include other prudential requirements to hold cash reserves or other liquid assets. As shall be shown, banking services can be performed over the Internet without these protections. Banking as a service, as this phenomenon known, is expected to increase in the future. This will change the nature of the protection available to clients. It will change the way banks transform assets, explained next.

A bank’s deposits are said to be a function of the proportion of total funds obtained through the issuance of the ith deposit type and its total funds F , represented by α i . Where deposits, represented by Bs , are made in the form of Bs (i  =  1 *s n) , they generate a rate of interest. It follows that Si Bs  =  B . As such,

Therefor it can be said that,

The importance of Eq. 3 is that the balance sheet can be leveraged by the issuance of loans. It should be noted, however, that not all loans are returned to the bank in whole or part. Non-performing loans reduce the asset side of a bank’s balance sheet and act as a constraint on capital, and therefore new lending. Clearly, this is not the case with banking as a service. In that model, loans are brokered. That said, with the traditional model, an advantage of financial technology is that it facilitates the data mining of clients’ accounts. Lending can therefore be more targeted to borrowers that are more likely to repay, thereby reducing non-performing loans. Pari passu, the incumbent bank of the future will therefore have a higher risk-adjusted return on capital. In practice, however, banking as a service will bring greater competition from challengers and possible further erosion of margins. Alternatively, some banks will proactively engage in partnerships and acquisitions to maintain their customer base and address the competition.

A bank must have reserves to meet the demand of customers demanding their deposits back. The amount of these reserves is a key function of banking regulation. The Basel Committee on Banking Supervision mandates a requirement to hold various tiers of capital, so that banks have sufficient reserves to protect depositors. The Committee also imposes a framework for mitigating excessive liquidity risk and maturity transformation, through a set Liquidity Coverage Ratio and Net Stable Funding Ratio.

Recent revisions of theory, because of financial technology advances, have altered our understanding of banking intermediation. This will impact the competitive landscape and therefor shape the nature of the bank of the future. In this respect, the threat to incumbent banks comes from peer-to-peer Internet lending platforms. These perform the brokerage function of financial intermediation without the use of the aforementioned banking balance sheet. Unlike regulated deposit takers, such lending platforms do not create assets and do not perform risk and asset transformation. That said, they are reliant on investors who do not always behave in a counter cyclical way.

Financial technology in banking is not new. It has been used to facilitate electronic markets since the 1980’s. Thakor ( 2020 ) refers to three waves of application of financial innovation in banking. The advent of institutional futures markets and the changing nature of financial contracts fundamentally changed the role of banks. In response to this, academics extended the concept of a bank into an entity that either fulfills the aforementioned functions of a broker or a qualitative asset transformer. In this respect, they connect the providers and users of capital without changing the nature of the transformation of the various claims to that capital. This transformation can be in the form risk transfer or the application of leverage. The nature of trading of financial assets, however, is changing. Price discovery can now be done over the Internet and that is moving liquidity from central marketplaces (like the stock exchange) to decentralized ones.

Alongside these trends, in considering what the bank of the future will look like, it is necessary to understand the unregulated lending market that competes with traditional banks. In this part of the lending market, there has been a rise in shadow banks. The literature on these entities is covered by Adrian and Ashcraft ( 2016 ). Shadow banks have taken substantial market share from the traditional banks. They fulfil the brokerage function of banks, but regulators have only partial oversight of their risk transformation or leverage. The rise of shadow banks has been facilitated by financial technology and the originate to distribute model documented by Bord and Santos ( 2012 ). They use alternative trading systems that function as electronic communication networks. These facilitate dark pools of liquidity whereby buyers and sellers of bonds and securities trade off-exchange. Since the credit crisis of 2008, total broker dealer assets have diverged from banking assets. This illustrates the changed lending environment.

In the disintermediated market, banking as a service providers must rely on their equity and what access to funding they can attract from their online network. Without this they are unable to drive lending growth. To explain this, let I represent the online network. Extending Klein ( 1971 ), further let Ψ represent banking as a service and their total funds by F . This state is depicted as,

Theoretically, it can be shown that,

Shadow banks, and those disintermediators who bypass the banking system, have an advantage in a world where technology is ubiquitous. This becomes more apparent when costs are considered. Buchak et al. ( 2018 ) point out that shadow banks finance their originations almost entirely through securitization and what they term the originate to distribute business model. Diversifying risk in this way is good for individual banks, as banking risks can be transferred away from traditional banking balance sheets to institutional balance sheets. That said, the rise of securitization has introduced systemic risk into the banking sector.

Thus, we can see that the nature of banking capital is changing and at the same time technology is replacing labor. Let A denote the number of transactions per account at a period in time, and C denote the total cost per account per time period of providing the services of the payment mechanism. Klein ( 1971 ) points out that, if capital and labor are assumed to be part of the traditional banking model, it can be observed that,

It can therefore be observed that the total service charge per account at a period in time, represented by S, has a linear and proportional relationship to bank account activity. This is another variable that financial technology can impact. According to Klein ( 1971 ) this can be summed up in the following way,

where d is the basic bank decision variable, the service charge per transaction. Once again, in an automated and digital environment, financial technology greatly reduces d for the challenger banks. Swankie and Broby ( 2019 ) examine the impact of Artificial Intelligence on the evaluation of banking risk and conclude that it improves such variables.

Meanwhile, the traditional banking model can be expressed as a product of the number of accounts, M , and the average size of an account, N . This suggests a banks implicit yield is it rate of interest on deposits adjusted by its operating loss in each time period. This yield is generated by payment and loan services. Let R 1 depict this. These can be expressed as a fraction of total demand deposits. This is depicted by Klein ( 1971 ), if one assumes activity per account is constant, as,

As a result, whether a bank is structured with traditional labor overheads or built digitally, is extremely relevant to its profitability. The capital and labor of tradition banks, depicted as Φ i , is greater than online networks, depicted as I i . As such, the later have an advantage. This can be shown as,

What Klein (1972) failed to highlight is that the banking inherently involves leverage. Diamond and Dybving (1983) show that leverage makes bank susceptible to run on their liquidity. The literature divides these between adverse shock events, as explained by Bernanke et al ( 1996 ) or moral hazard events as explained by Demirgu¨¸c-Kunt and Detragiache ( 2002 ). This leverage builds on the balance sheet mismatch of short-term assets with long term liabilities. As such, capital and liquidity are intrinsically linked to viability and solvency.

The way capital and liquidity are managed is through credit and default management. This is done at a bank level and a supervisory level. The Basel Committee on Banking Supervision applies capital and leverage ratios, and central banks manage interest rates and other counter-cyclical measures. The various iterations of the prudential regulation of banks have moved the microeconomic theory of banking from the modeling of risk to the modeling of imperfect information. As mentioned, shadow and disintermediated services do not fall under this form or prudential regulation.

The relationship between leverage and insolvency risk crucially depends on the degree of banks total funds F and their liability structure L . In this respect, the liability structure of traditional banks is also greater than online networks which do not have the same level of available funds, depicted as,

Diamond and Dybvig ( 1983 ) observe that this liability structure is intimately tied to a traditional bank’s assets. In this respect, a bank’s ability to finance its lending at low cost and its ability to achieve repayment are key to its avoidance of insolvency. Online networks and/or brokers do not have to finance their lending, simply source it. Similarly, as brokers they do not face capital loss in the event of a default. This disintermediates the bank through the use of a peer-to-peer environment. These lenders and borrowers are introduced in digital way over the internet. Regulators have taken notice and the digital broker advantage might not last forever. As a result, the future may well see greater cooperation between these competing parties. This also because banks have valuable operational experience compared to new entrants.

It should also be observed that bank lending is either secured or unsecured. Interest on an unsecured loan is typically higher than the interest on a secured loan. In this respect, incumbent banks have an advantage as their closeness to the customer allows them to better understand the security of the assets. Berger et al ( 2005 ) further differentiate lending into transaction lending, relationship lending and credit scoring.

The evolution of the business model in a digital world

As has been demonstrated, the bank of the future in its various manifestations will be a consequence of the evolution of the current banking business model. There has been considerable scholarly investigation into the uniqueness of this business model, but less so on its changing nature. Song and Thakor ( 2010 ) are helpful in this respect and suggest that there are three aspects to this evolution, namely competition, complementary and co-evolution. Although liquidity transformation is evolving, it remains central to a bank’s role.

All the dynamics mentioned are relevant to the economy. There is considerable evidence, as outlined by Levine ( 2001 ), that market liberalization has a causal impact on economic growth. The impact of technology on productivity should prove positive and enhance the functioning of the domestic financial system. Indeed, market liberalization has already reshaped banking by increasing competition. New fee based ancillary financial services have become widespread, as has the proprietorial use of balance sheets. Risk has been securitized and even packaged into trade-able products.

Challenger banks are developing in a complementary way with the incumbents. The latter have an advantage over new entrants because they have information on their customers. The liquidity insurance model, proposed by Diamond and Dybvig ( 1983 ), explains how such banks have informational advantages over exchange markets. That said, financial technology changes these dynamics. It if facilitating the processing of financial data by third parties, explained in greater detail in the section on Open Banking.

At the same time, financial technology is facilitating banking as a service. This is where financial services are delivered by a broker over the Internet without resort to the balance sheet. This includes roboadvisory asset management, peer to peer lending, and crowd funding. Its growth will be facilitated by Open Banking as it becomes more geographically adopted. Figure  3 illustrates how these business models are disintermediating the traditional banking role and matching burrowers and savers.

The traditional view of banks ecosystem between savers and borrowers, atop the Internet which is matching savers and borrowers directly in a peer-to-peer way. The Klein ( 1971 ) theory of the banking firm does not incorporate the mirrored dynamics, and as such needs to be extended to reflect the digital innovation that impacts both borrowers and severs in a peer-to-peer environment

Meanwhile, the banking sector is co-evolving alongside a shadow banking phenomenon. Lenders and borrowers are interacting, but outside of the banking sector. This is a concern for central banks and banking regulators, as the lending is taking place in an unregulated environment. Shadow banking has grown because of financial technology, market liberalization and excess liquidity in the asset management ecosystem. Pozsar and Singh ( 2011 ) detail the non-bank/bank intersection of shadow banking. They point out that shadow banking results in reverse maturity transformation. Incumbent banks have blurred the distinction between their use of traditional (M2) liabilities and market-based shadow banking (non-M2) liabilities. This impacts the inter-generational transfers that enable a bank to achieve interest rate smoothing.

Securitization has transformed the risk in the banking sector, transferring it to asset management institutions. These include structured investment vehicles, securities lenders, asset backed commercial paper investors, credit focused hedge and money market funds. This in turn has led to greater systemic risk, the result of the nature of the non-traded liabilities of securitized pooling arrangements. This increased risk manifested itself in the 2008 credit crisis.

Commercial pressures are also shaping the banking industry. The drive for cost efficiency has made incumbent banks address their personally costs. Bank branches have been closed as technology has evolved. Branches make it easier to withdraw or transfer deposits and challenger banks are not as easily able to attract new deposits. The banking sector is therefore looking for new point of customer contact, such as supermarkets, post offices and social media platforms. These structural issues are occurring at the same time as the retail high street is also evolving. Banks have had an aggressive roll out of automated telling machines and a reduction in branches and headcount. Online digital transactions have now become the norm in most developed countries.

The financing of banks is also evolving. Traditional banks have tended to fund illiquid assets with short term and unstable liquid liabilities. This is one of the key contributors to the rise to the credit crisis of 2008. The provision of liquidity as a last resort is central to the asset transformation process. In this respect, the banking sector experienced a shock in 2008 in what is termed the credit crisis. The aforementioned liquidity mismatch resulted in the system not being able to absorb all the risks associated with subprime lending. Central banks had to resort to quantitative easing as a result of the failure of overnight funding mechanisms. The image of the entire banking sector was tarnished, and the banks of the future will have to address this.

The future must learn from the mistakes of the past. The structural weakness of the banking business model cannot be solved. That said, the latest Basel rules introduce further risk mitigation, improved leverage ratios and increased levels of capital reserve. Another lesson of the credit crisis was that there should be greater emphasis on risk culture, governance, and oversight. The independence and performance of the board, the experience and the skill set of senior management are now a greater focus of regulators. Internal controls and data analysis are increasingly more robust and efficient, with a greater focus on a banks stable funding ratio.

Meanwhile, the very nature of money is changing. A digital wallet for crypto-currencies fulfills much the same storage and transmission functions of a bank; and crypto-currencies are increasing being used for payment. Meanwhile, in Sweden, stores have the right to refuse cash and the majority of transactions are card based. This move to credit and debit cards, and the solving of the double spending problem, whereby digital money can be crypto-graphically protected, has led to the possibility that paper money could be replaced at some point in the future. Whether this might be by replacement by a CBDC, or decentralized digital offering, is of secondary importance to the requirement of banks to adapt. Whether accommodating crytpo-currencies or CBDC’s, Kou et al. ( 2021 ) recommend that banks keep focused on alternative payment and money transferring technologies.

Central banks also have to adapt. To limit disintermediation, they have to ensure that the economic design of their sponsored digital currencies focus on access for banks, interest payment relative to bank policy rate, banking holding limits and convertibility with bank deposits. All these developments have implications for banks, particularly in respect of funding, the secure storage of deposits and how digital currency interacts with traditional fiat money.

Open banking

Against the backdrop of all these trends and changes, a new dynamic is shaping the future of the banking sector. This is termed Open Banking, already briefly mentioned. This new way of handling banking data protocols introduces a secure way to give financial service companies consensual access to a bank’s customer financial information. Figure  4 illustrates how this works. Although a fairly simple concept, the implications are important for the banking industry. Essentially, a bank customer gives a regulated API permission to securely access his/her banking website. That is then used by a banking as a service entity to make direct payments and/or download financial data in order to provide a solution. It heralds an era of customer centric banking.

How Open Banking operates. The customer generates data by using his bank account. A third party provider is authorized to access that data through an API request. The bank confirms digitally that the customer has authorized the exchange of data and then fulfills the request

Open Banking was a response to the documented inertia around individual’s willingness to change bank accounts. Following the Retail Banking Review in the UK, this was addressed by lawmakers through the European Union’s Payment Services Directive II. The legislation was designed to make it easier to change banks by allowing customers to delegate authority to transfer their financial data to other parties. As a result of this, a whole host of data centric applications were conceived. Open banking adds further momentum to reshaping the future of banking.

Open Banking has a number of quite revolutionary implications. It was started so customers could change banks easily, but it resulted in some secondary considerations which are going to change the future of banking itself. It gives a clear view of bank financing. It allows aggregation of finances in one place. It also allows can give access to attractive offerings by allowing price comparisons. Open Banking API’s build a secure online financial marketplace based on data. They also allow access to a larger market in a faster way but the third-party providers for the new entrants. Open Banking allows developers to build single solutions on an API addressing very specific problems, like for example, a cash flow based credit rating.

Romānova et al. ( 2018 ) undertook a questionnaire on the Payment Services Directive II. The results suggest that Open Banking will promote competitiveness, innovation, and new product development. The initiative is associated with low costs and customer satisfaction, but that some concerns about security, privacy and risk are present. These can be mitigated, to some extent, by secure protocols and layered permission access.

Discussion: strategic options

Faced with these disruptive trends, there are four strategic options for market participants to con- sider. There are (1) a defensive customer retention strategy for incumbents, (2) an aggressive customer acquisition strategy for challenger banks (3) a banking as a service strategy for new entrants, and (4) a payments strategy for social media platforms.

Each of these strategies has to be conducted in a competitive marketplace for money demand by potential customers. Figure  5 illustrates where the first three strategies lie on the tradeoff between money demand and interest rates. The payment strategy can’t be modeled based on the supply of money. In the figure, the market settles at a rate L 2 . The incumbent banks have the capacity to meet the largest supply of these loans. The challenger banks have a constrained function but due to a lower cost base can gain excess rent through higher rates of interest. The peer-to-peer bank as a service brokers must settle for the market rate and a constrained supply offering.

The money demand M by lenders on the y axis. Interest rates on the y axis are labeled as r I and r II . The challenger banks are represented by the line labeled Γ. They have a price and technology advantage and so can lend at higher interest rates. The brokers are represented by the line labeled Ω. They are price takers, accepting the interest rate determined by the market. The same is true for the incumbents, represented by the line labeled Φ but they have a greater market share due to their customer relationships. Note that payments strategy for social media platforms is not shown on this figure as it is not affected by interest rates

Figure  5 illustrates that having a niche strategy is not counterproductive. Liu et al ( 2020 ) found that banks performing niche activities exhibit higher profitability and have lower risk. The syndication market now means that a bank making a loan does not have to be the entity that services it. This means banks in the future can better shape their risk profile and manage their lending books accordingly.

An interesting question for central banks is what the future Deposit Supply function will look like. If all three forms: open banking, traditional banking and challenger banks develop together, will the bank of the future have the same Deposit Supply function? The Klein ( 1971 ) general formulation assumes that deposits are increasing functions of implicit and explicit yields. As such, the very nature of central bank directed monetary policy may have to be revisited, as alluded to in the earlier discussion on digital money.

The client retention strategy (incumbents)

The competitive pressures suggest that incumbent banks need to focus on customer retention. Reichheld and Kenny ( 1990 ) found that the best way to do this was to focus on the retention of branch deposit customers. Obviously, another way is to provide a unique digital experience that matches the challengers.

Incumbent banks have a competitive advantage based on the information they have about their customers. Allen ( 1990 ) argues that where risk aversion is observable, information markets are viable. In other words, both bank and customer benefit from this. The strategic issue for them, therefore, becomes the retention of these customers when faced with greater competition.

Open Banking changes the dynamics of the banking information advantage. Borgogno and Colangelo ( 2020 ) suggest that the access to account (XS2A) rule that it introduced will increase competition and reduce information asymmetry. XS2A requires banks to grant access to bank account data to authorized third payment service providers.

The incumbent banks have a high-cost base and legacy IT systems. This makes it harder for them to migrate to a digital world. There are, however, also benefits from financial technology for the incumbents. These include reduced cost and greater efficiency. Financial technology can also now support platforms that allow incumbent banks to sell NPL’s. These platforms do not require the ownership of assets, they act as consolidators. The use of technology to monitor the transactions make the processing cost efficient. The unique selling point of such platforms is their centralized point of contact which results in a reduction in information asymmetry.

Incumbent banks must adapt a number of areas they got to adapt in terms of their liquidity transformation. They have to adapt the way they handle data. They must get customers to trust them in a digital world and the way that they trust them in a bricks and mortar world. It is no coincidence. When you go into a bank branch that is a great big solid building great big facade and so forth that is done deliberately so that you trust that bank with your deposit.

The risk of having rising non-performing loans needs to be managed, so customer retention should be selective. One of the puzzles in banking is why customers are regularly denied credit, rather than simply being charged a higher price for it. This credit rationing is often alleviated by collateral, but finance theory suggests value is based on the discounted sum of future cash flows. As such, it is conceivable that the bank of the future will use financial technology to provide innovative credit allocation solutions. That said, the dual risks of moral hazard and information asymmetries from the adoption of such solutions must be addressed.

Customer retention is especially important as bank competition is intensifying, as is the digitalization of financial services. Customer retention requires innovation, and that innovation has been moving at a very fast rate. Until now, banks have traditionally been hesitant about technology. More recently, mergers and acquisitions have increased quite substantially, initiated by a need to address actual or perceived weaknesses in financial technology.

The client acquisition strategy (challengers)

As intermediaries, the challenger banks are the same as incumbent banks, but designed from the outset to be digital. This gives them a cost and efficiency advantage. Anagnostopoulos ( 2018 ) suggests that the difference between challenger and traditional banks is that the former address its customers problems more directly. The challenge for such banks is customer acquisition.

Open Banking is a major advantage to challenger banks as it facilitates the changing of accounts. There is widespread dissatisfaction with many incumbent banks. Open Banking makes it easier to change accounts and also easier to get a transaction history on the client.

Customer acquisition can be improved by building trust in a brand. Historically, a bank was physically built in a very robust manner, hence the heavy architecture and grand banking halls. This was done deliberately to engender a sense of confidence in the deposit taking institution. Pure internet banks are not able to do this. As such, they must employ different strategies to convey stability. To do this, some communicate their sustainability credentials, whilst others use generational values-based advertising. Customer acquisition in a banking context is traditionally done by offering more attractive rates of interest. This is illustrated in Fig.  5 by the intersect of traditional banks with the market rate of interest, depicted where the line Γ crosses L 2 . As a result of the relationship with banking yield, teaser rates and introductory rates are common. A customer acquisition strategy has risks, as consumers with good credit can game different challenger banks by frequently changing accounts.

Most customer acquisition, however, is done based on superior service offering. The functionality of challenger banking accounts is often superior to incumbents, largely because the latter are built on legacy databases that have inter-operability issues. Having an open platform of services is a popular customer acquisition technique. The unrestricted provision of third-party products is viewed more favorably than a restricted range of products.

The banking as a service strategy (new entrants)

Banking from a customer’s perspective is the provision of a service. Customers don’t care about the maturity transformation of banking balance sheets. Banking as a service can be performed without recourse to these balance sheets. Banking products are brokered, mostly by new entrants, to individuals as services that can be subscribed to or paid on a fee basis.

There are a number banking as a service solutions including pre-paid and credit cards, lending and leasing. The banking as a service brokers are effectively those that are aggregating services from others using open banking to enable banking as a service.

The rise of banking as a service needs to be understood as these compete directly with traditional banks. As explained, some of these do this through peer-to-peer lending over the internet, others by matching borrows and sellers, conducting mediation as a loan broker. Such entities do not transform assets and do not have banking licenses. They do not have a branch network and often don not have access to deposits. This means that they have no insurance protection and can be subject to interest rate controls.

The new genre of financial technology, banking as a service provider, conduct financial services transformation without access to central bank liquidity. In a distributed digital asset world, the assets are stored on a distributed ledger rather than a traditional banking ledger. Financial technology has automated credit evaluation, savings, investments, insurance, trading, banking payments and risk management. These banking as a service offering are only as secure as the technology on which they are built.

The social media payment strategy (disintermediators and disruptors)

An intermediation bank is a conceptual idea, one created solely on a social networking site. Social media has developed a market for online goods and services. Williams ( 2018 ) estimates that there are 2.46 billion social media users. These all make and receive payments of some kind. They demand security and functionality. Importantly, they have often more clients than most banks. As such, a strategy to monetize the payments infrastructure makes sense.

All social media platforms are rich repositories of data. Such platforms are used to buy and sell things and that requires payments. Some platforms are considering evolving their own digital payment, cutting out the banks as middlemen. These include Facebook’s Diem (formerly Libra), a digital currency, and similar developments at some of the biggest technology companies. The risk with social media payment platform is that there is systemic counter-party protection. Regulators need to address this. One way to do this would be to extend payment service insurance to such platforms.

Social media as a platform moves the payment relationship from a transaction to a customer experience. The ability to use consumer desires in combination with financial data has the potential to deliver a number of new revenue opportunities. These will compete directly with the banks of the future. This will have implications for (1) the money supply, (2) the market share of traditional banks and, (3) the services that payment providers offer.

Further research

Several recommendations for research derive from both the impact of disintermediation and the four proposed strategies that will shape banking in the future. The recommendations and suggestions are based on the mentioned papers and the conclusions drawn from them.

As discussed, the nature of intermediation is changing, and this has implications for the pricing of risk. The role of interest rates in banking will have to be further reviewed. In a decentralized world based on crypto currencies the central banks do not have the same control over the money supply, This suggest the quantity theory of money and the liquidity preference theory need to be revisited. As explained, the Internet reduces much of the friction costs of intermediation. Researchers should ask how this will impact maturity transformation. It is also fair to ask whether at some point in the future there will just be one big bank. This question has already been addressed in the literature but the Internet facilities the possibility. Diamond ( 1984 ) and Ramakrishnan and Thakor ( 1984 ) suggested the answer was due to diversification and its impact on reducing monitoring costs.

