Digitization of the banking industry is making new banking business models possible. But, it is the combination of regulation and technology that is making new business models a necessity.

There are 4 strategic options open to banks, shown below. These vary in terms of the scope of banks’ own activities as well as in terms of profitability. The traditional universal banking model and the infrastructure provider model are both asset intensive and low margin, which makes them unattractive. In addition, the universal banking model, in that it requires the bank to manufacture and distribute all of its products, is probably unsustainable. The aggregator model, top left, offers the possibility for very high profitability with low asset intensity, but will be difficult to defend. Thus, it is the vertically integrated but open platform model which offers the best route to sustainably high margins.