Do Financial Service Providers Utilise PESTLE Analysis to its Full Extent?
PESTLE Analysis is a versatile marketing analysis tool, and can be used in many industries. The Financial Services Industry provides an excellent opportunity for PESTLE to be used to its full capacity. However, are Financial Service Providers (FSPs) switched on to the potential of this marketing concept?
PESTLE Within Finance
The Political and Economic (P and E) elements of PESTLE are – almost by definition – the biggest factors affecting the Financial Sector, underpinning almost every other aspect of the model. Despite appearing to be an almost untouchable force, the financial sector is ultimately in government control. However, although the connection is unquestionably strong, quantifying it also remains somewhat problematic, and according to one Business Professor ‘under-researched’.
Naturally, the Economy is inextricably connected to the financial sector – they strongly influence each other; for example, in 2016, financial and insurance services made up 7.2% of the UK economy’s overall gross value added (GVA).
It is important for FSPs to consider the Social (S) factors that exist within the countries that it operates – businesses must consider what customers want, require and expect, and how it can deliver on these factors to remain competitive. The financial sector is very strongly linked to social welfare, and a change in a country’s financial state can have sweeping, long-term societal implications.
Technological (T) factors are of particular significance now due to the prevalence of mobile banking apps and modern payment methods. Financial transactions can be made at the touch of a button, and contactless payments are transforming the retail experience. Ensuring technological competitiveness is key to the strategy of many FSPs.
FSPs operate under strict laws, and it is paramount that they are adhered to. The Legal (L) influence of finance cannot be underestimated. For example, regulation within the industry ensures sensitive customer information is carefully handled. It also ensures fair competition within the industry.
The Environment (E) is becoming a factor of growing importance across all industries – not least within financial services. The environment and technology go very much hand in hand here, as banks provide ‘go paperless’ options to customers to reduce their carbon footprint. Many services can now be reached at the click of a button – reducing the need for administration and making the banking process more efficient.
How is PESTLE Used Within Finance? Does it Have Untapped Potential?
I wonder how many within the finance industry are unaware of PESTLE analysis, and rely instead upon the more generalised marketing analysis techniques such as SWOT. Even if they have previously used the PESTLE method, do they really understand its potential? Are they using the model correctly?
Looking at the FSP sector, the influence of all of the PESTLE elements is striking – all are of substantial relevance and import to the industry. From my experience, financial sector businesses seem to analyse and act upon each individual PESTLE point in relative isolation. This can lead to insular, blinkered thinking. However, using the PESTLE model forces business analysts to view the bigger picture – and also to see the fluid nature of the seven elements. The different elements are all of real central importance to the financial sector, and all offer very contrasting perspectives. So, using the model to its full potential should enable the user to gain a full, rounded and informed picture of the market they are dealing with.
Understanding how all the elements work together is the unique selling point of the PESTLE model. I believe PESTLE analysis could be used to greater effect within the industry, and could lead to more relevant, politically and socially astute products and services being offered. For example, as a popular financial product offered by many FSPs, ISAs could benefit from thorough PESTLE analysis.