Attention should be given by academics to the changing nature of banking risk. How should regulators, for example, address the moral hazard posed by challenger banks with weak balance sheets? What about deposit insurance? Should it be priced to include unregulated entities? Also, what criteria do borrowers use to choose non-banking intermediaries? The changing risk environment also poses two interesting practical questions. What will an online bank run look like, and how can it be averted? How can you establish trust in digital services?

There are also research questions related to the nature of competition. What, for example, will be the nature of cross border competition in a decentralized world? Is the credit rationing that generates competition a static or dynamic phenomena online? What is the value of combining consumer utility with banking services?

Financial intermediaries, like banks, thrive in a world of deficits and surpluses supported by information asymmetries and disconnectedness. The connectivity of the internet changes this dynamic. In this respect, the view of Schumpeter ( 1911 ) on the role of financial intermediaries needs revisiting. Lenders and borrows can be connected peer to peer via the internet.

All the dynamics mentioned change the nature of moral hazard. This needs further investigation. There has been much scholarly research on the intrinsic riskiness of the mismatch between banking assets and liabilities. This mismatch not only results in potential insolvency for a single bank but potentially for the whole system. There has, for example, been much debate on the whether a bank can be too big to fail. As a result of the riskiness of the banking model, the banks of the future will be just a liable to fail as the banks of the past.

This paper presented a revision of the theory of banking in a digital world. In this respect, it built on the work of Klein ( 1971 ). It provided an overview of the changing nature of banking intermediation, a result of the Internet and new digital business models. It presented the traditional academic view of banking and how it is evolving. It showed how this is adapted to explain digital driven disintermediation.

It was shown that the banking industry is facing several documented challenges. Risk is being taken of balance sheet, securitized, and brokered. Financial technology is digitalizing service delivery. At the same time, the very nature of intermediation is being changed due to digital currency. It is argued that the bank of the future not only has to face these competitive issues, but that technology will enhance the delivery of banking services and reduce the cost of their delivery.

The paper further presented the importance of the Open Banking revolution and how that facilitates banking as a service. Open Banking is increasing client churn and driving banking as a service. That in turn is changing the way products are delivered.

Four strategies were proposed to navigate the evolving competitive landscape. These are for incumbents to address customer retention; for challengers to peruse a low-cost digital experience; for niche players to provide banking as a service; and for social media platforms to develop payment platforms. In all these scenarios, the banks of the future will have to have digital strategies for both payments and service delivery.

It was shown that both incumbents and challengers are dependent on capital availability and borrowers credit concerns. Nothing has changed in that respect. The risks remain credit and default risk. What is clear, however, is the bank has become intrinsically linked with technology. The Internet is changing the nature of mediation. It is allowing peer to peer matching of borrowers and savers. It is facilitating new payment protocols and digital currencies. Banks need to evolve and adapt to accommodate these. Most of these questions are empirical in nature. The aim of this paper, however, was to demonstrate that an understanding of the banking model is a prerequisite to understanding how to address these and how to develop hypotheses connected with them.

In conclusion, financial technology is changing the future of banking and the way banks intermediate. It is facilitating digital money and the online transmission of financial assets. It is making banks more customer enteric and more competitive. Scholarly investigation into banking has to adapt. That said, whatever the future, trust will remain at the core of banking. Similarly, deposits and lending will continue to attract regulatory oversight.

Availability of data and materials

Diagrams are my own and the code to reproduce them is available in the supplied Latex files.

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Broby, D. Financial technology and the future of banking. Financ Innov 7 , 47 (2021). https://doi.org/10.1186/s40854-021-00264-y

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European Journal of Innovation Management

ISSN : 1460-1060

Article publication date: 31 March 2022

Issue publication date: 29 August 2023

In recent years, the penetration of digital technologies in the financial industry determined the arising of Fintech, which generated a dynamic and rapid change that business operators and supervisory authorities in the banking industry are struggling to follow it. This is especially due to issues affecting financial intermediaries and customers, and potential risks of stability of the financial system. The aim of this paper is to provide a review of Fintech in the banking industry thus to update the knowledge about technology innovation in the banking sector, identify the major trends in the domain and delineate future research directions.

Design/methodology/approach

The study reviews 377 articles indexed on Scopus from 2014 to 2021 that focus on Fintech and the banking industry. The methodology adopted is structured in two steps: the keywords selection and the analysis of the documents extracted. The first step identified “Fintech” and “bank” as keywords to be searched within the title, abstract or keywords of documents indexed on Scopus; whereas the second step combined R and VOSviewer to provide a descriptive analysis of the dataset and the analysis of keywords and occurrences, respectively.

Results achieved in the study allow providing a systemic view of the Fintech in the banking industry, including the emergent phenomenon of digital banking. In particular, it is provided with a general overview and descriptive information on the entire sample of documents analyzed, their authors, the keywords used and the most cited works. Besides, a deepening on the model of digital banking is provided, by delineating the six dimensions of the key effects generated by the digital bank model.

Originality/value

Two main elements of originality characterize this study. The first one is related to the fact that few review studies have been published on Fintech in the banking industry, and the second one concerns the multiple dimensions of the impact of Fintech in the banking sector, which includes customer, company, bank, regulation authority and society.

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• Financial services

Acknowledgements

The author(s) thank the Consorzio Universitario Interprovinciale Salentino (CUIS) for supporting this research.

Elia, G. , Stefanelli, V. and Ferilli, G.B. (2023), "Investigating the role of Fintech in the banking industry: what do we know?", European Journal of Innovation Management , Vol. 26 No. 5, pp. 1365-1393. https://doi.org/10.1108/EJIM-12-2021-0608

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• Published: 03 September 2022

A literature review of risk, regulation, and profitability of banks using a scientometric study

• Shailesh Rastogi 1 ,
• Arpita Sharma 1 ,
• Geetanjali Pinto 2 &
• Venkata Mrudula Bhimavarapu   ORCID: orcid.org/0000-0002-9757-1904 1 , 3  

Future Business Journal volume  8 , Article number:  28 ( 2022 ) Cite this article

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Metrics details

This study presents a systematic literature review of regulation, profitability, and risk in the banking industry and explores the relationship between them. It proposes a policy initiative using a model that offers guidelines to establish the right mix among these variables. This is a systematic literature review study. Firstly, the necessary data are extracted using the relevant keywords from the Scopus database. The initial search results are then narrowed down, and the refined results are stored in a file. This file is finally used for data analysis. Data analysis is done using scientometrics tools, such as Table2net and Sciences cape software, and Gephi to conduct network, citation analysis, and page rank analysis. Additionally, content analysis of the relevant literature is done to construct a theoretical framework. The study identifies the prominent authors, keywords, and journals that researchers can use to understand the publication pattern in banking and the link between bank regulation, performance, and risk. It also finds that concentration banking, market power, large banks, and less competition significantly affect banks’ financial stability, profitability, and risk. Ownership structure and its impact on the performance of banks need to be investigated but have been inadequately explored in this study. This is an organized literature review exploring the relationship between regulation and bank performance. The limitations of the regulations and the importance of concentration banking are part of the findings.

Introduction

Globally, banks are under extreme pressure to enhance their performance and risk management. The financial industry still recalls the ignoble 2008 World Financial Crisis (WFC) as the worst economic disaster after the Great Depression of 1929. The regulatory mechanism before 2008 (mainly Basel II) was strongly criticized for its failure to address banks’ risks [ 47 , 87 ]. Thus, it is essential to investigate the regulation of banks [ 75 ]. This study systematically reviews the relevant literature on banks’ performance and risk management and proposes a probable solution.

Issues of performance and risk management of banks

Banks have always been hailed as engines of economic growth and have been the axis of the development of financial systems [ 70 , 85 ]. A vital parameter of a bank’s financial health is the volume of its non-performing assets (NPAs) on its balance sheet. NPAs are advances that delay in payment of interest or principal beyond a few quarters [ 108 , 118 ]. According to Ghosh [ 51 ], NPAs negatively affect the liquidity and profitability of banks, thus affecting credit growth and leading to financial instability in the economy. Hence, healthy banks translate into a healthy economy.

Despite regulations, such as high capital buffers and liquidity ratio requirements, during the second decade of the twenty-first century, the Indian banking sector still witnessed a substantial increase in NPAs. A recent report by the Indian central bank indicates that the gross NPA ratio reached an all-time peak of 11% in March 2018 and 12.2% in March 2019 [ 49 ]. Basel II has been criticized for several reasons [ 98 ]. Schwerter [ 116 ] and Pakravan [ 98 ] highlighted the systemic risk and gaps in Basel II, which could not address the systemic risk of WFC 2008. Basel III was designed to close the gaps in Basel II. However, Schwerter [ 116 ] criticized Basel III and suggested that more focus should have been on active risk management practices to avoid any impending financial crisis. Basel III was proposed to solve these issues, but it could not [ 3 , 116 ]. Samitas and Polyzos [ 113 ] found that Basel III had made banking challenging since it had reduced liquidity and failed to shield the contagion effect. Therefore, exploring some solutions to establish the right balance between regulation, performance, and risk management of banks is vital.

Keeley [ 67 ] introduced the idea of a balance among banks’ profitability, regulation, and NPA (risk-taking). This study presents the balancing act of profitability, regulation, and NPA (risk-taking) of banks as a probable solution to the issues of bank performance and risk management and calls it a triad . Figure  1 illustrates the concept of a triad. Several authors have discussed the triad in parts [ 32 , 96 , 110 , 112 ]. Triad was empirically tested in different countries by Agoraki et al. [ 1 ]. Though the idea of a triad is quite old, it is relevant in the current scenario. The spirit of the triad strongly and collectively admonishes the Basel Accord and exhibits new and exhaustive measures to take up and solve the issue of performance and risk management in banks [ 16 , 98 ]. The 2008 WFC may have caused an imbalance among profitability, regulation, and risk-taking of banks [ 57 ]. Less regulation , more competition (less profitability ), and incentive to take the risk were the cornerstones of the 2008 WFC [ 56 ]. Achieving a balance among the three elements of a triad is a real challenge for banks’ performance and risk management, which this study addresses.

Triad of Profitability, regulation, and NPA (risk-taking). Note The triad [ 131 ] of profitability, regulation, and NPA (risk-taking) is shown in Fig.  1

Triki et al. [ 130 ] revealed that a bank’s performance is a trade-off between the elements of the triad. Reduction in competition increases the profitability of banks. However, in the long run, reduction in competition leads to either the success or failure of banks. Flexible but well-expressed regulation and less competition add value to a bank’s performance. The current review paper is an attempt to explore the literature on this triad of bank performance, regulation, and risk management. This paper has the following objectives:

To systematically explore the existing literature on the triad: performance, regulation, and risk management of banks; and

To propose a model for effective bank performance and risk management of banks.

Literature is replete with discussion across the world on the triad. However, there is a lack of acceptance of the triad as a solution to the woes of bank performance and risk management. Therefore, the findings of the current papers significantly contribute to this regard. This paper collates all the previous studies on the triad systematically and presents a curated view to facilitate the policy makers and stakeholders to make more informed decisions on the issue of bank performance and risk management. This paper also contributes significantly by proposing a DBS (differential banking system) model to solve the problem of banks (Fig.  7 ). This paper examines studies worldwide and therefore ensures the wider applicability of its findings. Applicability of the DBS model is not only limited to one nation but can also be implemented worldwide. To the best of the authors’ knowledge, this is the first study to systematically evaluate the publication pattern in banking using a blend of scientometrics analysis tools, network analysis tools, and content analysis to understand the link between bank regulation, performance, and risk.

This paper is divided into five sections. “ Data and research methods ” section discusses the research methodology used for the study. The data analysis for this study is presented in two parts. “ Bibliometric and network analysis ” section presents the results obtained using bibliometric and network analysis tools, followed by “ Content Analysis ” section, which presents the content analysis of the selected literature. “ Discussion of the findings ” section discusses the results and explains the study’s conclusion, followed by limitations and scope for further research.

Data and research methods

A literature review is a systematic, reproducible, and explicit way of identifying, evaluating, and synthesizing relevant research produced and published by researchers [ 50 , 100 ]. Analyzing existing literature helps researchers generate new themes and ideas to justify the contribution made to literature. The knowledge obtained through evidence-based research also improves decision-making leading to better practical implementation in the real corporate world [ 100 , 129 ].

As Kumar et al. [ 77 , 78 ] and Rowley and Slack [ 111 ] recommended conducting an SLR, this study also employs a three-step approach to understand the publication pattern in the banking area and establish a link between bank performance, regulation, and risk.

Determining the appropriate keywords for exploring the data

Many databases such as Google Scholar, Web of Science, and Scopus are available to extract the relevant data. The quality of a publication is associated with listing a journal in a database. Scopus is a quality database as it has a wider coverage of data [ 100 , 137 ]. Hence, this study uses the Scopus database to extract the relevant data.

For conducting an SLR, there is a need to determine the most appropriate keywords to be used in the database search engine [ 26 ]. Since this study seeks to explore a link between regulation, performance, and risk management of banks, the keywords used were “risk,” “regulation,” “profitability,” “bank,” and “banking.”

Initial search results and limiting criteria

Using the keywords identified in step 1, the search for relevant literature was conducted in December 2020 in the Scopus database. This resulted in the search of 4525 documents from inception till December 2020. Further, we limited our search to include “article” publications only and included subject areas: “Economics, Econometrics and Finance,” “Business, Management and Accounting,” and “Social sciences” only. This resulted in a final search result of 3457 articles. These results were stored in a.csv file which is then used as an input to conduct the SLR.

Data analysis tools and techniques

This study uses bibliometric and network analysis tools to understand the publication pattern in the area of research [ 13 , 48 , 100 , 122 , 129 , 134 ]. Some sub-analyses of network analysis are keyword word, author, citation, and page rank analysis. Author analysis explains the author’s contribution to literature or research collaboration, national and international [ 59 , 99 ]. Citation analysis focuses on many researchers’ most cited research articles [ 100 , 102 , 131 ].

The.csv file consists of all bibliometric data for 3457 articles. Gephi and other scientometrics tools, such as Table2net and ScienceScape software, were used for the network analysis. This.csv file is directly used as an input for this software to obtain network diagrams for better data visualization [ 77 ]. To ensure the study’s quality, the articles with 50 or more citations (216 in number) are selected for content analysis [ 53 , 102 ]. The contents of these 216 articles are analyzed to develop a conceptual model of banks’ triad of risk, regulation, and profitability. Figure  2 explains the data retrieval process for SLR.

Data retrieval process for SLR. Note Stepwise SLR process and corresponding results obtained

Bibliometric and network analysis

Figure  3 [ 58 ] depicts the total number of studies that have been published on “risk,” “regulation,” “profitability,” “bank,” and “banking.” Figure  3 also depicts the pattern of the quality of the publications from the beginning till 2020. It undoubtedly shows an increasing trend in the number of articles published in the area of the triad: “risk” regulation” and “profitability.” Moreover, out of the 3457 articles published in the said area, 2098 were published recently in the last five years and contribute to 61% of total publications in this area.

Articles published from 1976 till 2020 . Note The graph shows the number of documents published from 1976 till 2020 obtained from the Scopus database

Source of publications

A total of 160 journals have contributed to the publication of 3457 articles extracted from Scopus on the triad of risk, regulation, and profitability. Table 1 shows the top 10 sources of the publications based on the citation measure. Table 1 considers two sets of data. One data set is the universe of 3457 articles, and another is the set of 216 articles used for content analysis along with their corresponding citations. The global citations are considered for the study from the Scopus dataset, and the local citations are considered for the articles in the nodes [ 53 , 135 ]. The top 10 journals with 50 or more citations resulted in 96 articles. This is almost 45% of the literature used for content analysis ( n  = 216). Table 1 also shows that the Journal of Banking and Finance is the most prominent in terms of the number of publications and citations. It has 46 articles published, which is about 21% of the literature used for content analysis. Table 1 also shows these core journals’ SCImago Journal Rank indicator and H index. SCImago Journal Rank indicator reflects the impact and prestige of the Journal. This indicator is calculated as the previous three years’ weighted average of the number of citations in the Journal since the year that the article was published. The h index is the number of articles (h) published in a journal and received at least h. The number explains the scientific impact and the scientific productivity of the Journal. Table 1 also explains the time span of the journals covering articles in the area of the triad of risk, regulation, and profitability [ 7 ].

Figure  4 depicts the network analysis, where the connections between the authors and source title (journals) are made. The network has 674 nodes and 911 edges. The network between the author and Journal is classified into 36 modularities. Sections of the graph with dense connections indicate high modularity. A modularity algorithm is a design that measures how strong the divided networks are grouped into modules; this means how well the nodes are connected through a denser route relative to other networks.

Network analysis between authors and journals. Note A node size explains the more linked authors to a journal

The size of the nodes is based on the rank of the degree. The degree explains the number of connections or edges linked to a node. In the current graph, a node represents the name of the Journal and authors; they are connected through the edges. Therefore, the more the authors are associated with the Journal, the higher the degree. The algorithm used for the layout is Yifan Hu’s.

Many authors are associated with the Journal of Banking and Finance, Journal of Accounting and Economics, Journal of Financial Economics, Journal of Financial Services Research, and Journal of Business Ethics. Therefore, they are the most relevant journals on banks’ risk, regulation, and profitability.

Location and affiliation analysis

Affiliation analysis helps to identify the top contributing countries and universities. Figure  5 shows the countries across the globe where articles have been published in the triad. The size of the circle in the map indicates the number of articles published in that country. Table 2 provides the details of the top contributing organizations.

Location of articles published on Triad of profitability, regulation, and risk

Figure  5 shows that the most significant number of articles is published in the USA, followed by the UK. Malaysia and China have also contributed many articles in this area. Table 2 shows that the top contributing universities are also from Malaysia, the UK, and the USA.

Key author analysis

Table 3 shows the number of articles written by the authors out of the 3457 articles. The table also shows the top 10 authors of bank risk, regulation, and profitability.

Fadzlan Sufian, affiliated with the Universiti Islam Malaysia, has the maximum number, with 33 articles. Philip Molyneux and M. Kabir Hassan are from the University of Sharjah and the University of New Orleans, respectively; they contributed significantly, with 20 and 18 articles, respectively.

However, when the quality of the article is selected based on 50 or more citations, Fadzlan Sufian has only 3 articles with more than 50 citations. At the same time, Philip Molyneux and Allen Berger contributed more quality articles, with 8 and 11 articles, respectively.

Keyword analysis

Table 4 shows the keyword analysis (times they appeared in the articles). The top 10 keywords are listed in Table 4 . Banking and banks appeared 324 and 194 times, respectively, which forms the scope of this study, covering articles from the beginning till 2020. The keyword analysis helps to determine the factors affecting banks, such as profitability (244), efficiency (129), performance (107, corporate governance (153), risk (90), and regulation (89).

The keywords also show that efficiency through data envelopment analysis is a determinant of the performance of banks. The other significant determinants that appeared as keywords are credit risk (73), competition (70), financial stability (69), ownership structure (57), capital (56), corporate social responsibility (56), liquidity (46), diversification (45), sustainability (44), credit provision (41), economic growth (41), capital structure (39), microfinance (39), Basel III (37), non-performing assets (37), cost efficiency (30), lending behavior (30), interest rate (29), mergers and acquisition (28), capital adequacy (26), developing countries (23), net interest margin (23), board of directors (21), disclosure (21), leverage (21), productivity (20), innovation (18), firm size (16), and firm value (16).

Keyword analysis also shows the theories of banking and their determinants. Some of the theories are agency theory (23), information asymmetry (21), moral hazard (17), and market efficiency (16), which can be used by researchers when building a theory. The analysis also helps to determine the methodology that was used in the published articles; some of them are data envelopment analysis (89), which measures technical efficiency, panel data analysis (61), DEA (32), Z scores (27), regression analysis (23), stochastic frontier analysis (20), event study (15), and literature review (15). The count for literature review is only 15, which confirms that very few studies have conducted an SLR on bank risk, regulation, and profitability.

Citation analysis

One of the parameters used in judging the quality of the article is its “citation.” Table 5 shows the top 10 published articles with the highest number of citations. Ding and Cronin [ 44 ] indicated that the popularity of an article depends on the number of times it has been cited.

Tahamtan et al. [ 126 ] explained that the journal’s quality also affects its published articles’ citations. A quality journal will have a high impact factor and, therefore, more citations. The citation analysis helps researchers to identify seminal articles. The title of an article with 5900 citations is “A survey of corporate governance.”

Page Rank analysis

Goyal and Kumar [ 53 ] explain that the citation analysis indicates the ‘popularity’ and ‘prestige’ of the published research article. Apart from the citation analysis, one more analysis is essential: Page rank analysis. PageRank is given by Page et al. [ 97 ]. The impact of an article can be measured with one indicator called PageRank [ 135 ]. Page rank analysis indicates how many times an article is cited by other highly cited articles. The method helps analyze the web pages, which get the priority during any search done on google. The analysis helps in understanding the citation networks. Equation  1 explains the page rank (PR) of a published paper, N refers to the number of articles.

T 1,… T n indicates the paper, which refers paper P . C ( Ti ) indicates the number of citations. The damping factor is denoted by a “ d ” which varies in the range of 0 and 1. The page rank of all the papers is equal to 1. Table 6 shows the top papers based on page rank. Tables 5 and 6 together show a contrast in the top ranked articles based on citations and page rank, respectively. Only one article “A survey of corporate governance” falls under the prestigious articles based on the page rank.

Content analysis

Content Analysis is a research technique for conducting qualitative and quantitative analyses [ 124 ]. The content analysis is a helpful technique that provides the required information in classifying the articles depending on their nature (empirical or conceptual) [ 76 ]. By adopting the content analysis method [ 53 , 102 ], the selected articles are examined to determine their content. The classification of available content from the selected set of sample articles that are categorized under different subheads. The themes identified in the relationship between banking regulation, risk, and profitability are as follows.

Regulation and profitability of banks

The performance indicators of the banking industry have always been a topic of interest to researchers and practitioners. This area of research has assumed a special interest after the 2008 WFC [ 25 , 51 , 86 , 114 , 127 , 132 ]. According to research, the causes of poor performance and risk management are lousy banking practices, ineffective monitoring, inadequate supervision, and weak regulatory mechanisms [ 94 ]. Increased competition, deregulation, and complex financial instruments have made banks, including Indian banks, more vulnerable to risks [ 18 , 93 , 119 , 123 ]. Hence, it is essential to investigate the present regulatory machinery for the performance of banks.

There are two schools of thought on regulation and its possible impact on profitability. The first asserts that regulation does not affect profitability. The second asserts that regulation adds significant value to banks’ profitability and other performance indicators. This supports the concept that Delis et al. [ 41 ] advocated that the capital adequacy requirement and supervisory power do not affect productivity or profitability unless there is a financial crisis. Laeven and Majnoni [ 81 ] insisted that provision for loan loss should be part of capital requirements. This will significantly improve active risk management practices and ensure banks’ profitability.

Lee and Hsieh [ 83 ] proposed ambiguous findings that do not support either school of thought. According to Nguyen and Nghiem [ 95 ], while regulation is beneficial, it has a negative impact on bank profitability. As a result, when proposing regulations, it is critical to consider bank performance and risk management. According to Erfani and Vasigh [ 46 ], Islamic banks maintained their efficiency between 2006 and 2013, while most commercial banks lost, furthermore claimed that the financial crisis had no significant impact on Islamic bank profitability.

Regulation and NPA (risk-taking of banks)

The regulatory mechanism of banks in any country must address the following issues: capital adequacy ratio, prudent provisioning, concentration banking, the ownership structure of banks, market discipline, regulatory devices, presence of foreign capital, bank competition, official supervisory power, independence of supervisory bodies, private monitoring, and NPAs [ 25 ].

Kanoujiya et al. [ 64 ] revealed through empirical evidence that Indian bank regulations lack a proper understanding of what banks require and propose reforming and transforming regulation in Indian banks so that responsive governance and regulation can occur to make banks safer, supported by Rastogi et al. [ 105 ]. The positive impact of regulation on NPAs is widely discussed in the literature. [ 94 ] argue that regulation has multiple effects on banks, including reducing NPAs. The influence is more powerful if the country’s banking system is fragile. Regulation, particularly capital regulation, is extremely effective in reducing risk-taking in banks [ 103 ].

Rastogi and Kanoujiya [ 106 ] discovered evidence that disclosure regulations do not affect the profitability of Indian banks, supported by Karyani et al. [ 65 ] for the banks located in Asia. Furthermore, Rastogi and Kanoujiya [ 106 ] explain that disclosure is a difficult task as a regulatory requirement. It is less sustainable due to the nature of the imposed regulations in banks and may thus be perceived as a burden and may be overcome by realizing the benefits associated with disclosure regulation [ 31 , 54 , 101 ]. Zheng et al. [ 138 ] empirically discovered that regulation has no impact on the banks’ profitability in Bangladesh.

Governments enforce banking regulations to achieve a stable and efficient financial system [ 20 , 94 ]. The existing literature is inconclusive on the effects of regulatory compliance on banks’ risks or the reduction of NPAs [ 10 , 11 ]. Boudriga et al. [ 25 ] concluded that the regulatory mechanism plays an insignificant role in reducing NPAs. This is especially true in weak institutions, which are susceptible to corruption. Gonzalez [ 52 ] reported that firm regulations have a positive relationship with banks’ risk-taking, increasing the probability of NPAs. However, Boudriga et al. [ 25 ], Samitas and Polyzos [ 113 ], and Allen et al. [ 3 ] strongly oppose the use of regulation as a tool to reduce banks’ risk-taking.

Kwan and Laderman [ 79 ] proposed three levels in regulating banks, which are lax, liberal, and strict. The liberal regulatory framework leads to more diversification in banks. By contrast, the strict regulatory framework forces the banks to take inappropriate risks to compensate for the loss of business; this is a global problem [ 73 ].

Capital regulation reduces banks’ risk-taking [ 103 , 110 ]. Capital regulation leads to cost escalation, but the benefits outweigh the cost [ 103 ]. The trade-off is worth striking. Altman Z score is used to predict banks’ bankruptcy, and it found that the regulation increased the Altman’s Z-score [ 4 , 46 , 63 , 68 , 72 , 120 ]. Jin et al. [ 62 ] report a negative relationship between regulation and banks’ risk-taking. Capital requirements empowered regulators, and competition significantly reduced banks’ risk-taking [ 1 , 122 ]. Capital regulation has a limited impact on banks’ risk-taking [ 90 , 103 ].

Maji and De [ 90 ] suggested that human capital is more effective in managing banks’ credit risks. Besanko and Kanatas [ 21 ] highlighted that regulation on capital requirements might not mitigate risks in all scenarios, especially when recapitalization has been enforced. Klomp and De Haan [ 72 ] proposed that capital requirements and supervision substantially reduce banks’ risks.

A third-party audit may impart more legitimacy to the banking system [ 23 ]. The absence of third-party intervention is conspicuous, and this may raise a doubt about the reliability and effectiveness of the impact of regulation on bank’s risk-taking.

NPA (risk-taking) in banks and profitability

Profitability affects NPAs, and NPAs, in turn, affect profitability. According to the bad management hypothesis [ 17 ], higher profits would negatively affect NPAs. By contrast, higher profits may lead management to resort to a liberal credit policy (high earnings), which may eventually lead to higher NPAs [ 104 ].

Balasubramaniam [ 8 ] demonstrated that NPA has double negative effects on banks. NPAs increase stressed assets, reducing banks’ productive assets [ 92 , 117 , 136 ]. This phenomenon is relatively underexplored and therefore renders itself for future research.

Triad and the performance of banks

Regulation and triad.

Regulations and their impact on banks have been a matter of debate for a long time. Barth et al. [ 12 ] demonstrated that countries with a central bank as the sole regulatory body are prone to high NPAs. Although countries with multiple regulatory bodies have high liquidity risks, they have low capital requirements [ 40 ]. Barth et al. [ 12 ] supported the following steps to rationalize the existing regulatory mechanism on banks: (1) mandatory information [ 22 ], (2) empowered management of banks, and (3) increased incentive for private agents to exert corporate control. They show that profitability has an inverse relationship with banks’ risk-taking [ 114 ]. Therefore, standard regulatory practices, such as capital requirements, are not beneficial. However, small domestic banks benefit from capital restrictions.

DeYoung and Jang [ 43 ] showed that Basel III-based policies of liquidity convergence ratio (LCR) and net stable funding ratio (NSFR) are not fully executed across the globe, including the US. Dahir et al. [ 39 ] found that a decrease in liquidity and funding increases banks’ risk-taking, making banks vulnerable and reducing stability. Therefore, any regulation on liquidity risk is more likely to create problems for banks.

Concentration banking and triad

Kiran and Jones [ 71 ] asserted that large banks are marginally affected by NPAs, whereas small banks are significantly affected by high NPAs. They added a new dimension to NPAs and their impact on profitability: concentration banking or banks’ market power. Market power leads to less cost and more profitability, which can easily counter the adverse impact of NPAs on profitability [ 6 , 15 ].

The connection between the huge volume of research on the performance of banks and competition is the underlying concept of market power. Competition reduces market power, whereas concentration banking increases market power [ 25 ]. Concentration banking reduces competition, increases market power, rationalizes the banks’ risk-taking, and ensures profitability.

Tabak et al. [ 125 ] advocated that market power incentivizes banks to become risk-averse, leading to lower costs and high profits. They explained that an increase in market power reduces the risk-taking requirement of banks. Reducing banks’ risks due to market power significantly increases when capital regulation is executed objectively. Ariss [ 6 ] suggested that increased market power decreases competition, and thus, NPAs reduce, leading to increased banks’ stability.

Competition, the performance of banks, and triad

Boyd and De Nicolo [ 27 ] supported that competition and concentration banking are inversely related, whereas competition increases risk, and concentration banking decreases risk. A mere shift toward concentration banking can lead to risk rationalization. This finding has significant policy implications. Risk reduction can also be achieved through stringent regulations. Bolt and Tieman [ 24 ] explained that stringent regulation coupled with intense competition does more harm than good, especially concerning banks’ risk-taking.

Market deregulation, as well as intensifying competition, would reduce the market power of large banks. Thus, the entire banking system might take inappropriate and irrational risks [ 112 ]. Maji and Hazarika [ 91 ] added more confusion to the existing policy by proposing that, often, there is no relationship between capital regulation and banks’ risk-taking. However, some cases have reported a positive relationship. This implies that banks’ risk-taking is neutral to regulation or leads to increased risk. Furthermore, Maji and Hazarika [ 91 ] revealed that competition reduces banks’ risk-taking, contrary to popular belief.

Claessens and Laeven [ 36 ] posited that concentration banking influences competition. However, this competition exists only within the restricted circle of banks, which are part of concentration banking. Kasman and Kasman [ 66 ] found that low concentration banking increases banks’ stability. However, they were silent on the impact of low concentration banking on banks’ risk-taking. Baselga-Pascual et al. [ 14 ] endorsed the earlier findings that concentration banking reduces banks’ risk-taking.

Concentration banking and competition are inversely related because of the inherent design of concentration banking. Market power increases when only a few large banks are operating; thus, reduced competition is an obvious outcome. Barra and Zotti [ 9 ] supported the idea that market power, coupled with competition between the given players, injects financial stability into banks. Market power and concentration banking affect each other. Therefore, concentration banking with a moderate level of regulation, instead of indiscriminate regulation, would serve the purpose better. Baselga-Pascual et al. [ 14 ] also showed that concentration banking addresses banks’ risk-taking.

Schaeck et al. [ 115 ], in a landmark study, presented that concentration banking and competition reduce banks’ risk-taking. However, they did not address the relationship between concentration banking and competition, which are usually inversely related. This could be a subject for future research. Research on the relationship between concentration banking and competition is scant, identified as a research gap (“ Research Implications of the study ” section).

Transparency, corporate governance, and triad

One of the big problems with NPAs is the lack of transparency in both the regulatory bodies and banks [ 25 ]. Boudriga et al. [ 25 ] preferred to view NPAs as a governance issue and thus, recommended viewing it from a governance perspective. Ahmad and Ariff [ 2 ] concluded that regulatory capital and top-management quality determine banks’ credit risk. Furthermore, they asserted that credit risk in emerging economies is higher than that of developed economies.

Bad management practices and moral vulnerabilities are the key determinants of insolvency risks of Indian banks [ 95 ]. Banks are an integral part of the economy and engines of social growth. Therefore, banks enjoy liberal insolvency protection in India, especially public sector banks, which is a critical issue. Such a benevolent insolvency cover encourages a bank to be indifferent to its capital requirements. This indifference takes its toll on insolvency risk and profit efficiency. Insolvency protection makes the bank operationally inefficient and complacent.

Foreign equity and corporate governance practices help manage the adverse impact of banks’ risk-taking to ensure the profitability and stability of banks [ 33 , 34 ]. Eastburn and Sharland [ 45 ] advocated that sound management and a risk management system that can anticipate any impending risk are essential. A pragmatic risk mechanism should replace the existing conceptual risk management system.

Lo [ 87 ] found and advocated that the existing legislation and regulations are outdated. He insisted on a new perspective and asserted that giving equal importance to behavioral aspects and the rational expectations of customers of banks is vital. Buston [ 29 ] critiqued the balance sheet risk management practices prevailing globally. He proposed active risk management practices that provided risk protection measures to contain banks’ liquidity and solvency risks.

Klomp and De Haan [ 72 ] championed the cause of giving more autonomy to central banks of countries to provide stability in the banking system. Louzis et al. [ 88 ] showed that macroeconomic variables and the quality of bank management determine banks’ level of NPAs. Regulatory authorities are striving hard to make regulatory frameworks more structured and stringent. However, the recent increase in loan defaults (NPAs), scams, frauds, and cyber-attacks raise concerns about the effectiveness [ 19 ] of the existing banking regulations in India as well as globally.

Discussion of the findings

The findings of this study are based on the bibliometric and content analysis of the sample published articles.

The bibliometric study concludes that there is a growing demand for researchers and good quality research

The keyword analysis suggests that risk regulation, competition, profitability, and performance are key elements in understanding the banking system. The main authors, keywords, and journals are grouped in a Sankey diagram in Fig.  6 . Researchers can use the following information to understand the publication pattern on banking and its determinants.

Sankey Diagram of main authors, keywords, and journals. Note Authors contribution using scientometrics tools

Research Implications of the study

The study also concludes that a balance among the three components of triad is the solution to the challenges of banks worldwide, including India. We propose the following recommendations and implications for banks:

This study found that “the lesser the better,” that is, less regulation enhances the performance and risk management of banks. However, less regulation does not imply the absence of regulation. Less regulation means the following:

Flexible but full enforcement of the regulations

Customization, instead of a one-size-fits-all regulatory system rooted in a nation’s indigenous requirements, is needed. Basel or generic regulation can never achieve what a customized compliance system can.

A third-party audit, which is above the country's central bank, should be mandatory, and this would ensure that all three aspects of audit (policy formulation, execution, and audit) are handled by different entities.

Competition

This study asserts that the existing literature is replete with poor performance and risk management due to excessive competition. Banking is an industry of a different genre, and it would be unfair to compare it with the fast-moving consumer goods (FMCG) or telecommunication industry, where competition injects efficiency into the system, leading to customer empowerment and satisfaction. By contrast, competition is a deterrent to the basic tenets of safe banking. Concentration banking is more effective in handling the multi-pronged balance between the elements of the triad. Concentration banking reduces competition to lower and manageable levels, reduces banks’ risk-taking, and enhances profitability.

No incentive to take risks

It is found that unless banks’ risk-taking is discouraged, the problem of high NPA (risk-taking) cannot be addressed. Concentration banking is a disincentive to risk-taking and can be a game-changer in handling banks’ performance and risk management.

Research on the risk and performance of banks reveals that the existing regulatory and policy arrangement is not a sustainable proposition, especially for a country where half of the people are unbanked [ 37 ]. Further, the triad presented by Keeley [ 67 ] is a formidable real challenge to bankers. The balance among profitability, risk-taking, and regulation is very subtle and becomes harder to strike, just as the banks globally have tried hard to achieve it. A pragmatic intervention is needed; hence, this study proposes a change in the banking structure by having two types of banks functioning simultaneously to solve the problems of risk and performance of banks. The proposed two-tier banking system explained in Fig.  7 can be a great solution. This arrangement will help achieve the much-needed balance among the elements of triad as presented by Keeley [ 67 ].

Conceptual Framework. Note Fig.  7 describes the conceptual framework of the study

The first set of banks could be conventional in terms of their structure and should primarily be large-sized. The number of such banks should be moderate. There is a logic in having only a few such banks to restrict competition; thus, reasonable market power could be assigned to them [ 55 ]. However, a reduction in competition cannot be over-assumed, and banks cannot become complacent. As customary, lending would be the main source of revenue and income for these banks (fund based activities) [ 82 ]. The proposed two-tier system can be successful only when regulation especially for risk is objectively executed [ 29 ]. The second set of banks could be smaller in size and more in number. Since they are more in number, they would encounter intense competition for survival and for generating more business. Small is beautiful, and thus, this set of banks would be more agile and adaptable and consequently more efficient and profitable. The main source of revenue for this set of banks would not be loans and advances. However, non-funding and non-interest-bearing activities would be the major revenue source. Unlike their traditional and large-sized counterparts, since these banks are smaller in size, they are less likely to face risk-taking and NPAs [ 74 ].

Sarmiento and Galán [ 114 ] presented the concerns of large and small banks and their relative ability and appetite for risk-taking. High risk could threaten the existence of small-sized banks; thus, they need robust risk shielding. Small size makes them prone to failure, and they cannot convert their risk into profitability. However, large banks benefit from their size and are thus less vulnerable and can convert risk into profitable opportunities.

India has experimented with this Differential Banking System (DBS) (two-tier system) only at the policy planning level. The execution is impending, and it highly depends on the political will, which does not appear to be strong now. The current agenda behind the DBS model is not to ensure the long-term sustainability of banks. However, it is currently being directed to support the agenda of financial inclusion by extending the formal credit system to the unbanked masses [ 107 ]. A shift in goal is needed to employ the DBS as a strategic decision, but not merely a tool for financial inclusion. Thus, the proposed two-tier banking system (DBS) can solve the issue of profitability through proper regulation and less risk-taking.

The findings of Triki et al. [ 130 ] support the proposed DBS model, in this study. Triki et al. [ 130 ] advocated that different component of regulations affect banks based on their size, risk-taking, and concentration banking (or market power). Large size, more concentration banking with high market power, and high risk-taking coupled with stringent regulation make the most efficient banks in African countries. Sharifi et al. [ 119 ] confirmed that size advantage offers better risk management to large banks than small banks. The banks should modify and work according to the economic environment in the country [ 69 ], and therefore, the proposed model could help in solving the current economic problems.

This is a fact that DBS is running across the world, including in India [ 60 ] and other countries [ 133 ]. India experimented with DBS in the form of not only regional rural banks (RRBs) but payments banks [ 109 ] and small finance banks as well [ 61 ]. However, the purpose of all the existing DBS models, whether RRBs [ 60 ], payment banks, or small finance banks, is financial inclusion, not bank performance and risk management. Hence, they are unable to sustain and are failing because their model is only social instead of a much-needed dual business-cum-social model. The two-tier model of DBS proposed in the current paper can help serve the dual purpose. It may not only be able to ensure bank performance and risk management but also serve the purpose of inclusive growth of the economy.

Conclusion of the study

The study’s conclusions have some significant ramifications. This study can assist researchers in determining their study plan on the current topic by using a scientific approach. Citation analysis has aided in the objective identification of essential papers and scholars. More collaboration between authors from various countries/universities may help countries/universities better understand risk regulation, competition, profitability, and performance, which are critical elements in understanding the banking system. The regulatory mechanism in place prior to 2008 failed to address the risk associated with banks [ 47 , 87 ]. There arises a necessity and motivates authors to investigate the current topic. The present study systematically explores the existing literature on banks’ triad: performance, regulation, and risk management and proposes a probable solution.

To conclude the bibliometric results obtained from the current study, from the number of articles published from 1976 to 2020, it is evident that most of the articles were published from the year 2010, and the highest number of articles were published in the last five years, i.e., is from 2015. The authors discovered that researchers evaluate articles based on the scope of critical journals within the subject area based on the detailed review. Most risk, regulation, and profitability articles are published in peer-reviewed journals like; “Journal of Banking and Finance,” “Journal of Accounting and Economics,” and “Journal of Financial Economics.” The rest of the journals are presented in Table 1 . From the affiliation statistics, it is clear that most of the research conducted was affiliated with developed countries such as Malaysia, the USA, and the UK. The researchers perform content analysis and Citation analysis to access the type of content where the research on the current field of knowledge is focused, and citation analysis helps the academicians understand the highest cited articles that have more impact in the current research area.

Practical implications of the study

The current study is unique in that it is the first to systematically evaluate the publication pattern in banking using a combination of scientometrics analysis tools, network analysis tools, and content analysis to understand the relationship between bank regulation, performance, and risk. The study’s practical implications are that analyzing existing literature helps researchers generate new themes and ideas to justify their contribution to literature. Evidence-based research knowledge also improves decision-making, resulting in better practical implementation in the real corporate world [ 100 , 129 ].

Limitations and scope for future research

The current study only considers a single database Scopus to conduct the study, and this is one of the limitations of the study spanning around the multiple databases can provide diverse results. The proposed DBS model is a conceptual framework that requires empirical testing, which is a limitation of this study. As a result, empirical testing of the proposed DBS model could be a future research topic.

Availability of data and materials

SCOPUS database.

Abbreviations

Systematic literature review

World Financial Crisis

Non-performing assets

Differential banking system

SCImago Journal Rank Indicator

Liquidity convergence ratio

Net stable funding ratio

Fast moving consumer goods

Regional rural banks

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Rastogi, S., Sharma, A., Pinto, G. et al. A literature review of risk, regulation, and profitability of banks using a scientometric study. Futur Bus J 8 , 28 (2022). https://doi.org/10.1186/s43093-022-00146-4

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Work-Related Stress in the Banking Sector: A Review of Incidence, Correlated Factors, and Major Consequences

Gabriele giorgi.

1 Department of Human Sciences, European University of Rome, Rome, Italy

Giulio Arcangeli

2 Department of Experimental and Clinical Medicine, University of Florence, Florence, Italy

Milda Perminiene

3 School of Psychology, University of East London, London, United Kingdom

Chiara Lorini

4 Department of Health Sciences, University of Florence, Florence, Italy

Antonio Ariza-Montes

5 Department of Management, Universidad Loyola Andalucía, Córdoba, Spain

6 Department of Business Administration, Universidad Autónoma de Chile, Santiago, Chile

Javier Fiz-Perez

Annamaria di fabio.

7 Department of Education and Psychology, University of Florence, Florence, Italy

Nicola Mucci

For a number of years now, banks have been going through enormous changes in organization and structure. New technology and new ways of structuring the operation have left their mark on the working conditions and daily lives of employees. Deregulation of labor markets, emerging technologies and new types of jobs have significantly reshaping working lives by continuous changes on employment and working conditions. Such a scenario has a relevant impact not only on companies' organization but also on working population's health. The banking sector is particularly well-deserved of a specific and thorough analysis, in view of the recent increase in psycho-social disorders of employees. This may be related to the major organizational changes affecting this sector and, in particular, to the restructuring processes resulting from the global economic crisis. Our aim is to assess the scale of the phenomenon and how far it relates specifically to the processes of bank organization. With this in mind, through a review of the literature, we selected the main studies dealing with work-related stress in banking, so that we could reach a better understanding of the phenomenon as it relates specifically to this set of workers. The search took place on the MEDLINE® database; in total 20 articles were chosen. There was uniform agreement among the studies that stress in the banking workplace is now at critical levels, and that it can have deleterious psychological effects on workers, and on their physical health, and that organizations, too, are affected. Most studies showed that mental health problems had increased in the banking sector, and that they were stress-related. Examples began with anxiety and depression, carried on through maladaptive behaviors, and ended in job burnout. The reviewed studies' limitations were then discussed, and possible ways forward considered.

Introduction

In recent decades, moves to a global economy and deregulated markets have led to a series of large changes in the way financial services work and are sold, and this is particularly true of the organization and execution of work in the sector (Hassard et al., 2017 ; Kaur et al., 2017 ). There was enormous change in the way banks were organized and the effect on the working lives of employees of new technology and new structures was severe.

The credit industry is experiencing a particularly important moment due to major changes in organizations and the global economic crisis. In Italy, the main cause of reorganization of this sector lies in the large number of internal mergers and acquisitions (M&A), mainly due to strategic reasons rather than to financial failures (Pohl and Tortella, 2017 ). Therefore, these M&A processes not only helped to redraw the landscape of banks but also the scenario of the banking groups themselves: on the one hand the growing integration of the Italian banking system with the European one has pushed the creation of companies of such size to compete with the large groups in the rest of Europe, on the other, the reorganization has led to a remodeling through banking groups alliances, with the resulting acquisition of a dominant market position by only three large groups.

The explosion in 2008 of the economic crisis in Europe was determined by external factors that triggered a structural crisis that was undermining the economy of some countries (e.g., Italy, Greece and Portugal) already from the beginning 2000 and prevented a proper response to economic shocks, both from the effects of the 2007 international financial crisis and the sovereign debt crisis of 2011 (Dom et al., 2016 ). No economic sector has been immune from the effects of the crisis, especially in the most affected countries. The repercussions in the credit sector were of two types: on the one hand, the progressive reduction in saving and investment capacity of the customers, and, on the other hand, the increasingly frequent unforeseen of the global economic market. Therefore, it is reasonable to expect consequences on the psycho-physical well-being of employees (Van Hal, 2015 ; Frasquilho et al., 2016 ).

The International Labor Organization reported a number of worrying issues for workers in financial services; these included greater pressure on time, problems with ergonomics, conflicting roles, work demands that were considered excessive, difficult relationships with customers, and a rising number of cases of stress and violence (Giga and Hoel, 2003 ).

Such changes have had relevant effects on bank employees, not just in the workplace but also in their daily lives. In fact, banking work, in which for at least a century there have been no major changes, has been completely redesigned. This process is inserted in a context of increased competition between national and international banks, institutional changes, implementation of economic plans, and reduced inflationary rates (Silva and Navarro, 2012 ; Bozdo and Kripa, 2015 ). The basis of the new requirements and qualifications is based on three characteristic social phenomena: unemployment, precariousness of work, and intensification of the labor rhythm (Hantzaroula, 2015 ).

It is possible to affirm that the substantial changes that took place with the productive restructuring were in the sense of implementing strategies such as charging clients for a greater diversity of services and products, intensification of outsourcing, flexibility of work, redefinition of tasks and traditional banking activities, and transferring more and more services to the clients themselves (i.e., through home-banking) (Silva and Navarro, 2012 ; Blazy et al., 2014 ). In this new management model, bank employees have experienced a full redefinition of their tasks, becoming bank sellers (rather than bank employees), working with clients to meet the bank's targets in areas such as the sale of investment funds, bonds, and insurance policies (Jinkings, 2004 ; Adrian and Ashcraft, 2016 ). Moreover, a considerable reduction in job positions intensified the volume of work for those who remained, as well as for new employees (Silva and Navarro, 2012 ).

In addition to those changes that have occurred since the process of productive restructuring have affected the way of being of bank employees, they also affected the health of workers, as a result of increasing pressure, tension and stress in the bank environment (Silva and Navarro, 2012 ). For some authors, both the informatization processes and the profile redefinitions can endanger the well-being and health of workers (Ganesh Kumar and Deivanai Sundaram, 2014 ; De Cuyper and Isaksson, 2017 ; Manjunatha and Renukamurthy, 2017 ).

The National Institute for Occupational Safety and Health (NIOSH) ranked occupations for stress levels, with some of the 130 occupations found to be more stressful. What these stressful occupations had in common was that the employee had insufficient control over the work, with employees feeling that they were trapped in jobs where they were regarded as quasi-machines rather than as people. The dozen most stressful positions were managerial, administrative and supervisory roles; if we extend the 12 most stressful occupations to 28, bank tellers feature in the list (Michailidis and Georgiou, 2005 ).

There is much literature to support the idea of occupational stress as a disease promoter, placing workers' social and psychological health at risk and damaging their social, professional and affective lives. Poor performance at work, a high level of absenteeism and staff turnover, and violence in the workplace all follow (Godin et al., 2005 ; Stansfeld and Candy, 2006 ; Bhagat et al., 2010 ; Burke, 2010 ; Dalgaard et al., 2017 ).

In light of what we have discussed, we believe that there is a strong need for a thorough analysis of the increasing spread of negative health outcomes that work-related stress may assume in a very changing organizational context as the banking one. Despite the existence of a plentiful Literature on work-related stress, the study of this phenomenon in the banking sector is still limited, although it falls into the field of collective health. This review can support stakeholders and institutions agencies responsible for monitoring workplaces to framing the issue as well as to develop prevention and protection strategies. In this manuscript, our intention is to assess the scale of the phenomenon and how far it relates specifically to the processes of bank organization. In particular, through a review of the literature, we selected the main studies dealing with work-related stress in banking, so that we could reach a better understanding of the phenomenon (epidemiology of work-related stress, health problems related to work-related stress, risk factors, health outcomes as an effect of work-related stress, consequences for the organization) as it relates specifically to this set of workers.

Materials and methods

To find recent date scientific literature on the subject of work-related stress in the banking sector, we conducted a review following the MOOSE Group's guidelines (MOOSE is the acronym for Meta-analyses Of Observational Studies in Epidemiology) (Stroup et al., 2000 ). The platform chosen for the literature search was MEDLINE®.

Keywords used in the search were: “bank,” “banking,” “work-related stress,” “job stress,” “organizational stress,” and “stress,” and we searched for them in the title and in the abstract of manuscripts. In order to be included, papers had to describe the results of original studies (primary studies), they had to be published in English and their full-text had to be available online (based on both the subscriptions of the University of Florence and of the European University of Rome). No temporal filter has been adopted. MEDLINE® was last accessed on 31 July 2017.

Fist, the articles were selected on the basis of title and abstract, then on the basis of the full-text. The references of the selected articles were then examined to identify other suitable studies.

The quality of the selected studies, included in the final synthesis, was assessed according to the study design: Table ​ Table1 1 lists three quality grades, reflecting that, while some studies will meet the quality criteria in full, some will be deficient in some way and some will fail to meet the criteria in any way. Since there is not a universal agreement on the criteria to be included in quality assessment, the criteria listed in Table ​ Table1 1 were chosen by the research group, according to the expertise of each component of the team. Specifically, the type of study, the type of parameters used to investigate work-related stress, and the type of data collection were considered to assess the quality of the selected study.

Description of the quality criteria used to assess the quality of the studies.

Longitudinal studies are those that follow a cohort of workers for an extended period, permitting changes in the incidence of pathological facets of banking sector work-related stress to be assessed while taking into account observed changes in both physical and psychological working conditions. There is no doubt that such longitudinal studies, as opposed to cross-sectional, studies, would produce more accurate results. Subjective (self-perceived) parameters could lead to social desirability bias, which could result in misclassification or in bias in the interpretation of objective parameters. Moreover, studies with data collected three or more times were considered more accurate and so with higher quality.

About 600 citations (565 articles) were identified thought the search strategy. The selection by title and abstract led to the exclusion of 530 studies not related specifically to the topic or not in agreement with the inclusion criteria (not primary studies, published in any language different from English, full text not available). The selection by full text led to the exclusion of 20 papers. By consulting the reference lists of the selected articles, five papers were identified. So, the procedure set out above, led to the selection of 20 articles, of which five were European (Spain, Cyprus, the Netherlands, Italy, and Iceland), nine were Asian (India, Pakistan, China and Malaysia), four came from Brazil, and two were African (South Africa, Nigeria).

Table ​ Table2 2 summarizes results drawn from the studies concerning work-related stress and its effects, with particular reference to the banking sector.

Summary of the studies included in the review.

Considering the study design, no studies are classified in the first, completely satisfactory, quality category (Table ​ (Table1), 1 ), because not one of the examined studies met every quality criterion. The most obvious reasons for this are that there are no longitudinal studies into how banking sector work-related stress affects employees, and that the studies al rely on respondents self-assessing and self-reporting, so that there is a risk of social desirability bias. In fact, all publications were assigned in the low quality category.

The oldest study included in this review was published in 1996; the other researches are quite recent, and 17 (85%) were published in the last 10 years.

Five of the articles examined ways in which stress at work might give rise to various negative mental health and physical results. These included anxiety and depression, together with such maladaptive behaviors such as smoking and drinking (Silva and Barreto, 2010 , 2012 ; Snorradóttir et al., 2013 ; Petarli et al., 2015 ; Valente et al., 2015 ). Another five investigated how stress at work can give rise to such specific conditions as workplace discrimination, work-family conflict, (lack of) job satisfaction and employee motivation, high staff turnover and work-life imbalance in employees (Seegers and van Elderen, 1996 ; Mughal et al., 2010 ; Oginni et al., 2013 ; Imam et al., 2014 ; Kan and Yu, 2016 ). A further three looked for an occupational stress/job burnout nexus (Mutsvunguma and Gwandure, 2011 ; Amigo et al., 2014 ; Li et al., 2015 ). In two cases, the focus was those factors in the banking sector that could make or increase stress levels in particular roles (Fernandes et al., 2012 ; Devi and Sharma, 2013 ). Two more were concerned with the role played in development of specific physical symptoms by organizational stress in the development of specific physical symptoms (Mocci et al., 2001 ; Makhbul et al., 2011 ); two others looked at factors contributing to work-related stress in banking sector employees (Michailidis and Georgiou, 2005 ; Ahmad and Singh, 2011 ); and the last looked for differences between male and female respondents and between those employed by private and by public sector banks in the kind of stress and the degree of intensity (Preshita and Pramod, 2014 ).

The majority of papers analyzed for our review dealt with the effects of work-related stress in the banking sector.

Seegers and van Elderen ( 1996 ) investigated how stressors related to work affected the physical and psychological well-being in a large Dutch banking organization, and what levels of absenteeism they gave rise to. Invitations to complete a questionnaire were sent to five hundred bank directors, of whom 376 (75.2%) responded by completing the forms. The basis of the questionnaire was a Dutch version of a questionnaire developed by the Institute for Social Research at the University of Michigan (Vragenlijst voor Organizatie Stress (VOS-D) for the measurement of organizational stress (Bergers et al., 1986 ) with the addition of objective stressors (age, years of directorship, staff size). Also added were two subscales drawn from the Self-Expression and Self-Control Questionnaire (Zelfexpressie en Controle Vragenlijst, ZECV) (Maes et al., 1987 ) in order to measure the degree to which anger was internalized or externalized, and questions intended to assess the degree of social support. Stressor variables included:

• - Workload;
• - Role ambiguity, role conflict and lack of responsibility; and
• - Lack of knowledge.

Work-related stressors included two scales:

• - Meaninglessness of work; and
• - Uncertainty as to job future.

There was a division of work-related psychological strains into job dissatisfaction and cognitive anxiety, in addition to which were also considered:

• - Psychological and health complaints; and
• - Absenteeism (measured by self-reporting of days' absence in the past year.

The conclusion was that subjective stressors did contribute to work-related stress, while lack of knowledge and lack of responsibility expressed themselves in increased feelings that work was meaningless and the future uncertain. Meaninglessness of work and job dissatisfaction were connected with each other; so were psychological complaints to cognitive anxiety and health complaints; while a person's perceived psychological well-being was related to work-related strains.

Social support was confirmed as compensating for stress in that it tended to lessen negative effects caused by stressors and so led to reduced stress reactions. The study's limitations centered on the fact that the data came from a cross-sectional study and were for the most part self-reported and retrospective.

Mocci et al. ( 2001 ) set out to examine how far psychological stressors contribute to asthenopeic complaints (asthenopia is visual discomfort) as well as the extent to which social support could mitigate the effect of job stressors. To this end, it looked at the influence of such stressors as task, individual characteristics and social environment on asthenopia in computer users. Ophthalmological examination allowed the selection from a total of 385 Italian bank workers of 212 who did not have organic visual weaknesses, and who shared both work environment and job duties to create the study group. This group was given three questionnaires:

• - the NIOSH job stress questionnaire (Hurrell and McLaney, 1988 ; Mocci, 1994 );
• - a questionnaire designed to identify subjective discomfort springing from or caused by the workplace's environment and lighting conditions; and
• - a questionnaire on whether oculo-visual disturbances were experienced.

Results showed the following (or their lack) predictors of visual complaints:

• - Social support;
• - Self-esteem;
• - Work satisfaction;
• - Group conflict; and
• - The underuse of skills

Social support could also act to mitigate the stress and strain model which was responsible for 30% of the variance. Although they could have a significant correlation with asthenopia, subjective environmental factors did not show up strongly as predictors of the symptoms. The authors' conclusion was that complaints about visual health by VDT workers probably reflect in part a psychological discomfort attributable to conditions of work. Discussing the limitations of their work, the researchers observed that they had evaluated environmental discomfort on the basis of self-reporting only, that the same caveat applied to occupational stressors and visual discomfort, and that using self-reports of both job stressors and strains made for a greater likelihood of conceptual overlap.

Michailidis and Georgiou ( 2005 ) studied occupational stress as it affects Cyprus's banking sector. The study improved understanding of factors contributing to occupational stress as employees in this industry feel it. The authors evaluated the extent of any correlation between employees' educational levels, relaxation patterns, and smoking and drinking habits with their perceptions of their level of occupational stress. Subjects, drawn from both genders and a variety of educational backgrounds, completed the Occupational Stress Indicator (OSI) (Cooper et al., 1988 ) with a view to establishing the degree to which occupational stress affects varying groups. 80 full-time employees of different banks in Nicosia, the Cypriot capital, were chosen at random to receive the questionnaires were distributed to 80 randomly selected. There were significant differences in the results between employees educated to higher degree level and those without formal qualifications. It was those educated to higher degree level who were most affected by the impact of the home/work interface; they showed a tendency to take work problems and demands home with them, and to appear to be following career objectives to the detriment of their home life. They were also the ones most likely to feel the brunt of such factors as: variety of work; delegation; favoritism; and conflicting tasks. The study also showed that, faced with high levels of these issues, these were the employees most likely to reduce the amount of time they had for themselves, thus losing relaxation time. Finally, employees in the habit of drinking alcohol were shown to have difficulty seeking advice from their supervisors and to be reluctant to look for social support. This research suggests that an employee with more educational qualifications will be more likely to act in a more detached and unemotional way and be more objective in order to reduce the impact of stress.

Silva and Barreto ( 2010 ) took as their study's starting point Nakao's work ( 2010 ) on work-related stress and how it connects to a variety of negative outcomes in both physical and mental health, including depression and anxiety, together with such maladaptive behaviors as smoking and drinking. The aim of the study was to estimate how prevalent minor psychiatric disorders (MPD) were in the employees of a large bank in Brazil, and to investigate how far these could be related to adverse psychosocial working conditions. Their methodology embraced demand control (Karasek, 1979 ) and the effort-reward imbalance (ERI) model (Siegrist, 1996 ). Authors also examined the degree to which social support or the presence of over-commitment could modify these associations, as suggested by, respectively, the JCQ and ERI models, respectively. A version of the General Health Questionnaire containing 12 questions (GHQ-12) adapted by Mari and Williams, tested for the presence of MPD (Mari and Williams, 1985 ), while two tools were used to assess psychosocial factors at work: the JCQ reduced version that Araújo had adapted to Portuguese ( 2003 ), and the version of the ERI scale that Silva and Barreto had adapted to Portuguese by (2010). On the basis of assumptions in Karasek's model, the median value was used to dichotomize variables, which were combined in four distinct categories. The highest exposure group contained those workers faced with a combination of low control and high demand. Intermediate groups were those for active job (high control and high demand) and passive job (low demand and low control). Eighty-eight percent of the 2,337 eligible workers took part in the study, and results suggested a statistical association with MPD for adverse working conditions in both scales. MPD prevalence more than doubled among those facing maximum demand while exercising minimum control. ERI produced similar results, with MPD prevalence varying from 33% (low-effort and high-reward employees) to 70% for high effort/low reward staff. Absence of social support at work and over-commitment both also showed a statistical association with MPD. Limitations of the population and design, the healthy worker effect and data collection through self-response were present in the study and. the study's cross-sectional nature prevents inferences from being drawn on the causal nature of associations thrown up between common mental disorders and stress at work. Finally, as MPD is a major cause of temporary leave and invalidity pensions among bank workers in the country (Silva et al., 2007 ), the authors commented on the possibility that there was no participation in this work by individuals with severe mental disorders, so that the prevalence of MPD in the study population would be underestimated. The authors went on to suggest that new studies of bank workers be developed, and especially those of a longitudinal design, in an attempt to understand the mechanism of these associations. Ahmad and Singh ( 2011 ) investigated how occupational stress and a number of biographical variables in a sample of 350 bank employees randomly drawn from various Indian banks (age, experience in present position, total experience, salary and number of dependents) affected employee reactions to organizational change (OC). A scale developed by Rahman ( 1993 ) was used to measure organizational change, while the Occupational Stress Index−46 items covering 12 aspects of occupational stress (role ambiguity, role overload, role conflict, powerlessness, under-participation, unreasonable group and political pressures, responsibility for persons, poor peer-relations, low status, intrinsic impoverishment, strenuous working conditions, and unprofitability) was used to gauge occupational stress. The authors found a causative influence on employees' perceived reactions to OC in certain stressors from the occupational stress scale; these were: responsibility for persons, intrinsic impoverishment, low status and unprofitability. The only biographical variable to predict banking sector employees' reactions to organizational change was “experience in the present position.”

Silva and Barreto ( 2012 ) examined how far poor self-rated health of Brazilian employees in financial services could be connected to adverse psychosocial working conditions. In a cross-sectional study, a random sample of 2,054 bank employees (49.7% male and 50.3% female) answered a questionnaire containing questions about five areas of interest: socio-demographic, health, psychosocial, behavioral and work-related factors. Among the latter were: length of service in the company; current job; and psychosocial nature of the job. The demand-control model (Karasek, 1979 ) and effort reward imbalance (ERI) model were used to assess independent associations with the outcome (Siegrist, 1996 ). Employees with a high demand/low control work combination appeared in the group that had most exposure to stressful conditions. High demand/high control employees were placed in the intermediate exposure group, together with low control/ low demand employees, while employees working under low demand and high control provided the reference category for statistical analysis, since they were seen as having no exposure to stress. For the ERI model, a work-related stress index was constructed using cutoffs derived from the distribution's tertiles (Jonge et al., 2000 ). Of these, the highest was the most exposed group; the intermediate exposure group was second, and in the first tertile were the unstressed reference category. To find the dependent variable for the analysis, a single question was used: “In general, compared to people of your age, would you say your health is (…)?” Five responses were possible: very poor; poor; good, very good; or excellent). A statistical association with poor self-rated health was found with advancing years; lack of physical activity; chronic diseases; problems sleeping; regular medication use; and having been employed by the company for between 6 and 14 years. Exposure to high strain work and lack of social support at work also showed a statistical association with poor self-rated health. These results added further support to the idea of a relationship between poor self-rated health and exposure to an adverse psychosocial work environment, an effect seen in both demand-control and ERI models. In the first of those models, the association was stronger both among high strain/low control workers and employees lacking social support at work, while in the ERI model, the likelihood of poor self- rated health increased for high effort-reward imbalance and a high level of commitment at work.

The subject of study for Snorradóttir et al. ( 2013 ) was psychological distress caused to employees by rapid and unpredictable changes when the organizations they worked for underwent financial collapse. What they examined was the level of psychological distress among those employees who survived the crash, and the impact on them of involvement in the twin processes of downsizing and restructuring. The study was cross-sectional in design; data were collected from all the headquarters and branch‘ employees in all of the three Icelandic banks that collapsed during the first week of October 2008. The basis of the questionnaire used was the General Nordic Questionnaire for psychological and social factors at work (short version) (QPS-Nordic 34þ), with some questions from the long version added (Dallner et al., 2000 ), together with questions culled from the Copenhagen Psychosocial Questionnaire (COPSOQ) (Kristensen et al., 2005 ) and from questionnaires that had previously been administered by the Icelandic Public Health Institute (Jónsson and Gudlaugsson, 2010 ) and the Administration of Occupational Safety and Health (AOSH) (Rafnsdottir and Gudmundsdottir, 2004 ; Sveinsdóttir and Gunnarsdóottir, 2008 ). Completed questionnaires were returned by a total of 1,880 employees. The scale used to measure psychological distress was one previously used by AOSH (Sveinsdóttir and Gunnarsdóottir, 2008 ) including five items indicating symptoms of depression, anxiety, being overly concerned, sleep disturbances, and feeling exhausted. What was demonstrated is that workers who were more entangled in the downsizing or restructuring processes were more distressed than those who were not. Higher distress levels were seen in bank employees working in downsized departments, transferred to a different department, or having taken a salary reduction and the likelihood of psychological distress varied according to how much change had been experienced and how deeply involved in the process the person was. The researchers' conclusion was that factors relating to psychosocial work environment played a part, but only a limited part, in perceived psychological distress for those involved in the organizational change processes in the early aftermath of the collapse of the banks. Also, results indicated that psychological distress in employees could be reduced during difficult economic times if management prioritized employee well-being, informing and encouraging employee participation in decision-making (Arnetz, 2005 ; Svensen et al., 2007 ), and that distress was reduced in such employees when friends and family provided social support. Coworker support or support from supervisors, however, was not so effective. This study gains strength from having been, uniquely, nationwide with every employee of a collapsed major bank in one country being involved. As with the other studies, the central weakness was its cross-sectional nature and use of self-reported data (Kompier, 2002 ).

In the first large-scale study carried out in the Spanish banking sector, Amigo et al. ( 2014 ) investigated how prevalent employee burnout syndrome (BS) is. One aim of the study was to differentiate between commercial branch office staff who dealt with the general public, and central services employees. Participants in the study came from all the Spanish Savings Banks and totaled 1,341, of whom 883 were men and 458 women. 1,130 worked in branch offices and had direct contact with the clients; the number of central services workers was 211. The Maslach Burnout Inventory-General Survey (MBI-GS) (Schaufeli et al., 1996 ), adapted for the Spanish environment by Salanova et al. ( 2000 ), was used. While the study showed high BS rates among employees of Spanish savings banks, and 63.16% of participants showed high levels of risk, significant differences emerged between the two groups in all three dimensions of BS: emotional exhaustion ( p < 0.001); cynicism ( p < 0.001); and professional efficacy ( p < 0.001). Branch office workers returned higher scores for emotional exhaustion and cynicism and lower scores for professional efficacy. This high incidence of BS was higher even than that shown by other studies where the professions involved are associated with BS (Hernández et al., 2006 ; Longas et al., 2012 ) and the high rate of BS shown becomes even more relevant when one takes into account that the criteria used to establish risk was very restrictive; only workers who posted high scores in a minimum of two factors of the MBI-GS were counted. Emotional exhaustion was the factor involving the greatest number of workers showing high BS risk of BS. The difference between groups may be interpreted as arising from the likelihood that branch office workers will have daily contact with people whose economic problems are severe, and that they had to deal with these problems. What's more, branch workers were required to sell financial products with a problematic past illustrating the very competitive practices among financial institutions. All these things led to a certain loss of control for branch office employees and might be seen as explaining their feelings of less professional efficacy, greater emotional exhaustion and greater cynicism (Alarcon, 2011 ; Lee et al., 2011 ). A branch office job carries more risk of burnout than one in central services. The significant difference was contact with the public, which branch office staff have and central services personnel do not. The suggestion from these results is that burnout has more to do with daily interpersonal stress at work, exacerbated by the sector's commercial strategies of recent years, than to the possibility of being let go or asked to take a cut in salary.

The incidence of occupational stress in Brazilian bank employees, and its association with socioeconomic, demographic, and labor characteristics, was studied by Petarli et al. ( 2015 ). This was a cross-sectional study of 521 people aged between 20 and 64 and drawn from both sexes who worked for a banking network in the state of Espirito Santo. Data collection took place between August 2008 and August 2009. The short version of the Job Stress Scale (Alves et al., 2004 ), adapted for the Brazilian market and developed according to the demand-control model, was used (Karasek et al., 1998 ). The demand-control model has four quadrants: high distress (high-demand/low-control jobs), passive job (low-demand/low-control jobs), active job (high-demand/high-control jobs), and low distress (low-demand/high-control jobs). The study placed the biggest number of bank employees ( n = 179, 34.5%) in the “passive” quadrant; the drawback to passive jobs lies in their combination of low psychological distress and low control, possibly leading to a gradual decrease in learning and skill development. The greatest risk of occupational stress lay with the quadrant that had the lowest number of employees. These results were not those expected, given the factors in today's banking activities—demanding targets, fierce competition, fewer available jobs, a constant demand to increase qualifications, intensified and overloaded tasks, and increased control and pressure on workers—that could increase the occupational stress risk. The control-demand model concentrates on processes of workforce organization to assess the risk of stress (Alves et al., 2004 ) and takes no account of other important facets of development and perception of occupational stress, so that a broader evaluation of stress levels in the employees studied might have been possible. Social support, regarded as the most well-known situational variable for occupational stress analysis (Bakker and Demerouti, 2007 ), was shown in the study to play an important role: Where there was low social support, there was a greater likelihood of being in the “high distress” quadrant. This variable's efficacy in reducing predicted occupational stress was borne out by results from other studies (Leong et al., 1996 ; Urbanetto et al., 2011 ). Finally, those variables making up quadrants associated with increased occupational stress risks were:

• - Low education levels;
• - Working in bank agencies;
• - More than 5 years' employment at the bank;
• - Six hour daily work shifts; and especially
• - Low levels of social support.

Conversely, the following correlated with a lower risk of occupational stress than being single:

• - Being married;
• - Living with a partner; and
• - Being separated, divorced, or widowed.

A sample of 1,046 employees in financial services in northern Brazil allowed Valente et al. ( 2015 ) to look for correlations between:

• - Psychosocial conditions in banking work, as assessed by the Job Demand-Control-Support model (Karasek et al., 1998 ) and Effort-Reward Imbalance (ERI) at work model (Siegrist et al., 2004 ); and
• - Major depressive symptoms and other forms of depressive symptoms.

This cross-sectional study was conducted between 2012 and 2013, with data obtained through a self-administered questionnaire that combined the Patient Health Questionnaire-9 (PHQ-9) (Fraguas et al., 2006 ), the Demand–Control–Support Questionnaire (DCSQ), adapted to Brazilian Portuguese (Alves et al., 2004 ), and the Brazilian version of the ERI-Questionnaire (ERI-Q) (Chor et al., 2008 ) to assess:

• - Work, social and demographic issues;
• - Depressive symptoms; and
• - Psychosocial aspects of the working environment.

Thirty-two percent of bank employees were found to have depressive symptoms which would justify a diagnosis of clinical depression. There was a strong correlation between, on the one hand, depressive symptoms both major and otherwise to be characterized and, on the other, being in work that could be seen as high in strain, low in social support, combining high effort with low reward, and a high level of over-commitment. The authors also saw a strong correlation between low social support levels and symptoms of depression, which confirmed previous findings (Wang et al., 2011 ; Yu et al., 2013 ); in sum, employees whose working environment combined high strain with low social support levels were more likely to have health problems than were with those whose social support levels were high. The conclusion was that banking sector work demanded constant skill updating to stay abreast of new work organization forms. Employees, and especially older employees, could find this threatening and experience additional stress as a result (Giga and Hoel, 2003 ). A private banking sector job might also bring with it the possibility of instability of employment, with downsizing resulting in pressure overload and stress a major employee concern.

According to Li et al. ( 2015 ), there had been no examination of the role of Psychological Capital (PsyCap) in mediating between occupational stress and job burnout in bank employees. Their study of a Chinese population filled this gap by examining potential mediation of PsyCap on occupational stress leading to job burnout. Their aims were:

• - To determine what association, if any, existed between occupational stress and job burnout;
• - To appraise the association between PsyCap and job burnout; and
• - To explore whatever efficacy PsyCap might have in mediating the occupational stress/job burnout connection in the case of Chinese bank employees.
• - This study was to be carried out separately for male and female employees

The study was cross-sectional survey by nature and carried out in northeast China from June to August 2013. Self-administered questionnaires were returned by 1,239 employees. The Chinese version of the ERI questionnaire was used to assess occupational stress, with a claim to examine failed reciprocity in cases where substantial efforts are met with low rewards (Yang and Li, 2004 ). PsyCap was measured using the Chinese version of the 24-item Psychological Capital Questionnaire (PCQ) (Luthans et al., 2007 ), while the Chinese version of the Maslach Burnout Inventory-General Survey (MBI-GS) was used to measure job burnout. Average scores of all three job burnout dimensions exceeded those in five other occupational groups (managers, clerks, foremen, technical professionals, and blue-collar workers) in Finland, Sweden and the Netherlands (Schutte et al., 2000 ). There was no difference in correlation of occupational stress with the three occupational stress dimensions between male and female bank employees. A positive relationship was found between extrinsic effort and over-commitment with, respectively, emotional exhaustion and depersonalization. It follows that tiredness is less likely in bank employees whose PsyCap is adequate and that their burnout symptoms were likely to show improvement. The implication was that PsyCap might have a strong effect on job burnout and that it could prove an effective resource in combating job burnout among Chinese bank employees. There was, though, a gender difference in how PsyCap mediates the association between occupational stress and job burnout: male bank employees found that PsyCap mediated the effects of extrinsic effort and reward on emotional exhaustion and depersonalization, while female bank employees found that PsyCap partially mediated effects of extrinsic effort, reward and over-commitment on the same two job burnout dimensions. The authors said that the study's main contribution was highlighting occupational stress's possible role in affecting bank employees' job burnout risk through PsyCap as mediator So that, as well as reducing the amount of excessive effort and over- commitment and increasing rewards, bank administrators could use PsyCap more to reduce job burnout among their employees, and especially their female employees.

Makhbul et al. ( 2011 ) investigated which factor in the ergonomic workstation variables in the Banking Supervision Department in ABC Bank in Malaysia had the most influence on stress levels. Thirty-one employees of department took part in this study. Several questionnaires having to do with ergonomic workstation factors and resulting stress at work inherited from past research contributed to developing questionnaires; questions included:

• - Human and environment variables in the matter of ergonomic workstations; and
• physiological (somatic complaints),
• psychological (job dissatisfaction complaints),
• behavioral (intention to quit) elements.

47.2% of changes in workplace stress levels were shown to be due to alterations in posture and other health matters. Factors relating to ergonomic workstations included the effect of posture which correlated significantly with workplace stress levels. Health was shown on analysis to have a stronger relationship than any other factor with workplace stress due to the hours of input work demanded in the department. Dissatisfaction with the job, somatic illnesses and a decision to leave were all fueled by postural weaknesses due to ergonomic considerations related to the workstation and health factors.

Fernandes et al. ( 2012 ) conducted a study to measure how organizational, environmental and health matters affected organizational role stress (ORS). Data was collected in a survey of 483 respondents in both public and private banking sectors in Goa, India. ORS was measured using a technique of Pareek ( 1983 ), which indexed the stress individuals perceived in their role, split across 10 categories: The extent to which the role is ambiguous; what is expected of the role; inadequacy of available resource; stress arising from the content of the role; erosion of the role; isolation of the role; perceived distance between self and role; stress due to the magnitude of the role; stagnation of the role; perceived distance between roles; role overload; and a sense that the personal assigned to the role is inadequate to perform it. In looking for the categories that could best encourage stress reduction, the study selected human support as the most effective. Second came health regimens that encouraged relaxation like meditation and yoga, together with more vigorous health pursuits like jogging and playing games. The study found a negative correlation between role definition stress and a combination of meditation, human and physical support, and yoga. When it came to reducing stress due to the magnitude of the role, human support again scored the highest correlation, followed by the more vigorous activities. The authors defined the study's limitations as difficulty in generalizing the findings to fit a wider range of bankers, which would require responses from a more diverse sample.

Preshita and Pramod ( 2014 ) set out to understand what contributed to occupational stress in Indian private and public sector banks. With 230 respondents collected by convenience and random sampling through the ORS scale (Pareek, 1983 ), they looked for differences in the kinds of stress felt and the strength with which it was experienced, looking also for male/female and public/private sector differences The study found that stress was experienced, at levels ranging from moderate to high, in both sectors, with stagnating roles being the most powerful stressor across either sector; distance between roles and erosion of roles came next. ORS scores were higher in private sector employees. According to the authors, stagnation of roles is inherent in the job–banking contains many monotonous jobs and employees who have repeated the same task again and again over a long period without career growth opportunities and with no likelihood of future change are likely to feel that their capacities are not used to the full, that there are no learning opportunities, and to be stressed by the perception that their role is stagnating.

The study by Imam et al. ( 2014 ) looked at ways in which job stress can mediate between discrimination in the workplace and such outcomes as motivation and job satisfaction in banking in Pakistan. Types of discrimination considered were mainly to do with gender distinctions. From a random sample of three banks, the study found that in corporate banking the dependent variable had a marked predictive validity, with job stress acting in partial mediation between the two conditions, showing the role played by stress in increasing the extent to which discrimination against one gender affects motivation and job satisfaction.

The study by Mughal et al. ( 2010 ) also looked at Pakistani banks and their current issues regarding stress related to work. In this study, the subject was how stress affects work-life balance. It follows Robbins ( 2003 ) in seeing the environment, the organization and the individual as sources of stress and the results thereof (Gunkel et al., 2007 ). For this research only organization was used as a source of stress; job security or insecurity was added, together with others related to environment. 200 employees in middle and lower executive posts in banks responded. Six elements, or stressors, subordinate to organization, were chosen as independent variables and questions focused on each of these, an additional goal being to establish how important each was. The research uncovered the contribution to employee work/life balance of each aspect of the stressor and the scale of that relationship. Six factors (demands of the task, demands of the role, interpersonal demands, the structure of the organization, quality of leadership and security in the job) brought about a change of 63.2% change in work-life balance. The relationship between work/life balance and employee performance was also clarified. Work/life balance was strongly impacted by issues around security in the job. The conclusion was that those factors listed earlier in this paragraph caused stress and interfered with both the working and the personal lives of employees.

Occupational stress, conflicting demands of family and work, and their effect on symptoms of depression were studied by Kan and Yu ( 2016 ), who also examined what effect PsyCap had on those same symptoms and whether PsyCap could mediate the impact on symptoms of depression of occupational stress and conflicting demands of family and work. The sample was drawn from employees of Chinese banks for a cross-sectional survey from May to June 2013. With informed consent confirmed in writing, self-administered questionnaires were distributed directly and 1,239 sets of complete responses were returned. The levels of symptoms of depression and stress at work were measured by, respectively, a Chinese version of CES-D, the Depression Scale of the Center for Epidemiologic (Radloff, 1977 ) and the ERI scale, Chinese version (Li et al., 2006 ). To measure levels of conflict between family and work, the study used a Chinese version of the WIF scale (which assesses how far demands of work interfere with obligations to family) (Netemeyer et al., 1996 ) and PsyCap levels were measured using a Chinese version of the Psychological Capital Questionnaire (PCQ) (Luthans et al., 2007 ). Overall, the results may be said to have shown high levels of symptoms of depression among Chinese bank employees and the study called for urgent efforts to tackle these symptoms. The correlation between PsyCap and symptoms of depression was shown to be substantially negative. Also, extrinsic effort and reward as ERI occupational stressors showed significant association with PsyCap, leading researchers to examine the possible use of PsyCap to predict symptoms of depression. PsyCap may, in fact, be seen as partially mediating these associations, and PsyCap could act as a resource for alleviating symptoms of depression in employees of Chinese banks, reducing negative effects on mental health of occupational stress. Bank employees experiencing greater extrinsic effort or lower reward levels would be likely to have lower PsyCap levels, raising the risk and seriousness of symptoms of depression.

In South African banks, Mutsvunguma and Gwandure ( 2011 ) compared the psychological well-being of employees who handle cash with those who don't in a cross-sectional study of 50 respondents. Levels of work stress, burnout and satisfaction with life were measured using, respectively, the Job Stress Survey Scale, the Maslach Burnout Inventory and the Congruity Life Satisfaction Scale. There were significant differences between the two groups in the areas of depersonalization, emotional exhaustion, work stress, and overall burnout. Inner-city Johannesburg employees handling cash experienced work-related stress, possibly connected with the very common Johannesburg incidence of unpredictable violence to which bank employees in Johannesburg are subject (Carter, 2010 ; Harrison and Kinner, 2010 ). This was a limited study, involving a small sample and not being generalizable to different settings.

Devi and Sharma ( 2013 ) used a random sample of 501 workers to examine how stressors affected frontline bank employees in India, role stressors being events demands and constraints creating role stress by affecting an individual's role fulfillment (Beehr and Glazer, 2005 ). Role stress was measured using indicators from a 50-item five-point Likert type “organizational role stress” scale developed by Pareek ( 1993 ) and assessed by 15 experts identifying scale items that did not truly measure role stress in the frontline bank employee context. The experts' suggestions were incorporated to produce a final role stress scale of 22 items. Frontline bank employees were shown to differ enough in their experience of role stressors to be categorized into segments: “overloaded employees,” “unclear employees,” and “underutilized employees.” The profiles of the employees who fell into these segments were also significantly different. Overloaded employees experienced workloads heavier than they expected (high role excess). The works could also be monotonous and routine (high role fortification), leading to a compromise between work quality and time for family, friends and other personal interests (high role invasiveness). Unclear employees lacked enough knowledge to meet the responsibilities of the role (high role divergence) and/or experienced ambiguous work situations (high role indistinctness). Underutilized employees saw few growth opportunities for themselves (high role augmentation), and/or were unsure they had the necessary skills and knowledge (high self-diminution) which led to isolation at work (high resource shortage). The study made clear the need for customized approaches to role stress management. Present in the study were the following limitations: cross-sectional data; self-reported measures; and a context-specific scale that could not be generalized for other contexts without validity and reliability testing.

Oginni et al. ( 2013 ) investigated how job stress affected staff turnover in the Nigerian banking sector. This study identified job stress variables including personal problems, organizational and institutional policies, work materials, work pressure and environment, and job security. 533 respondents took part and job security was revealed as the biggest source of job stress to Nigerian bankers, with work materials second and organizational policies guiding employee activities and decisions third. Then came work pressure, which may be regarded as a follow-up the organizational policies. Work environment, institutional policies and personal problems were also important sources of stress for bankers. Job stress variables already listed had a significant effect on staff turnover. The conclusion was that job stress variables were important indicators and should be connected to staff turnover for better workforce productivity and stability (Abang et al., 2009 ).

Most of the selected studies were published in the last 10 years: the work-related stress in the banking sector is a rather recent issue, and this could be the result of the enormous changes in organization and structure that have been occurred in the last decade.

Five studies were conducted in Europe, nine in Asia, four in America and two in Africa. Many differences occurred between countries and ethnicities as regards to cultural characteristics and the approach to work-related stress, that result in different risk perception and evaluation (Zoni and Lucchini, 2012 ; Capasso et al., 2016 ) and could limit the generalizability of the results across countries. Despite that, this review provides an overview on risk factors and health outcomes related to work-related stress in the banking sector, as described in Figure ​ Figure1 1 .

Risk factors and health outcomes of work-related stress in the bank sectors: synthesis form the studies included in this review.

All studies in this review show that workplace stress is a critical banking sector issue with potentially negative effects on workers' and organizations' psychological and physical health. Most of the studies showed increases in mental health problems in the sector which were closely related to stress at work. Authors have used a number of different parameters to investigate banking sector job stress: some (Silva and Barreto, 2010 , 2012 ; Snorradóttir et al., 2013 ; Petarli et al., 2015 ; Valente et al., 2015 ) used the Demand Control (Karasek, 1979 ) and Effort-Reward Imbalance (ERI) (Siegrist, 1996 ) theoretical models. These studies showed a link between several undesirable mental and physical health outcomes and stress related to work. Silva and Barreto (Silva and Barreto, 2010 , 2012 ) found a statistical association between adverse working conditions and minor psychiatric disorders (MPD) and a more than doubling of MPD where staff found themselves in conditions of maximum demand and minimum control. Snorradóttir et al.'s ( 2013 ) examination of psychological trauma among surviving bank employees in restructuring and downsizing processes showed that such environment factors as high job demand and low job control were fingered to a limited degree in perceptions of psychological distress, and that empowering leadership and family/friend support could at least partly mitigate the effect.

Petarli et al. ( 2015 ) saw social support as important and this is seen as best-known situational variable in occupational stress (Bakker and Demerouti, 2007 ): low social support made it more likely that a worker would be in the “high distress” quadrant (high-demand and low-control jobs). Where a quadrant intimated higher risk of occupational stress, variables associated with that quadrant were low levels of education, working in bank agencies, having worked more than 5 years at the bank, daily 6-h work shifts of, and—in particular—low social support. Valente et al. ( 2015 ) showed that working roles seen as high strain, low social support, high effort/low reward and high over-commitment correlated strongly with depressive symptoms both major and lesser.

Michailidis and Georgiou ( 2005 ) looked for factors contributing to occupational stress for employees in this sector, and identified the degree of occupational stress experienced by people in different groups. Evidence was presented educational levels, family support and drinking habits had an effect on the degree of stress experienced, while Ahmad and Singh ( 2011 ) assessed how far occupational stress and certain biographical variables in a sample of Indian bank employees influenced employees' perceived reactions to organizational change (OC). Organizational stressors such as responsibility for people, intrinsic impoverishment, low status and unprofitability were all shown to have causative influence on banking sector employees' perceived reactions toward OC. The only biographical variable found to be predictive of banking sector employees' reactions toward organizational change was “experience in the present position.”

Preshita and Pramod ( 2014 ) researched differences between male and female respondents and between those employed in private and in public sector banks in the nature of stress. Moderate to high stress levels were felt in both sectors, and the most powerful role stressor in either sector was shown to be role stagnation, with inter-role distance second and role erosion third.

Associations between occupational stress and job burnout were investigated (Mutsvunguma and Gwandure, 2011 ; Amigo et al., 2014 ; Li et al., 2015 ). Li et al. ( 2015 ) showed that occupational stress may play a part in job burnout but that it can be mediated by Psychological Capital, which Luthans et al. ( 2005 ) defined as “a positive psychological state that an individual performs in the process of growth and development.” It comprises four holders of psychological resource; self-efficacy; hope; optimism; and resilience. Banking employers could decrease burnout by increasing PsyCap. Amigo et al. ( 2014 ) showed that Spanish bank staff had high levels of burnout syndrome (BS) and that emotional exhaustion was the chief factor. There was a greater risk of burnout for those working in branch offices than for those in central services and a close correlation between burnout and interpersonal stress at work on a daily basis because of the commercial strategies the sector has used in recent years. A comparison by Mutsvunguma and Gwandure ( 2011 ) of levels of work stress, burnout and life satisfaction showed that bank employees who handled cash had higher levels of stress, depersonalization, emotional exhaustion and burnout than those who did not. Exposure of cash-handlers to unpredictable violence was shown to be a powerful factor in this differentiation (Harrison and Kinner, 2010 ).

There was analysis from some authors of how work-related stress impacted specific conditions (Seegers and van Elderen, 1996 ; Mughal et al., 2010 ; Oginni et al., 2013 ; Imam et al., 2014 ; Kan and Yu, 2016 ). Kan and Yu ( 2016 ) researched how occupational stress and work-family conflict affected depressive symptoms, and whether PsyCap could mediate those effects. A number of occupational stressors associated strongly with PsyCap, which mediated at least in part the associations of symptoms of depression with extrinsic effort and reward, suggesting that in PsyCap the banks may have a resource to mitigate their employees' symptoms of depression. Imam et al. ( 2014 ) investigated job stress as a mediator between gender discrimination in the workplace and levels of job satisfaction and employee motivation, finding that stress was a partial but vital mediator not in reducing but in strengthening gender discrimination in Pakistani banks. Oginni et al. ( 2013 ) examined how job stress affected staff turnover in Nigeria's banking sector. Job security was shown to be the Number One source of Nigerian bankers' job stress, with work materials second, organizational policies third and work pressure (which is in some ways a follow-up to the organizational policies) coming after those. Mughal et al. ( 2010 ) measured how far job stress affected work-life balance and found that organizational sources of stress did have an impact on work-life balance, so that stressors can be said to be directly proportional to work-life balance. Seegers and van Elderen's ( 1996 ) research into work-related stressors and their impact on psychological and physical well-being and absenteeism used the Michigan model as a theoretical framework (Caplan et al., 1975 ), and this threw up an interesting relationship between the investigated variables. Subjective stressors and stressors related to work did well as predictors of psychological strains and complaints, which may become health problems for the affected employee, but the model is inadequate as a way to research absenteeism which remained largely unexplained.

Other researchers looked closely at role stressors in the banking sector (Fernandes et al., 2012 ; Devi and Sharma, 2013 ). Devi and Sharma's ( 2013 ) research into the role stressors of frontline Indian bank employees showed significant differences among frontline bank employees, who could be divided into three categories: “overloaded employees,” “unclear employees,” and “underutilized employees.” Employees in each of these categories had profiles different from those in the other categories and the results reinforced the need to customize approaches to role stress management. Fernandes et al. ( 2012 ) questioned what impact health, environmental, and organizational factors had on organizational role stress (ORS), which was measured using the scale developed by Pareek ( 1983 ), from which can be derived indices of individuals' perceived role stress. The authors were able to find specific factors for stress reduction, with human support chief among them; relaxed health practices and vigorous health practices came next. This study increased the available evidence for the idea permanent cures for workplace stress may be found using environmental, health, and demographics in the workplace as explanatory variables. Human relations were said to have overwhelming significance in relieving stress, which may be symptomatic of a culture—like India's—in which community plays the major role in everything.

Some authors concentrated on organizational stress's role in development of specific symptoms. Makhbul et al. ( 2011 ) sought to identify the most significant among the ergonomic workstation variables influencing stress levels in Malaysia's Banking Supervision Department. 47.2% of changes in workplace stress were shown to be due to posture and health factors. Posture was significantly related to workplace stress outcomes. Mocci et al. ( 2001 ) looked at how different stressors such as social environment, task, and individual characteristics influenced asthenopia (visual discomfort) in computer users, to study how far psychological stressors might be at the root of asthenopeic complaints. Social support was found to be a predictor of visual complaints, as were self-esteem, work satisfaction, group conflict, and the underuse of skills. At least some complaints about visual health made by workers were probably indirect expressions of psychological discomfort related to working conditions.

Most studies agreed that social support could provide protection against occupational stress thus be important in reducing perceived stress levels. Social support was shown to tend to mitigate negative effect of stressors and to reduce the volume of stress reactions, and could be considered the best-established anti-occupational situational variable (Seegers and van Elderen, 1996 ; Fernandes et al., 2012 ; Petarli et al., 2015 ). It could also act as a visual complaint predictor of (Mocci et al., 2001 ). A lack of social support in the work environment had a statistically association with minor psychiatric disorders (Silva and Barreto, 2010 , 2012 ; Valente et al., 2015 ). This variable's predictive ability in reducing occupational stress confirmed results seen in other studies (Leong et al., 1996 ; Urbanetto et al., 2011 ). Social integration, confidence in peers and the support of colleagues and superiors when performing tasks, could protect workers' health against work-related stress and its effects, and it is interesting that cortisol, the hormone released during stress, was found in increased amounts in women whose social support was low (Evolahti et al., 2006 ). This result strengthened the evidence for the protective effect of social support. Snorradóttir et al. ( 2013 ) presented contradictory findings, in that it found social support from friends and family to be a stress reducer for employees involved in organizational change, but found no such effect when the support was provided by coworkers or supervisors. This study did show, though, a correlation between coworker and supervisor support and empowering leadership. Other studies have also found effects of work-related support to be limited following downsizing (Lavoie-Tremblay et al., 2010 ). One reason could be that organizational change disrupts social bonds, especially soon afterwards when new social bonds have not had time to form (Shah, 2000 ); this study does offer support for that view, since employees going through organizational change were less likely than others to say they felt they had received good support from supervisors or coworkers. Support from friends and family, on the other hand, continued to be important for mental health when rapid and unpredicted organizational change loomed (House, 1980 ; LaRocco et al., 1980 ; Snorradóttir et al., 2013 ).

Several studies investigated what effect demographic characteristics had on workplace stress. Looking at age, Silva and Barreto ( 2012 ) found that being over 40 had a significant association with poor self-rated health; Kan and Yu ( 2016 ) measured a significantly higher level of depressive symptoms in bank employees over 40 than in those aged 30; Amigo et al. ( 2014 ) saw age's effect in Burnout Syndrome scores, with those over 55 showing less “emotional exhaustion” and less “cynicism” than those between 46 and 54, while under-35s saw themselves as more professionally efficient than any older group on the “efficacy” scale. Other authors, however, found no significant differences related to the age variable (Snorradóttir et al., 2013 ; Valente et al., 2015 ).

On years of service, Petarli et al. ( 2015 ) found that those who had worked in the bank for more than 5 years were more likely to fall in the “passive” (intermediate risk of stress) quadrant than those employed for <5 years; in Ahmad and Singh ( 2011 ) the only biographical variable to act as a predictor of employees' perceived reactions toward Organizational Change was “experience in the present position”; Amigo et al. ( 2014 ) reported that those with more than 30 years of service scored significantly lower on the burnout's cynicism scale than any of the shorter-service groups, whereas workers with <10 years of service had a higher efficacy score than any other group. Valente et al. ( 2015 ) found an association between total years worked and MDS (major depressive symptoms), resulting from the continuous updating of skills required in banking to keep up with new organization formats; researchers wondered whether this added extra stress, especially for older workers, who might feel threatened by such pressures (Giga and Hoel, 2003 ). On the other hand, Silva and Barreto ( 2010 ) found that the prevalence of minor psychiatric disorders showed little variation linked to duration of employment or job position.

Results with regard to the level of education variable conflicted with each other. Michailidis and Georgiou ( 2005 ) showed marked differences between bank employees with higher degree level qualifications, and those without formal qualifications. The former seemed most affected by home/work interaction and tended to take work problems and demands home, appearing to pursue a career to the detriment of home life. They were also most affected by the work variety, favoritism, delegation and conflicting task variables. The study also showed that, when those issues reached a high level, they tended to reduce the time employees had for themselves. On the other hand, Petarli et al. ( 2015 ) evaluated occupational stress on the demand-control model (Karasek et al., 1998 ) and showed that low education increased an employee's probability of being in the “passive” (intermediate risk of stress) quadrant. And, last, Kan and Yu ( 2016 ) detected no significant difference in bankers' symptoms of depression stemming from the education variable.

Several authors looked for gender differences. Snorradóttir et al. ( 2013 ) reported higher levels of psychological distress among women; Li et al. ( 2015 ) saw gender differences in mediation by Psychological Capital of the occupational stress/job burnout association, with PsyCap mediating the effects of two dimensions of occupational stress (extrinsic effort and reward) on two dimensions of job burnout (emotional exhaustion and depersonalization) for male staff while, for female bank employees, PsyCap partially mediated the effects of three dimensions of occupational stress (extrinsic effort, reward and over-commitment) on two dimensions of job burnout. Amigo et al. ( 2014 ) also found significant differences in emotional exhaustion and professional efficacy, with women scoring higher for emotional exhaustion and men scoring lower for professional efficacy. Fernandes et al. ( 2012 ) reported that females experienced more stress than males and attributed this to domestic pressures and increasing demands in the workplace. Other authors, however, reported no significant gender difference (Silva and Barreto, 2010 , 2012 ; Preshita and Pramod, 2014 ; Valente et al., 2015 ; Kan and Yu, 2016 ).

Finally, some researchers researched which work characteristics were most associated with stress. Petarli et al. ( 2015 ) said that bank agency workers were more likely to belong to the “high distress” quadrant than workers in the administrative unit. A study by Valente et al. ( 2015 ) suggested that private bank or branch office work were most associated with ODS (other depressive symptoms). There was also a higher risk of employment instability and downsizing for those in the private bank sector which led to greater pressure at work, more stress and a higher rate of overload (Giga and Hoel, 2003 ). Preshita and Pramod ( 2014 ) also found higher total organizational role stress scores in private sector employees. Possible causes lie in the strict deadlines and lack of job security in private sector banking. Mutsvunguma and Gwandure ( 2011 ) examined how the psychological functioning of bank employees who handled cash and those who did not differed and found significant differences in work stress, emotional exhaustion, depersonalization and overall burnout. This study's findings corroborated existing research evidence to the effect that exposing employees to unpredictable and violent work environments could raise psychological distress levels and impair employee effectiveness (Harrison and Kinner, 2010 ). Amigo et al. ( 2014 ) split the study population into two groups: workers not working with the general public; branch office workers. There were significant differences between the two groups in all three burnout dimensions: emotional exhaustion, cynicism and professional efficacy. Branch office workers returned higher scores for emotional exhaustion and cynicism and lower scores for professional efficacy. Branch office workers were in daily contact with people with serious economic problems and were also required to sell their customers complicated financial products, and all of these things took away their control over aspects of their working lives and might explain their feelings of lower professional efficacy and greater emotional exhaustion and cynicism (Alarcon, 2011 ; Lee et al., 2011 ).

The relationship between work-related stress and mental disorders were confirmed also in other sectors, as described in a recent systematic meta-review of work-related risk factors for common mental health problems (Harvey et al., 2017 ). The Authors observed as certain types of work may increase the risk of some mental disorders, but the nature of the relationship is far from clear and is still a subject of debate. Nevertheless, the results of our review confirm, on the one hand, the initial assumption that psycho-social disorders of bank employees are increasing and, on the other hand, that—even though we could not identify specific clinical frameworks—banks are nowadays an occupational sector particularly at risk for work-related stress.

This review was conducted according to scientific criteria and explored the main stress-related aspects in a changing productive sector such as credit industry. This is a strength, but there are also some limitations, which may affect the results. First, this is not a systematic review, so it has not been designed to provide a complete and exhaustive summary of current literature relevant to the research question. Second, studies overviewed in this paper are all cross-sectional, none used objective parameters, and all were self-reporting. One may add to that the fact that only studies in which the keywords appeared in the abstract or title were included. Moreover, only MEDLINE® was explored to give this first description of work-related stress in the banking sector. All these aspects may have led to not including all the articles related to the investigated topic, so limiting the extent of knowledge of the effects and features of work-related stress in the banking sector. Future systematic reviews, including other databases as well, will be performed to deeply describe the state of the art of this phenomenon according to specific issues, such as risk factors or health outcomes.

Finally, the overview was restricted to studies published in the English language, so limiting the extent of knowledge of the effects and features of work-related stress in the banking sector.

In conclusion, occupational stress has clearly become a significant cause of ill health and is a serious risk factor for bank workers' psychological and social well-being. This literature review has demonstrated an increasing diffusion of adverse health outcomes from work-related stress in this sector.

There is a need for further studies to provide a better analysis of the relationship between work- related stress and health in the banking sector. It would be particularly interesting to carry out longitudinal studies to identify changes in the level and incidence of health problems and to map variations in economic, organizational, and social conditions. Future research should couple longitudinal designs with both objective and subjective measurements of stressors from a number of sources to increase understanding of organizational stress. Future research should also evaluate changes in the different groups of bank employees resulting from actions taken in organizations.

Author contributions

GG, GA, AD, and NM conceived and designed the review; MP, CL, and JF-P performed the literature research; GG, NM, and AA-M analyzed the data; GG and NM wrote the paper.

Conflict of interest statement

The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

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McKinsey Global Private Markets Review 2024: Private markets in a slower era

At a glance, macroeconomic challenges continued.

McKinsey Global Private Markets Review 2024: Private markets: A slower era

If 2022 was a tale of two halves, with robust fundraising and deal activity in the first six months followed by a slowdown in the second half, then 2023 might be considered a tale of one whole. Macroeconomic headwinds persisted throughout the year, with rising financing costs, and an uncertain growth outlook taking a toll on private markets. Full-year fundraising continued to decline from 2021’s lofty peak, weighed down by the “denominator effect” that persisted in part due to a less active deal market. Managers largely held onto assets to avoid selling in a lower-multiple environment, fueling an activity-dampening cycle in which distribution-starved limited partners (LPs) reined in new commitments.

About the authors

This article is a summary of a larger report, available as a PDF, that is a collaborative effort by Fredrik Dahlqvist , Alastair Green , Paul Maia, Alexandra Nee , David Quigley , Aditya Sanghvi , Connor Mangan, John Spivey, Rahel Schneider, and Brian Vickery , representing views from McKinsey’s Private Equity & Principal Investors Practice.

Performance in most private asset classes remained below historical averages for a second consecutive year. Decade-long tailwinds from low and falling interest rates and consistently expanding multiples seem to be things of the past. As private market managers look to boost performance in this new era of investing, a deeper focus on revenue growth and margin expansion will be needed now more than ever.

Perspectives on a slower era in private markets

Global fundraising contracted.

Fundraising fell 22 percent across private market asset classes globally to just over $1 trillion, as of year-end reported data—the lowest total since 2017. Fundraising in North America, a rare bright spot in 2022, declined in line with global totals, while in Europe, fundraising proved most resilient, falling just 3 percent. In Asia, fundraising fell precipitously and now sits 72 percent below the region’s 2018 peak.

Despite difficult fundraising conditions, headwinds did not affect all strategies or managers equally. Private equity (PE) buyout strategies posted their best fundraising year ever, and larger managers and vehicles also fared well, continuing the prior year’s trend toward greater fundraising concentration.

The numerator effect persisted

Despite a marked recovery in the denominator—the 1,000 largest US retirement funds grew 7 percent in the year ending September 2023, after falling 14 percent the prior year, for example 1 “U.S. retirement plans recover half of 2022 losses amid no-show recession,” Pensions and Investments , February 12, 2024. —many LPs remain overexposed to private markets relative to their target allocations. LPs started 2023 overweight: according to analysis from CEM Benchmarking, average allocations across PE, infrastructure, and real estate were at or above target allocations as of the beginning of the year. And the numerator grew throughout the year, as a lack of exits and rebounding valuations drove net asset values (NAVs) higher. While not all LPs strictly follow asset allocation targets, our analysis in partnership with global private markets firm StepStone Group suggests that an overallocation of just one percentage point can reduce planned commitments by as much as 10 to 12 percent per year for five years or more.

Despite these headwinds, recent surveys indicate that LPs remain broadly committed to private markets. In fact, the majority plan to maintain or increase allocations over the medium to long term.

Investors fled to known names and larger funds

Fundraising concentration reached its highest level in over a decade, as investors continued to shift new commitments in favor of the largest fund managers. The 25 most successful fundraisers collected 41 percent of aggregate commitments to closed-end funds (with the top five managers accounting for nearly half that total). Closed-end fundraising totals may understate the extent of concentration in the industry overall, as the largest managers also tend to be more successful in raising non-institutional capital.

While the largest funds grew even larger—the largest vehicles on record were raised in buyout, real estate, infrastructure, and private debt in 2023—smaller and newer funds struggled. Fewer than 1,700 funds of less than $1 billion were closed during the year, half as many as closed in 2022 and the fewest of any year since 2012. New manager formation also fell to the lowest level since 2012, with just 651 new firms launched in 2023.

Whether recent fundraising concentration and a spate of M&A activity signals the beginning of oft-rumored consolidation in the private markets remains uncertain, as a similar pattern developed in each of the last two fundraising downturns before giving way to renewed entrepreneurialism among general partners (GPs) and commitment diversification among LPs. Compared with how things played out in the last two downturns, perhaps this movie really is different, or perhaps we’re watching a trilogy reusing a familiar plotline.

Dry powder inventory spiked (again)

Private markets assets under management totaled $13.1 trillion as of June 30, 2023, and have grown nearly 20 percent per annum since 2018. Dry powder reserves—the amount of capital committed but not yet deployed—increased to $3.7 trillion, marking the ninth consecutive year of growth. Dry powder inventory—the amount of capital available to GPs expressed as a multiple of annual deployment—increased for the second consecutive year in PE, as new commitments continued to outpace deal activity. Inventory sat at 1.6 years in 2023, up markedly from the 0.9 years recorded at the end of 2021 but still within the historical range. NAV grew as well, largely driven by the reluctance of managers to exit positions and crystallize returns in a depressed multiple environment.

Private equity strategies diverged

Buyout and venture capital, the two largest PE sub-asset classes, charted wildly different courses over the past 18 months. Buyout notched its highest fundraising year ever in 2023, and its performance improved, with funds posting a (still paltry) 5 percent net internal rate of return through September 30. And although buyout deal volumes declined by 19 percent, 2023 was still the third-most-active year on record. In contrast, venture capital (VC) fundraising declined by nearly 60 percent, equaling its lowest total since 2015, and deal volume fell by 36 percent to the lowest level since 2019. VC funds returned –3 percent through September, posting negative returns for seven consecutive quarters. VC was the fastest-growing—as well as the highest-performing—PE strategy by a significant margin from 2010 to 2022, but investors appear to be reevaluating their approach in the current environment.

Private equity entry multiples contracted

PE buyout entry multiples declined by roughly one turn from 11.9 to 11.0 times EBITDA, slightly outpacing the decline in public market multiples (down from 12.1 to 11.3 times EBITDA), through the first nine months of 2023. For nearly a decade leading up to 2022, managers consistently sold assets into a higher-multiple environment than that in which they had bought those assets, providing a substantial performance tailwind for the industry. Nowhere has this been truer than in technology. After experiencing more than eight turns of multiple expansion from 2009 to 2021 (the most of any sector), technology multiples have declined by nearly three turns in the past two years, 50 percent more than in any other sector. Overall, roughly two-thirds of the total return for buyout deals that were entered in 2010 or later and exited in 2021 or before can be attributed to market multiple expansion and leverage. Now, with falling multiples and higher financing costs, revenue growth and margin expansion are taking center stage for GPs.

Real estate receded

Demand uncertainty, slowing rent growth, and elevated financing costs drove cap rates higher and made price discovery challenging, all of which weighed on deal volume, fundraising, and investment performance. Global closed-end fundraising declined 34 percent year over year, and funds returned −4 percent in the first nine months of the year, losing money for the first time since the 2007–08 global financial crisis. Capital shifted away from core and core-plus strategies as investors sought liquidity via redemptions in open-end vehicles, from which net outflows reached their highest level in at least two decades. Opportunistic strategies benefited from this shift, with investors focusing on capital appreciation over income generation in a market where alternative sources of yield have grown more attractive. Rising interest rates widened bid–ask spreads and impaired deal volume across food groups, including in what were formerly hot sectors: multifamily and industrial.

Private debt pays dividends

Debt again proved to be the most resilient private asset class against a turbulent market backdrop. Fundraising declined just 13 percent, largely driven by lower commitments to direct lending strategies, for which a slower PE deal environment has made capital deployment challenging. The asset class also posted the highest returns among all private asset classes through September 30. Many private debt securities are tied to floating rates, which enhance returns in a rising-rate environment. Thus far, managers appear to have successfully navigated the rising incidence of default and distress exhibited across the broader leveraged-lending market. Although direct lending deal volume declined from 2022, private lenders financed an all-time high 59 percent of leveraged buyout transactions last year and are now expanding into additional strategies to drive the next era of growth.

Infrastructure took a detour

After several years of robust growth and strong performance, infrastructure and natural resources fundraising declined by 53 percent to the lowest total since 2013. Supply-side timing is partially to blame: five of the seven largest infrastructure managers closed a flagship vehicle in 2021 or 2022, and none of those five held a final close last year. As in real estate, investors shied away from core and core-plus investments in a higher-yield environment. Yet there are reasons to believe infrastructure’s growth will bounce back. Limited partners (LPs) surveyed by McKinsey remain bullish on their deployment to the asset class, and at least a dozen vehicles targeting more than $10 billion were actively fundraising as of the end of 2023. Multiple recent acquisitions of large infrastructure GPs by global multi-asset-class managers also indicate marketwide conviction in the asset class’s potential.

Private markets still have work to do on diversity

Private markets firms are slowly improving their representation of females (up two percentage points over the prior year) and ethnic and racial minorities (up one percentage point). On some diversity metrics, including entry-level representation of women, private markets now compare favorably with corporate America. Yet broad-based parity remains elusive and too slow in the making. Ethnic, racial, and gender imbalances are particularly stark across more influential investing roles and senior positions. In fact, McKinsey’s research  reveals that at the current pace, it would take several decades for private markets firms to reach gender parity at senior levels. Increasing representation across all levels will require managers to take fresh approaches to hiring, retention, and promotion.

Artificial intelligence generating excitement

The transformative potential of generative AI was perhaps 2023’s hottest topic (beyond Taylor Swift). Private markets players are excited about the potential for the technology to optimize their approach to thesis generation, deal sourcing, investment due diligence, and portfolio performance, among other areas. While the technology is still nascent and few GPs can boast scaled implementations, pilot programs are already in flight across the industry, particularly within portfolio companies. Adoption seems nearly certain to accelerate throughout 2024.

Private markets in a slower era

If private markets investors entered 2023 hoping for a return to the heady days of 2021, they likely left the year disappointed. Many of the headwinds that emerged in the latter half of 2022 persisted throughout the year, pressuring fundraising, dealmaking, and performance. Inflation moderated somewhat over the course of the year but remained stubbornly elevated by recent historical standards. Interest rates started high and rose higher, increasing the cost of financing. A reinvigorated public equity market recovered most of 2022’s losses but did little to resolve the valuation uncertainty private market investors have faced for the past 18 months.

Within private markets, the denominator effect remained in play, despite the public market recovery, as the numerator continued to expand. An activity-dampening cycle emerged: higher cost of capital and lower multiples limited the ability or willingness of general partners (GPs) to exit positions; fewer exits, coupled with continuing capital calls, pushed LP allocations higher, thereby limiting their ability or willingness to make new commitments. These conditions weighed on managers’ ability to fundraise. Based on data reported as of year-end 2023, private markets fundraising fell 22 percent from the prior year to just over $1 trillion, the largest such drop since 2009 (Exhibit 1).

The impact of the fundraising environment was not felt equally among GPs. Continuing a trend that emerged in 2022, and consistent with prior downturns in fundraising, LPs favored larger vehicles and the scaled GPs that typically manage them. Smaller and newer managers struggled, and the number of sub–$1 billion vehicles and new firm launches each declined to its lowest level in more than a decade.

Despite the decline in fundraising, private markets assets under management (AUM) continued to grow, increasing 12 percent to $13.1 trillion as of June 30, 2023. 2023 fundraising was still the sixth-highest annual haul on record, pushing dry powder higher, while the slowdown in deal making limited distributions.

Investment performance across private market asset classes fell short of historical averages. Private equity (PE) got back in the black but generated the lowest annual performance in the past 15 years, excluding 2022. Closed-end real estate produced negative returns for the first time since 2009, as capitalization (cap) rates expanded across sectors and rent growth dissipated in formerly hot sectors, including multifamily and industrial. The performance of infrastructure funds was less than half of its long-term average and even further below the double-digit returns generated in 2021 and 2022. Private debt was the standout performer (if there was one), outperforming all other private asset classes and illustrating the asset class’s countercyclical appeal.

Private equity down but not out

Higher financing costs, lower multiples, and an uncertain macroeconomic environment created a challenging backdrop for private equity managers in 2023. Fundraising declined for the second year in a row, falling 15 percent to $649 billion, as LPs grappled with the denominator effect and a slowdown in distributions. Managers were on the fundraising trail longer to raise this capital: funds that closed in 2023 were open for a record-high average of 20.1 months, notably longer than 18.7 months in 2022 and 14.1 months in 2018. VC and growth equity strategies led the decline, dropping to their lowest level of cumulative capital raised since 2015. Fundraising in Asia fell for the fourth year of the last five, with the greatest decline in China.

Despite the difficult fundraising context, a subset of strategies and managers prevailed. Buyout managers collectively had their best fundraising year on record, raising more than $400 billion. Fundraising in Europe surged by more than 50 percent, resulting in the region’s biggest haul ever. The largest managers raised an outsized share of the total for a second consecutive year, making 2023 the most concentrated fundraising year of the last decade (Exhibit 2).

Despite the drop in aggregate fundraising, PE assets under management increased 8 percent to $8.2 trillion. Only a small part of this growth was performance driven: PE funds produced a net IRR of just 2.5 percent through September 30, 2023. Buyouts and growth equity generated positive returns, while VC lost money. PE performance, dating back to the beginning of 2022, remains negative, highlighting the difficulty of generating attractive investment returns in a higher interest rate and lower multiple environment. As PE managers devise value creation strategies to improve performance, their focus includes ensuring operating efficiency and profitability of their portfolio companies.

Deal activity volume and count fell sharply, by 21 percent and 24 percent, respectively, which continued the slower pace set in the second half of 2022. Sponsors largely opted to hold assets longer rather than lock in underwhelming returns. While higher financing costs and valuation mismatches weighed on overall deal activity, certain types of M&A gained share. Add-on deals, for example, accounted for a record 46 percent of total buyout deal volume last year.

Real estate recedes

For real estate, 2023 was a year of transition, characterized by a litany of new and familiar challenges. Pandemic-driven demand issues continued, while elevated financing costs, expanding cap rates, and valuation uncertainty weighed on commercial real estate deal volumes, fundraising, and investment performance.

Managers faced one of the toughest fundraising environments in many years. Global closed-end fundraising declined 34 percent to $125 billion. While fundraising challenges were widespread, they were not ubiquitous across strategies. Dollars continued to shift to large, multi-asset class platforms, with the top five managers accounting for 37 percent of aggregate closed-end real estate fundraising. In April, the largest real estate fund ever raised closed on a record $30 billion.

Capital shifted away from core and core-plus strategies as investors sought liquidity through redemptions in open-end vehicles and reduced gross contributions to the lowest level since 2009. Opportunistic strategies benefited from this shift, as investors turned their attention toward capital appreciation over income generation in a market where alternative sources of yield have grown more attractive.

In the United States, for instance, open-end funds, as represented by the National Council of Real Estate Investment Fiduciaries Fund Index—Open-End Equity (NFI-OE), recorded $13 billion in net outflows in 2023, reversing the trend of positive net inflows throughout the 2010s. The negative flows mainly reflected $9 billion in core outflows, with core-plus funds accounting for the remaining outflows, which reversed a 20-year run of net inflows.

As a result, the NAV in US open-end funds fell roughly 16 percent year over year. Meanwhile, global assets under management in closed-end funds reached a new peak of $1.7 trillion as of June 2023, growing 14 percent between June 2022 and June 2023.

Real estate underperformed historical averages in 2023, as previously high-performing multifamily and industrial sectors joined office in producing negative returns caused by slowing demand growth and cap rate expansion. Closed-end funds generated a pooled net IRR of −3.5 percent in the first nine months of 2023, losing money for the first time since the global financial crisis. The lone bright spot among major sectors was hospitality, which—thanks to a rush of postpandemic travel—returned 10.3 percent in 2023. 2 Based on NCREIFs NPI index. Hotels represent 1 percent of total properties in the index. As a whole, the average pooled lifetime net IRRs for closed-end real estate funds from 2011–20 vintages remained around historical levels (9.8 percent).

Global deal volume declined 47 percent in 2023 to reach a ten-year low of $650 billion, driven by widening bid–ask spreads amid valuation uncertainty and higher costs of financing (Exhibit 3). 3 CBRE, Real Capital Analytics Deal flow in the office sector remained depressed, partly as a result of continued uncertainty in the demand for space in a hybrid working world.

During a turbulent year for private markets, private debt was a relative bright spot, topping private markets asset classes in terms of fundraising growth, AUM growth, and performance.

Fundraising for private debt declined just 13 percent year over year, nearly ten percentage points less than the private markets overall. Despite the decline in fundraising, AUM surged 27 percent to $1.7 trillion. And private debt posted the highest investment returns of any private asset class through the first three quarters of 2023.

Private debt’s risk/return characteristics are well suited to the current environment. With interest rates at their highest in more than a decade, current yields in the asset class have grown more attractive on both an absolute and relative basis, particularly if higher rates sustain and put downward pressure on equity returns (Exhibit 4). The built-in security derived from debt’s privileged position in the capital structure, moreover, appeals to investors that are wary of market volatility and valuation uncertainty.

Direct lending continued to be the largest strategy in 2023, with fundraising for the mostly-senior-debt strategy accounting for almost half of the asset class’s total haul (despite declining from the previous year). Separately, mezzanine debt fundraising hit a new high, thanks to the closings of three of the largest funds ever raised in the strategy.

Over the longer term, growth in private debt has largely been driven by institutional investors rotating out of traditional fixed income in favor of private alternatives. Despite this growth in commitments, LPs remain underweight in this asset class relative to their targets. In fact, the allocation gap has only grown wider in recent years, a sharp contrast to other private asset classes, for which LPs’ current allocations exceed their targets on average. According to data from CEM Benchmarking, the private debt allocation gap now stands at 1.4 percent, which means that, in aggregate, investors must commit hundreds of billions in net new capital to the asset class just to reach current targets.

Private debt was not completely immune to the macroeconomic conditions last year, however. Fundraising declined for the second consecutive year and now sits 23 percent below 2021’s peak. Furthermore, though private lenders took share in 2023 from other capital sources, overall deal volumes also declined for the second year in a row. The drop was largely driven by a less active PE deal environment: private debt is predominantly used to finance PE-backed companies, though managers are increasingly diversifying their origination capabilities to include a broad new range of companies and asset types.

Infrastructure and natural resources take a detour

For infrastructure and natural resources fundraising, 2023 was an exceptionally challenging year. Aggregate capital raised declined 53 percent year over year to $82 billion, the lowest annual total since 2013. The size of the drop is particularly surprising in light of infrastructure’s recent momentum. The asset class had set fundraising records in four of the previous five years, and infrastructure is often considered an attractive investment in uncertain markets.

While there is little doubt that the broader fundraising headwinds discussed elsewhere in this report affected infrastructure and natural resources fundraising last year, dynamics specific to the asset class were at play as well. One issue was supply-side timing: nine of the ten largest infrastructure GPs did not close a flagship fund in 2023. Second was the migration of investor dollars away from core and core-plus investments, which have historically accounted for the bulk of infrastructure fundraising, in a higher rate environment.

The asset class had some notable bright spots last year. Fundraising for higher-returning opportunistic strategies more than doubled the prior year’s total (Exhibit 5). AUM grew 18 percent, reaching a new high of $1.5 trillion. Infrastructure funds returned a net IRR of 3.4 percent in 2023; this was below historical averages but still the second-best return among private asset classes. And as was the case in other asset classes, investors concentrated commitments in larger funds and managers in 2023, including in the largest infrastructure fund ever raised.

The outlook for the asset class, moreover, remains positive. Funds targeting a record amount of capital were in the market at year-end, providing a robust foundation for fundraising in 2024 and 2025. A recent spate of infrastructure GP acquisitions signal multi-asset managers’ long-term conviction in the asset class, despite short-term headwinds. Global megatrends like decarbonization and digitization, as well as revolutions in energy and mobility, have spurred new infrastructure investment opportunities around the world, particularly for value-oriented investors that are willing to take on more risk.

Private markets make measured progress in DEI

Diversity, equity, and inclusion (DEI) has become an important part of the fundraising, talent, and investing landscape for private market participants. Encouragingly, incremental progress has been made in recent years, including more diverse talent being brought to entry-level positions, investing roles, and investment committees. The scope of DEI metrics provided to institutional investors during fundraising has also increased in recent years: more than half of PE firms now provide data across investing teams, portfolio company boards, and portfolio company management (versus investment team data only). 4 “ The state of diversity in global private markets: 2023 ,” McKinsey, August 22, 2023.

In 2023, McKinsey surveyed 66 global private markets firms that collectively employ more than 60,000 people for the second annual State of diversity in global private markets report. 5 “ The state of diversity in global private markets: 2023 ,” McKinsey, August 22, 2023. The research offers insight into the representation of women and ethnic and racial minorities in private investing as of year-end 2022. In this chapter, we discuss where the numbers stand and how firms can bring a more diverse set of perspectives to the table.

The statistics indicate signs of modest advancement. Overall representation of women in private markets increased two percentage points to 35 percent, and ethnic and racial minorities increased one percentage point to 30 percent (Exhibit 6). Entry-level positions have nearly reached gender parity, with female representation at 48 percent. The share of women holding C-suite roles globally increased 3 percentage points, while the share of people from ethnic and racial minorities in investment committees increased 9 percentage points. There is growing evidence that external hiring is gradually helping close the diversity gap, especially at senior levels. For example, 33 percent of external hires at the managing director level were ethnic or racial minorities, higher than their existing representation level (19 percent).

Yet, the scope of the challenge remains substantial. Women and minorities continue to be underrepresented in senior positions and investing roles. They also experience uneven rates of progress due to lower promotion and higher attrition rates, particularly at smaller firms. Firms are also navigating an increasingly polarized workplace today, with additional scrutiny and a growing number of lawsuits against corporate diversity and inclusion programs, particularly in the US, which threatens to impact the industry’s pace of progress.

Fredrik Dahlqvist is a senior partner in McKinsey’s Stockholm office; Alastair Green  is a senior partner in the Washington, DC, office, where Paul Maia and Alexandra Nee  are partners; David Quigley  is a senior partner in the New York office, where Connor Mangan is an associate partner and Aditya Sanghvi  is a senior partner; Rahel Schneider is an associate partner in the Bay Area office; John Spivey is a partner in the Charlotte office; and Brian Vickery  is a partner in the Boston office.

The authors wish to thank Jonathan Christy, Louis Dufau, Vaibhav Gujral, Graham Healy-Day, Laura Johnson, Ryan Luby, Tripp Norton, Alastair Rami, Henri Torbey, and Alex Wolkomir for their contributions

The authors would also like to thank CEM Benchmarking and the StepStone Group for their partnership in this year's report.

This article was edited by Arshiya Khullar, an editor in the Gurugram office.

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Female labor force participation

Across the globe, women face inferior income opportunities compared with men. Women are less likely to work for income or actively seek work. The global labor force participation rate for women is just over 50% compared to 80% for men. Women are less likely to work in formal employment and have fewer opportunities for business expansion or career progression. When women do work, they earn less. Emerging evidence from recent household survey data suggests that these gender gaps are heightened due to the COVID-19 pandemic.

Women’s work and GDP

Women’s work is posited to be related to development through the process of economic transformation.

Levels of female labor force participation are high for the poorest economies generally, where agriculture is the dominant sector and women often participate in small-holder agricultural work. Women’s participation in the workforce is lower in middle-income economies which have much smaller shares of agricultural activities. Finally, among high-income economies, female labor force participation is again higher, accompanied by a shift towards a service sector-based economy and higher education levels among women.

This describes the posited  U-shaped relationship  between development (proxied by GDP per capita) and female labor force participation where women’s work participation is high for the poorest economies, lower for middle income economies, and then rises again among high income economies.

This theory of the U-shape is observed globally across economies of different income levels. But this global picture may be misleading. As more recent studies have found, this pattern does not hold within regions or when looking within a specific economy over time as their income levels rise.

In no region do we observe a U-shape pattern in female participation and GDP per capita over the past three decades.

Structural transformation, declining fertility, and increasing female education in many parts of the world have not resulted in significant increases in women’s participation as was theorized. Rather, rigid historic, economic, and social structures and norms factor into stagnant female labor force participation.

Historical view of women’s participation and GDP

Taking a historical view of female participation and GDP, we ask another question: Do lower income economies today have levels of participation that mirror levels that high-income economies had decades earlier?

The answer is no.

This suggests that the relationship of female labor force participation to GDP for lower-income economies today is different than was the case decades past. This could be driven by numerous factors -- changing social norms, demographics, technology, urbanization, to name a few possible drivers.

Gendered patterns in type of employment

Gender equality is not just about equal access to jobs but also equal access for men and women to good jobs. The type of work that women do can be very different from the type of work that men do. Here we divide work into two broad categories: vulnerable work and wage work.

The Gender gap in vulnerable and wage work by GDP per capita

Vulnerable employment is closely related to GDP per capita. Economies with high rates of vulnerable employment are low-income contexts with a large agricultural sector. In these economies, women tend to make up the higher share of the vulnerably employed. As economy income levels rise, the gender gap also flips, with men being more likely to be in vulnerable work when they have a job than women.

From COVID-19 crisis to recovery

The COVID-19 crisis has exacerbated these gender gaps in employment. Although comprehensive official statistics from labor force surveys are not yet available for all economies,  emerging studies  have consistently documented that working women are taking a harder hit from the crisis. Different patterns by sector and vulnerable work do not explain this. That is, this result is not driven by the sectors in which women work or their higher rates of vulnerable work—within specific work categories, women fared worse than men in terms of COVID-19 impacts on jobs.

Among other explanations is that women have borne the brunt of the increase in the demand for care work (especially for children). A strong and inclusive recovery will require efforts which address this and other underlying drivers of gender gaps in employment opportunities.

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Green banking initiatives: a qualitative study on Indian banking sector

• Published: 02 May 2021
• Volume 24 , pages 293–319, ( 2022 )

Cite this article

• Meenakshi Sharma   ORCID: orcid.org/0000-0002-6841-052X 1 &
• Akanksha Choubey 1  

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The environmental concern is on rise in all types of business; however, banking assumes a special niche due to its ability to influence the economic growth and development of the country. The present study proposes conceptual model of Green banking initiatives and studies the impact of three Green banking initiatives, viz. green products development, green corporate social responsibility and green internal process on two possible outcomes, viz. Green brand image and Green trust. The study is qualitative in nature comprising of semistructured in-depth interviews conducted with 36 middle- to senior-level managers of twelve public and private Indian banks. Banking sector can play a crucial role in greening the banking system by enhancing the availability of finance and serve the needs of a “green economy”. The findings of the study revealed that 63% of the total respondents were of view that their bank indulges in development of several green banking products and services, 53% of the bankers said that their bank incorporates green internal processes in their daily activities, and 78% respondents said that their bank undertakes several green corporate social responsibility initiatives. This investigation further highlights that more than 60% respondents believed that Green banking initiatives have positive role in restoring customer trust through enhanced Green brand image. With dearth of studies on green banking in India, the present qualitative study contributes to the body of knowledge and paves way for future research in green banking for sustainable development.

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1 Introduction

Sustainability today is an “emerging mega-trend” (Lubin & Esty, 2020 ) and a very important business objective to drive green business innovation (Raska & Shaw, 2012 ; Royne et al., 2011 ). Companies like Cisco, HP and Walmart have successfully integrated it into their business practices (Sheth et al., 2010 ). The relevance of green marketing in existent scenario is conspicuous because of environmental concerns amongst marketing researchers and practitioners (Chamorro et al., 2009 ; Peattie & Crane, 2005 ; Ottman et al., 2006 ; Lee, 2008 ; Polonsky, 2011 ; Sharma, 2018 ). Industrialization has resulted in ecological inequality, and corporates are blooming at the expense of local community (Porter & Kramer, 2014 ). Uneven industrialization has disturbed ecological balance and has resulted in natural and industrial disasters (Rehman et al., 2021 ). High levels of environmental pollution have raised social concern over environmental issues (Chen, 2010 ). This environmental concern is surging in divergent businesses. Manufacturing, technology, electronics and IT industries (Bae, 2011 ) all are willingly accepting environmental dedication as a paramount business responsibility (Chen et al., 2006 ).

Banks play a pivotal role in sustainable development of a country, and green banking today has become a phraseology. Due to financial, economic and environmental changes, financial services market is re-shaping and an all-inclusive engagement of ethical proposal and values into banking practices is taking place (Lymperopoulos et al., 2012 ; San-Jose et al., 2009 ). Banking sector facilitates adaptation of environment friendly strategies, mitigates climate risks and supports recovery by diverting funds to climate-sensitive sectors (Part & Kim, 2020 ). Today, environmental and green banking has become synonym with sustainability (Kärnä et al., 2003 ), so banks are broadcasting corporate social responsibility (CSR) activities (Scholtens, 2011 ). Banks globally are investing substantially in green strategies (Evangelinos et al., 2009 ) to create green image. Greening of bank is further reducing carbon footprints from banking activities, and this is mutually beneficial to the banks, industries and the economy (Bihari & Pandey, 2015 ).

Many relevant studies have been conducted on green banking before. Scholtens assigns green bank marketing as a component of larger CSR concept. Economic agents banks play an important role in financing environment-friendly projects (Nizam et al., 2019 ) and thus contribute towards society (Rehman et al., 2021 ). Kärnä et al. ( 2003 ) and Grove et al. ( 1996 ) explained association between green marketing and CSR, in non-banking sector. Lymperopoulos et al. ( 2012 ) tested the favorable impact of green bank marketing and green image ; for Evangelinos et al. ( 2009 ) development of green services was the prime focus. Kumar and Prakash ( 2018 ) also opine that implementing sustainable banking practices can be a strong stimulus to sustainable development and points towards scarcity of studies related to sustainable banking in Indian banks. Nizam et al. ( 2019 ) emphasized the need for implementing Green banking initiatives in routine operations, whereas Masukujjaman et al. ( 2017 ) talked about pivotal role played by green banking in developing economies at social, corporate and environmental level.

Developed nations have attracted major research on green banking though developing nations have ignored them (Khan et al., 2015 ; Jeucken, 2015 ; Amacanin, 2005 ; Scholtens, 2011 ; Roca & Searcy, 2012 ; Weber, 2016 ), and in countries like India research on green banking is relatively undiscovered (Prakash et al., 2018 ). Majority of research in India is on corporate social responsibility and management of environment (Biswas, 2011 ; Narwal, 2007 ; Rajput et al., 2013 ; Sahoo & Nayak, 2007 ; Sharma & Mani, 2013 ), green banking strategies (Bihari, 2010 ; Bahl, 2012 ; Jha & Bhoome, 2013 ; Tara & Singh, 2014 ) and green practices adopted by public and private sector banks.

Equator Principles (EPs) and United National Environmental Protection Finance initiative (UNEPF1) and Equator Principles (EPs) promote sustainable development through financial institutions. It has been embraced by more than 200 member nations, and India also being a member nation is following the guidelines of RBI (Reserve Bank of India, 2017). However, despite taking vigorous steps by Indian government, sustainability is yet to dribble down to ordinary people.

Communication gap between the various stakeholders, lack of awareness, lack of green image of the banks and lack of trust are amongst the various reasons why the outcome of the green outreach by the banks is not as expected. Lymperopoulos et al. ( 2012 ) empirically validated that green bank marketing positively influences green image of the bank. However, no such study has been conducted in Indian scenario. The impact of Green banking initiatives to enhance the Green trust and further Green brand image has not been studied so far in Indian scenario.

Henceforth, there is a need to develop a framework that will fill the research gaps by asking following research questions:

What are the Green banking initiatives of leading Indian public and private banks?

What are the major challenges for Indian banks towards “going green”?

How the Green banking initiatives contribute towards creation of Green trust?

How the Green banking initiatives contribute towards creation of Green brand image?

The remaining of this paper is organized as follows: the next section discusses literature review which throws light on green banking, Green banking initiatives in India and challenges of implementing Green banking initiatives in India. Thereafter, the outcomes of Green banking initiatives, viz. Green brand image and Green trust, are discussed as subsections. Afterwards, the research methodology is explained with the help of techniques used for data collection and data analysis. Thereby, findings are discussed which elucidate how research questions are answered. The study is concluded by highlighting the implications and limitations of the research.

2 Literature review

2.1 green banking.

Green banking was initially introduced in the year 2009 in State of Florida. In India, SBI (state bank of India) being the largest commercial bank took a lead towards setting higher standards of sustainability and undertook foremost step towards “green banking” initiative. SBI was the first bank to inaugurate wind farm project in Coimbatore.

Green banking is a form of banking activity where the banks take initiative to do its daily activates as a conscious entity in the society by considering in-house and external environmental sustainability. The banks who do such type of banking activities are termed as socially responsible and a sustainable bank or green bank or ethical bank (Hossain et al., 2020 ; Zhixia et al., 2018 ).

A green bank is a bank that promotes and enacts green technologies in bank operations both internally and externally to minimize carbon footprints and facilitates environment management (Bose et al., 2017 ). It is an influencer for holistic growth of economy in the nation (Jeucken & Bouma, 1999 ; UNEP FI, 2016 ). Green banks adopt social and economic aspect into their strategies and progress towards sustainable practices (UNEP FI, 2011 , 2017 ).

According to Indian Banks Association, green banking refers to a normal banking system which involves all environmental as well as social factors with an aim to ensure ecological sustainability and optimum use of natural resources (Scholtens, 2009 ; Lymperopoulos et al., 2012 ; Kumar & Prakash, 2018 ; Sahi & Pahuja, 2020 ). Hermes et al. ( 2005 ) said that banks involve a shift from traditional towards sustainable practices and social, governance and environment criteria are being integrated into their core strategy. Scholtens ( 2009 ) has explained the concept of green corporate social responsibility in banking and pronounces that a green bank offers savings accounts to stakeholders, ensuring that the savings will finance sustainable projects. He developed a framework to assess the social responsibility of global banks and further tested it on 30 institutions and concluded that there is a positive and significant association between a bank’s CSR score and its financial size and quality. As per Evangelinos et al. ( 2009 ), development of green products like green financial products, loans for renewable energies, greener technologies, green lending and environmental management strategies is green marketing in bank. This improves banks’ reputation and contribute towards sustainability. This has motivated several banks implementing green strategies to invest in developing environmental image to better prepare for future challenges.

Lymperopoulos et al. ( 2012 ) verified empirically that banking initiatives that are green result in a favorable, green image. His green bank marketing construct is comprised of green corporate social responsibility (GCSR), green internal process (GIP) and green product development (GPD).

According to (Dewi & Dewi, 2017 ), green banking promotes environment-friendly practices in banking sector. He further postulated that green banking guides the bank’s core operation towards sustainability. Kumar and Prakash ( 2018 ) have studied the adoption level of sustainable banking tools and categorized 40 criteria into five heads. They further used content analysis to evaluate the sustainable practices of Indian banks and concluded that green banking adoption is still at the nascent stage in Indian banking.

As a part of Green banking initiatives, several banks throughout the globe and NBFIs have adopted eco-friendly mechanisms for financing as well as green transformation of internal operations. For instance, banks in nations like Bangladesh, Brazil, Columbia and Indonesia have started practicing green banking relatively along the lines of the policy framework (Bahl, 2012 ; Rahman & Akhtar, 2016 ). Bank of Ceylon in its annual report of 2015 stated that all their services and goods are driven towards more technology-oriented platforms which helps in reduction of carbon footprints. Also, peoples bank has initiated a paradigm shift to its old model of banking (Oyegunle & Weber, 2015 ). Banks in China, Turkey, Mongolia, Vietnam, Indonesia, Kenya and Peru have also introduced green banking concepts like SmartGen with mobile and internet-oriented passbook free application, fortune branches being installed and initiation of smart zones (Scholtens, 2009 ; Bank of Ceylon, 2015 ; Herath & Herath, 2019 ).

Currently, Indian banks are seen being desirable towards entering global markets (Laskowska, 2018 ; Nuryakin & Maryati, 2020 ; Paramesswari, 2018 ), and it has become important that they recognize their environmental and social responsibilities (Prasanth et al., 2018 ; Sahi & Pahuja, 2020 ; Zhixia et al., 2018 ). As a result, green strategies have become prevalent, not only amongst smaller alternative and cooperative banks, but also amongst diversified financial service providers, asset management firms and insurance companies (Allen & Craig, 2016 ; Gopalakrishnan & Priya, 2020 ; Hossain et al., 2020 ; Kapoor et al., 2016 ).

2.2 Green banking initiatives in India

Green initiatives may be referred to as developing green products which consume less energy, and accordingly distribution, pricing and communication strategies follow. Peattie and Charter ( 1994 ) have defined green marketing as a comprehensive process of management which identify, anticipate and satisfy the needs of customers and society, in a fruitful and sustainable way.

Banking defines green marketing in a similar manner as other industries do. Evangelinos et al. ( 2009 ) defined green bank marketing as developing an innovative environment-friendly financial product like green loans that finance clean technology, and green strategies, like waste management programs and energy efficiency to augment banks’ green reputation and performance.

Green marketing by banks or green initiatives forms a favorable eco-friendly image that satisfies the customer’s green needs and green desires (Chang & Fong, 2010 ) and contributes towards sustainable development (Portney, 2008 ). Several banks are already implementing green banking, green strategies and building their green image to handle existing confrontation. Such green actions can help banks to procure environmental reputation and inculcate their environmental concern (Evangelinos et al., 2009 ; Lymperopoulos et al., 2012 ; Portney, 2008 ).

Green marketing in banks should address green methods and process (Kärnä et al., 2003 ) that suggests green communication also be a part of green initiatives. Evangelinos et al. ( 2009 ) suggest three aspects of green bank marketing in banking literature: lending decisions of banks should be based on environmental criteria; bank environmental management strategies; and developing environmental financial products. He suggested that “green” marketing refers to development of new green financial products that improves banks reputation and performance.

Lymperopoulos et al. ( 2012 ) empirically validated that green bank marketing which comprises of green product development (GPD), green corporate social responsibility (GCSR) and green internal processing (GIP) is a complex concept, is crucial for the bank’s green image (Hartmann et al., 2005 ) and critically contributes in developing customer loyalty and satisfaction (Chang & Fong, 2010 ).

Role of CSR in banks in creating Green brand image has not been explored much (Lymperopoulos et al., 2012 ). CSR is decision making in business, and it has ethical values, compliance with law and regards for environment, communities and people, communities attached to it. Banking relates to CSR with reference to cause-related marketing, ethical issues concerning minority and environment and quality of life (Donaldson & Dunfee, 2002 ). GCSR in banking has been emphasized by Scholtens ( 2009 ), as a socially responsible bank that safeguard savings that are financing environmental projects.

In the contemporary circumstances in market, financial service sector has been reshaped, demanding fresh marketing insight with an aim to provide instructions for successful practice. Going ecological has become a massive trend in the banking industry worldwide. The idea of green banking has encouraged banks to familiarize with paperless, technology driven goods and services while curtailing ecological impacts and performing their role as a corporate citizen on country’s development. The need of the hour is to understand the demand for green initiatives because the eventual success or even failures of these investments are influenced by apparent satisfaction of green consumers. They also assist banks to develop environmental reputation and concern, which is has become imperative today.

Several issues of green marketing like green corporate social responsibility, green product development and green internal processing are addressed by previous studies (Scholtens, 2009 ; Evangelinos et al., 2009 ; Lymperopoulos et al., 2012 ; Herath & Herath, 2019 ) and are long established by several experts, as measurements of Green banking initiatives. Additionally, the outcomes of several qualitative research underline the major contribution of GCSR as an accomplishment for green banks, thereby backing up several former studies (Grove et al., 1996 ; Kärnä et al., 2003 ). Green communications also form an important part of green initiatives as the success of implementation depends upon how well they are communicated to the masses. Lymperopoulos et al. ( 2012 ) also pointed out that environmental awareness can be included in green banking.

India lags other market economies that are in emerging stage in terms of distinctive sustainability policy for their banking practices. Ministry of Finance and RBI together are focusing on developing a policy framework specifically for Indian green banking sector (Roy, 2017 ; Kumar & Prakash, 2018 ). The present study has clubbed the Green banking initiatives of leading Indian private and public sector banks in Indian banking into three categories, viz. green product development, green corporate social responsibility and green internal process (Scholtens, 2009 ; Evangelinos et al., 2009 ; Lymperopoulos et al., 2012 ) as presented in Table 1 . Table 1 explains the three categories of Green banking initiatives, viz. GPD, GCSR and GIP, and different products introduced by different banks under each category.

2.2.1 Green product development

Green product development has actually become the major strategic consideration for several firms throughout the globe because of the ecological regulations and public awareness of eco-friendly practices (Nuryakin & Maryati, 2020 ; Paramesswari, 2018 ). Green product development can be defined as development of business loans for green logistics and waste management, renewable energy sources, loans granted to produce organic products, green mutual funds, stimulating purchase of hybrid cars and other green products, installing photovoltaic systems and investing in production of eco-friendly products (Lymperopoulos et al., 2012 ), green mortgages and green bonds (Campiglio, 2016 ; Kumar & Prakash, 2018 ) and climate fund (Jeucken, 2001 ; Scholtens, 2009 ; Islam et al., 2016 ; GRI G4-FSS1,8, EN6). GPD emphasizes on “end of pipe technology” where organizations are well aware of environmental issues via procedure of production and product design. As per Chen (2001), the product designed to minimize the use of non-renewable resource and avoid toxic materials and renewable resource during its whole life-cycle would be the most effective to display green technological development (Driessen et al., 2013 ; Fraccascia et al., 2018 ; Gopalakrishnan & Priya, 2020 ; Nuryakin & Maryati, 2020 ; Prasanth et al., 2018 ; Yan & Yazdanifard, 2014 ).

2.2.2 Green corporate social responsibility

Green corporate social responsibility (GCSR) can be described as the environmental aspect of CSR—the duty to cover the environmental implications of the company’s operations and the minimization of practices that might adversely affect the enjoyment of the country’s resources by future generations (Laskowska, 2018 ; Nuryakin & Maryati, 2020 ). It can be defined as development of community involvement program (GRI G4-26; Mitra & Schmidpeter, 2017 ; Hossain & Reaz2 007), charity and sponsoring (Jeucken, 2001 ; Scholtens, 2009 ; GRI G4-EC1; Islam et al., 2016 ; Shukla & Donovan, 2014 ) and health care and sanitation program (Hossain & Reaz, 2007 ; Narwal, 2007 ). Access points for financial services in low populated or remote areas of the country (GRI FSS 13; Kumar et al., 2015 ) improve access to financial services for disadvantaged people (GRI FSS 14; Hossain & Reaz, 2007 ; Sarma & Pais, 2011 ). GCSR can decrease business risk, rally reputation as well as afford opportunities for cost savings .  Thus, GCSR is no longer a luxury but a requirement . While much of the drive for sustainability has come from regulatory directives, research has shown that if implemented constructively, GCSR can drive business performance improvements in many areas ( Allen & Craig, 2016 ; Nuryakin & Maryati, 2020 ) .

2.2.3 Green internal process

Green internal process can be defined as relevant strategies for maximizing the utilization of bank’s resources and preserving energy such as saving paper and water, recycling and providing eco-friendly equipment; appropriate curriculum for personnel training to safeguard environment; and upgraded internal functions in to insulate the environment.

2.2.4 Challenges of implementing Green banking initiatives

Implementing Green banking initiatives in India involves a lot of problems. There is a lack of awareness amongst the customers and the bank employees about the concept of “green banking” and even if they are aware, the information they have is inaccurate (The Boston Consulting Group, 2009 ; Jayadatta & Nitin, 2017 ; Sharma et al., 2014 ; Maheshwari, 2014 ; Rastogi & Khan, 2015 ; Sindhu, 2015 ). A huge gap has been found in what banks want or try to spread and what people think of banks to be doing regarding green banking (Jayadatta & Nitin, 2017 ; The Boston Consulting Group, 2009 ). Green washing has led consumers to doubt towards environmental advertising and has led to increase in skepticism that has negative influence on green brand equity (Alniacik & Yilmaz, 2012 ; Shrum et al., 1995 ). It was found that almost three-fourth of people using online facilities provided by their banks were unaware of the term green banking or misunderstood it with digital banking (Sharma et al., 2014 ; Maheshwari, 2014 ; Rastogi & Khan, 2015 ; Sindhu, 2015 ). Awareness of green banking is especially less within middle and senior age groups (Sahoo et al., 2016 ). Henceforth, significant gap in terms of studying the impact of demographic exists.

Inclusive growth of economy requires a robust and healthy banking practices (Kumar & Prakash, 2018 ) Most of the activities of a green bank in India are focused on ATMs, internet banking, paperless banking, etc. (Biswas, 2011 ). It is also researched that Indian banks are not so well equipped to implement Green banking initiatives (Rajput et al., 2013 ), and they still have a long way to go (Kumar & Prakash, 2018 ). Reserve Bank of India is a major contributor in facilitating environmental policies. A developing country like India requires more thrust on the social dimension of banking and couples it with economic growth (UNEP FI, 2017 ). Limited Indian banks have advocated the green banking principles as per international standard. There is a need to improve regulatory framework (UNEP FI, 2011 ).

3 Outcomes of Green banking initiatives

3.1 green brand image.

Chang and Fong ( 2010 ) defined green corporate image as “the perceptions developed from the interaction among the institute, personnel, customers and the community that are linked to environmental commitments and environmental concerns”. If the green products of a company are reliable and stable, they converge with the environmental needs of consumer, enjoy excellent environmental performance and have green reputation that company will relish green image. According to Chen ( 2010 ), Green brand image is when a product is perceived by the customers as having green commitment and green concerns. It is accepted via its competence in green reputation, success in sustainable achievement and trustworthiness of environmental promises. Chen ( 2010 ) also endorsed that green marketing positively influences a company to obtain competitive advantages, enhance corporate image and product value and hunt for innovative opportunities in market and augment the product value with reference to information technology products. Hartmann et al. ( 2005 ) posit that an efficiently chalked out green positioning strategy can provide direction towards more appreciative brand perceptions.

In the banking studies, green bank image is related to bank superiority substantially and reputation in their environmental endeavor vis-a-vis competition (Lewis & Soureli, 2006 ). This clubbed with the impression of the customers plays an important role in describing Green brand image (Nguyen & LeBlanc, 2001 ). Further, green bank image can help in retaining the customers, winning back the lost and attracting new ones, thus leading to banks’ prosperity and future sustainability. Thus, it can be presumed that corporate image has a substantial impact on customer loyalty and achieving the fundamentals of green marketing (Chaudhuri, 1997 ; Chen & Chang, 2013 ; Lewis & Weigert, 1985 ; Mitchell et al., 1997 ).

3.2 Green trust

Rotter ( 1971 ) defined trust as the extent to which a party can entrust on another party’s word, statement or promise. Hart and Saunders ( 1997 ) believe that trust is the assurance that others would behave as is conventional based on integrity, ability and benevolence (Schurr & Ozanne, 1985 ), a degree of willingness to believe another party based on ability, reliability and benevolence (Ganesan, 1994 ). Green trust is a willingness to rely on a product, brand or service or expectation arising out of its ability and credibility because of its environmental performance (Chen, 2010 ). Prior research has shown a positive relationship between trust and long-term consumer behavior (Lee et al., 2011 ) and purchase intentions (Harris & Goode, 2010 ; Schlosser et al., 2006 ) and is an antecedent of the same (Van der Heijden et al., 2003 ). Chen and Chang ( 2013 ) endorse that green initiatives can enhance customer trust and their willingness to purchase a product or service (Gefen & Straub, 2004 ).

Henceforth, it can be concluded that Green banking initiatives will have positive influence on Green trust and customers’ green expectations. However, exaggerating the green performance can also lead to reluctance of customers to trust (Kalafatis et al., 1999 ). For a bank to gain Green trust of its customer, its environmental performance, expectations and promises should be reliable, dependable and trustworthy (Chen, 2010 ); more information about the “greenness” of product should be shared with stakeholders (Chen & Chang, 2013 ); else it can give rise to mistrust (Jain & Kaur, 2004 ). Table 2 summarizes the various items of the major constructs of the study, viz. Green banking initiatives, Green brand image and Green trust.

4 Proposed framework

This research develops a conceptual framework (Fig.  1 ) that illustrates the impact of Green banking initiatives on Green brand image and Green trust. Green banking initiatives consist of three items, viz. green product development, green corporate social responsibility and green internal process (Lymperopoulos et al., 2012 ). The outcomes of Green banking initiatives are Green brand image measured by four items in the scale by Chen ( 2010 ) and Green trust measured by five items in the scale given by (Chen & Chang, 2013 ) (Table 2 ).

Conceptual model of Green banking initiatives

Green banking initiatives positively influence Green brand image (Lymperopoulos et al., 2012 ), and Green banking initiatives enhance customer trust and their willingness to purchase a product or service (Gefen & Straub, 2004 ).

5 Methodology and case study

As mentioned before, there is dearth of extensive study on green banking in India. Henceforth, the need for exploratory research is realized and chosen for the present study. Qualitative research provides a deep-seated understanding of the experience or case under observation and study by illuminating uncovering loosely connected insights and taking forward the casual relationship. Use of qualitative research is more apt for formulization and theory dissemination in the background when not much is public about the elemental variance. According to Eisenhardt ( 1989 ), developing a case study method which is based on theory is the favored investigation technique which assist not only in testing but also provoke innovative policy in new arenas.

The present analysis is based on multiple case study where the same phenomenon is investigated in multiple situations. However, the multiple cases shall be selected in such a careful manner so that it either anticipates analogous outcome or anticipates contradictory outcome for anticipated inference (Yin, 2003 ). The above-mentioned twin conditions are addressed in the present study by taking into consideration more than one branch of the same bank and branches from different banks. Henceforth, the findings obtained from analysis of each case from contrasting groups (between State bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BOB), Canara Bank, ICICI Bank Ltd, HDFC Bank Ltd, Axis Bank Ltd, Kotak Mahindra Bank, IndusInd Bank, YES Bank, IDFC Group, IDBI) were regarded as object of comparison and the results from each case from similar group (amongst three branches of SBI or three branches of PNB) are findings which further exaggerate the understanding of Green banking initiatives of Indian banks.

In comparison to a single case study, multiple case study provides more sturdy, persuasive and conclusive results. Furthermore, the findings from multiple case study can be hypothesized to a larger extent and collaborate in theory building. Henceforth, a study based on multiple case study is more accurate, logical, and sound (Ray & Sharma, 2019 ). The findings accomplished from multiple case study method are more robust and trustworthy (Baxter & Jack, 2008 ). They allow for a comprehensive development of research questions and academic transformation. The results validate the described complementary and comparative findings to enrich the knowledge base of green banking.

5.1 Exploratory interviews

As the study is exploratory in nature, the research questions focused on what (do you […], e.g., believe?), how (do you […], e.g., feel?), why (do you […], e.g., believe?), in contrast to how much and how many and other quantifiable question. Exploratory interviews were found to be more fruitful technique of providing relevant information deemed necessary for developing a new theory (Amaratunga et al., 2002 ; De Ruyter & Scholl, 1998 ). Several probing questions like “what are the Green banking initiatives used by your bank?”, “what are the problems faced in communicating Green banking initiatives?” …….” Were asked to reveal as much information as possible. The benefit of asking such practical questions was that they provided a structure for reference and conceded the researcher to explore deeper and get analytical. Laddering and funneling techniques were used (Eisenhardt & Graebner, 2007 ; Kvale & Brinkmann, 2009 ) to discover the hidden meaning. The questions were semistructured so had flexibility of words and sequence guided by interviewee’s response. Divergent themes and subthemes were explored dictated by interviewee’s interest and expertise. The focus of the conversation was on green initiatives, their impact on Green brand image and Green trust. This directed the study to conduct interviews in the form of conversation, which were deemed apt for the study’s exploratory nature. It was also considered relevant to conduct detailed analysis (Flick, 2009 ).

5.2 Data collection

Exploratory research design has been used in the present study, and data have been collected by interviewing 36 middle to senior level bank employees from 12 public and private sector banks. Twelve banks that were targeted were State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BOB), Canara Bank, ICICI Bank Ltd, HDFC Bank Ltd, Axis Bank Ltd, Kotak Mahindra Bank, IndusInd Bank, YES Bank, IDFC Group, IDBI from Delhi NCR region. From each bank three middle-level managers were selected using purposive sampling and were interviewed using semistructured questionnaire method. The chosen respondents with their knowledge and expertise answered the semistructured questionnaire, and this helped in gathering critical points and in-depth knowledge of different aspects of green banking. The theoretical insights that emerged increased the likelihood to expand based on emergent theories (Baker, 2002 ; Eisenhardt & Graebner, 2007 ). As not much research has been done in green banking in India, if analysis had considered a sample up to twelve for conducting in-depth interviews it was considered sufficient (Carson et al., 2001 ). However, this investigation conducted in-depth semistructured interviews with 36 banking sector employees. The detailed profile of the respondents is provided in Table 3 .

The details of the interview were duly recorded and were written on paper. The interview lasted for 50 min on an average, varying from 30 to 90 min (total number of hours exceeding 30 h). Interviews were conducted face to face, and each interview was classified into tables encompassing the most relevant headings under research (as explained earlier), to organize the data. This phenomenon focused attention on distinctive opinions and segregated those from customary perspective shared. Repetitive and interpreted logic produced strong hypothesis development. With the help of in-text, entwined with germane literature, the liaison between factual documentation and emerging theory was established (Amaratunga et al., 2002 ; Eisenhardt & Graebner, 2007 ).

5.3 Data analysis

After reaching the point of exhaustion when no contribution was done by new interviews, data analysis was done. The data were analyzed based on conceptual framework (Fig.  1 ) once interview material was transcripted. Thereafter, process of data analysis was initiated wherein for each item in the interview detailed content analysis was performed (Flick, 2009 ) to remove the crucial facets. It was followed by an interesting exercise of highlighting the cut-outs and freezing the nucleus statements in association with the conceptual framework in Fig.  1 (Saldaña, 2012 ). Characterization was performed for each interview, cut-outs found intriguing were underlined, and further important statements were frozen in association with the conceptual framework (Saldaña, 2012 ). A characterization emerged out of each interview. Then intensity analysis was performed wherein excellent responses were analyzed further to compare the phenomenon under study.

This step involved following robust quality criteria. Every phase was documented, memos were critically written, and motivation for each interpretation was worked upon. Coding of the interview took place in two cycles, and the crucial facets of the findings were assigned to the major categories of Green banking initiatives, Green brand image and Green trust. Next, the extensive interview material was immersed as it was private investigation of an exclusive interview. The objective of such technique was to point at the trends emerging and to reinforce them all with fitting justifications. In summation, demonstration was for the main constructs explained at the time of interviews in a pattern (i.e., putting together coding cycles) (Fig.  1 ). Consequently, the indicators were categorized. Content analysis and topic-based analysis together justified and verified the authenticity of the analysis.

The qualitative data for the study were collected with the help of in-depth personal interviews conducted with the bank employees. The data developed thereafter provided relevant insight. Numerous green marketing issues, such as GPD and GIP already addressed before by previous research (Evangelinos et al., 2009 ; Lymperopoulos et al., 2012 ), were confirmed as components of green marketing by the practitioners. The findings of qualitative analysis conducted in the study highlighted the role of GCSR as a crucial factor for success of green bank marketing (Grove et al., 1996 ; Kärnä et al., 2003 ; Lymperopoulos et al., 2012 ).

6 Findings and discussion

The present study aims to provide answer to the following research questions:

The process adopted in the paper is depicted with the help of flowchart in Fig.  2 . The study begins with the introduction and now has moved to the findings and discussions by answering the research questions identified in the beginning of the study.

Workflow of the research paper

The Green banking initiatives in the paper are divided into three major categories: green products development, green corporate social responsibility and green internal process. They are further summarized in detail in Table 1 along with different products introduced under different heads by different banks under consideration. All the 36 respondents agreed that the twelve public sector and private sector banks are using these Green banking initiatives.

One branch manager of a leading public sector bank stated: The bank has come up with several green products and services like green loans/green financing of energy efficient projects, promote renewable energy, green vehicle finance, loans for constructing green buildings etc .

Another branch manager stated: My bank is involved in several green corporate social responsibility activities as a part of green initiatives like tree plantation campaigns, maintenance of parks, promoting environmental literacy etc .

One of the regional managers commented: Bank is implementing responsible waste management disposal systems, rainwater harvesting, use of more daylight, using emails and internal network communication instead of paper-based documentation.

Another AGM said: Implementing green banking has always been a major issue but it plays an important role in the development of a developing nation like India .

Majority of the bank employees agreed that now both public and private sector banks are taking steps to implement Green banking initiatives. They also commented about the reputation risks involved from financing environmentally objectionable projects (Sahi & Pahuja, 2020 ; Zhixia et al., 2018 ).

In a country like India with literacy rate of 70% on an average, green banking is still at a nascent stage and desired results have not been achieved (Kumar & Prakash, 2018 ). The analysis revealed that there were multifold reasons attributed to it. The bank employees provided very valuable and honest insight during the semistructured interviews.

One of the regional managers commented: People have trust issue with green goods and services. Most of the customers are uncomfortable adopting new tools and technologies.

Branch manager said: Many customers are not aware of several green tools and technologies resulting in no use or less use of them .

Another commented: Elderly and uneducated people are less adaptable towards green products and services.

There were several other comments as mentioned below:

Staff training is a major task as few older staff are reluctant towards the change.

Green goods and services increase bank’s cost at least initially though reduces administrative cost in the long run.

The major problem bank faces in this process is of customers not accepting the online transactions happily.

Customers are skeptical towards safety in transactions undertaken online; however, educated people easily adopt green technologies.

Majority of the bank employees agreed that a proactive way of future sustainability is Green banking, but banks in India are running far behind their counterparts from developed nations because of lack of education, lack of awareness and lack of preparedness of Indian banks to implement green initiatives (Jayadatta & Nitin, 2017 ; The Boston Consulting Group, 2009 ). However, there was a consensus that a lot needs be done till green banking percolate to grassroots level and this was not possible till all stakeholders, i.e., government, bankers and customers work in union to achieve it (Kumar & Prakash, 2018 ).

Green trust is a willingness to rely on a product, brand or service or expectation arising out of its environmental performance. The Green banking initiatives if successfully explained and implemented will enhance customer’s trust in bank and will positively influence their purchasing decisions.

One of the bank managers stated: Bank’s priority must be to make customers do everything themselves digitally without being dependent on bank. This will increase their confidence and enhance their trust on the bank.

Another bank employee stated: My bank undertakes several green corporate social responsibility activities like tree plantation, maintenance of parks etc . They enhance our reputation and reliability.

Regional manager said: One of our customers told me that he participated in the marathon sponsored by our bank. He very proudly told other participants that he has account in our bank, and we are very committed to the environmental cause.

Another employee stated: One customer came to me and said that he read in the newspaper that our bank is a signatory to UNEP F1 and adhere to UN Global Compact Principles. He said that he was very much impressed that our bank keeps promises and commitments for environmental protection.

Hence, based on comments received it can be affirmatively concluded that Green banking initiatives in the form of green products and services, green corporate social responsibility and green internal process can go a long way in creating Green trust of all stakeholders (Chen, 2010 ).

Researchers studied the relation amid green banking and Green brand image resulting to the conclusion that a positive relation actually exists amid the banks undertaking Green banking initiatives and the development that takes place in terms of improving the banks brand image (Chang & Fong, 2010 ; Hartmann et al., 2005 ; Lymperopoulos et al., 2012 ).

One manager stated: Green initiatives have influenced all our eco-friendly and environmentally concerned consumers and they through positive word of mouth have augmented bank’s green image within the society.

Regional manager Commented: Steps taken to create environmental awareness has created Green brand image amongst our ecofriendly customers. This in future will be a driver of satisfaction and loyalty. Bank green corporate social responsibility initiatives like sponsorship for protection of wildlife, development of school fees collection modules etc . augment the banks green image.

One bank employee said: One of the customers told me that he saw two ambulances donated by this bank outside an eye hospital. A slogan on environmental protection was painted on the ambulance. He was very touched. His impression of our bank’s reputation got enhanced.

The above reviews guide the researchers to conclude that Green banking initiatives in the form of green products and services, green corporate social responsibility and green internal process contribute towards creation of Green brand image of the bank (Chaudhuri, 1997 ; Chen & Chang, 2013 ; Lewis & Weigert, 1985 ; Mitchell et al., 1997 ).

On the basis of content analysis in Table 4 , it can be concluded that 63% of the total respondents were of view that their bank indulges in development of several green banking products and services; 53% of the bankers said that their bank incorporates green internal processes in their daily activities; 78% respondents said that their bank undertakes several GCSR actions like marathon for promoting sustainability, reduction of carbon footprints, green loans, green mortgages etc.; and 22% of respondents were of view that their bank still has a long way to go for fulfilling its green corporate social responsibilities. Though 84% of bankers believe that their bank is concerned as a benchmark for ecological commitment, 16% bankers said that their bank is far away from setting a standard for Green banking initiatives. Majority, i.e., 70%, of bankers feel that their bank is very professional when it comes to environmental protection, but 30% said that their bank is still an amateur in undertaking green initiatives and thereby fails to embark on environmental protection. Though when it comes to fulfillment of ecological performance and success in the same, half of the respondents agree and half disagree to this fact. Majority of respondents, i.e., 63%, said that their bank undertakes many actions to build its establishment towards environmental concern and approximately same, i.e., 65% bankers also said that their bank seems to be trustworthy when it comes to environmental argument that it puts amongst its customers. A widely held belief observed amongst bankers was regarding reliability of bank’s environmental commitments, to which 84% agreed and, merely 16% denied. Same results were attained when it came to dependability on the bank’s environmental performance. Even though bankers feel that their banks try and perform as much as possible towards ecological concerns, and even 63% felt that their bank keeps its promises for environmental performance, yet majority of them feel that expectations are yet not fulfilled and almost all the bankers were of view that banks face a lot of challenges like difficulty in gaining trust, lack of ease with digital forms, cybercrimes, hacking risks, etc., while implementing green initiatives. Results of content analysis are also depicted using bar graphs in Fig.  3 .

Results of the content analysis using bar graphs

7 Conclusions

To facilitate the market transformation demanded in Paris agreement, green banks play a critical role to meet the goal of restricting global warming (Ihlen, 2009 ; Kolk & Pinkse, 2005 ; Miah et al., 2020 ). Banks needs to apply morality of sustainability and responsibility to their business model. By adopting the environmental factors in their lending activities, banks can gain public trust and also fulfill their responsibility towards the society. Green banking, if implemented sincerely, will act as an effective measure for attaining people’s trust and building bank’s brand image (Chen, 2010 ).

Countries like USA, UK, Australia, Japan and Malaysia have embedded Green banking initiatives, guidelines and principles in their banking system (Meng et al., 2019 ; Thompson & Cowton, 2004 ); however, India has a long way to go vis-a-vis their developed counterparts (Scholtens, 2009 ; Bank of Ceylon, 2015 ; Herath & Herath, 2019 ) and require strong motivation and reinforcement to do so. In such a backdrop, the present study has relevant theoretical, social and managerial implications.

The present study proposed conceptual model of Green banking initiatives in Fig.  1 with three antecedents of Green banking initiatives, viz. green products development, green corporate social responsibility and green internal process with two green banking outcomes: Green brand image and Green trust with themes and dimensions as described in Table 2 . Based on the findings of semistructured interviews and discussions; thereafter, the proposed relationship in the conceptual model was appropriately concluded. This investigation highlights the role of Green banking initiatives in restoring customer trust through enhanced green image. The study has successfully answered all the four research questions posed in the beginning of the study.

In response to RQ1, the study suggests that majority of public and private sector banks are implementing Green banking initiatives in the form of Green product development like Green loans, green financing, green mortgages, loans for green construction, etc.; Green corporate social responsibility like green credit cards, internet banking, green savings account, payment of school fees through ATM, solar ATM, green CDs, green awareness programs; and green internal process like use of more daylight, employee training on green initiatives, conducting energy audits, using internal network communication (Herath & Herath, 2019 ; Lymperopoulos et al., 2012 ; Sudhalaksmi & Chinnadorai, 2014 ).Quantitative analysis revealed that 63% of the total respondents were of view that their bank indulges in development of several green banking products and services; 53% of the bankers said that their bank incorporates green internal processes in their daily activities; and 78% respondents said that their bank undertakes several GCSR.

The study revealed very valid information regarding the major challenges for Indian banks towards “going green”. It was found that there are lack of awareness, lack of education and presence of green washing (The Boston Consulting Group, 2009 ; Jayadatta & Nitin, 2017 ; Shrum et al., 1995 ; Alniacik & Yilmaz, 2012 ; Sharma et al., 2014 ; Maheshwari, 2014 ; Rastogi & Khan, 2015 ; Sindhu, 2015 ) because of which Indian banks were not able to meet international standard. Need for improved regulatory framework and collaborated efforts of all stakeholders was also found imperative in achieving the required goals (Miah et al., 2020 ). Previous studies clearly point out towards multi-stakeholder involvement in facilitating green building adoption (Bukhari et al., 2020 ).

Bank employees revealed that engaging in green corporate social responsibility activities like tree plantation, organizing marathons, undertaking green internal processes like reducing paper usage, using digital banking safely, launching green counters and green credit cards all enhance consumer’s trust in green activities of banks and create Green trust (Chen, 2010 ; Lymperopoulos et al., 2012 ; Hossain et al., 2020 ).

The study revealed a positive relationship between Green banking initiatives and Green brand image. The bank employees confirmed that eco-friendly consumers were very proud of Green banking initiatives and also created positive word of mouth that helped in creation of Green brand image that helps in achieving customer loyalty and the fundamentals of green marketing (Chaudhuri, 1997 ; Chen & Chang, 2013 ; Lewis & Weigert, 1985 ; Mitchell et al., 1997 ).

On the basis of in-depth interviews, the study further concludes that 63% of the total respondents were of view that their bank indulges in development of several green banking products and services; 53% of the bankers said that their bank incorporates green internal processes in their daily activities; and 78% respondents said that their bank undertakes several green corporate social responsibility initiatives. This investigation further highlights that more than 60% respondents believed that Green banking initiatives have positive role in restoring customer trust through enhanced green image.

8 Suggestions and implications of the study

The theoretical implication of the present research is to validate using qualitative research the positive relationship between Green banking initiatives, Green trust and Green brand image of the Indian banks. The semistructured interview of thirty-six middle- to senior-level bank managers of twelve banks has very lucidly thrown light on the challenges and the proposed conceptual framework comprising of three constructs, viz. Green banking initiatives, Green trust and Green brand image. With dearth of studies on green banking in India, the present qualitative study makes valuable contribution to the body of knowledge and paves way for future research in green banking for sustainable development.

The present study’s managerial implications are wide ranging. The investigation clearly states that if Green banking initiatives are implemented effectively, augmenting environmental reputation and reinforcing environmental concern will no longer be a utopia. So, through efficient resource planning of green activities, new and interesting opportunities can be created by the bank which can boost their prominence and help to win trust of current and prospective customers. The study will motivate the banking sector to be engaged in green corporate social responsibility as “social banking” is an important aspect of “green banking” and use green internal process to create awareness amongst the divergent stakeholders. The study has great relevance for environmentalist, policy makers and all stakeholders in developing effective and efficient green banking strategies.

9 The limitations and directions for future studies

The proposed relationship in this qualitative study can be further validated quantitatively, and the impact of demographics on it can also be investigated. The study has been conducted in Delhi NCR region in India, and an exhaustive study in different countries at different stages of development can provide valuable insight. The proposed framework can also be studied from the point of view of other stakeholders apart from bank employees.

The study has very placidly explained how use of green initiatives by banks can enhance Green brand image and solidify trust with stakeholders. The research results provide relevant and divergent insights into government, strategist and academician to chalk out effective green banking strategies for “green economy”. The State of Green Bank Report ( 2020 ) also declares that for a sustainable economic recovery during the global COVID 19 crises as well as for reducing emission before 2050 “climate-resilient green banks” are the need of the hour.

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Sharma, M., Choubey, A. Green banking initiatives: a qualitative study on Indian banking sector. Environ Dev Sustain 24 , 293–319 (2022). https://doi.org/10.1007/s10668-021-01426-9

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