Rethinking bank business models: The role of intangibles

Purpose:
This paper provides a new way of rethinking banking models by using qualitative research on intangibles.

This is required because the banking sector has been transformed significantly by the changing environment over the past two decades. The 2007-2009 financial crisis also added to concerns about existing bank business models.

Design/Methodology approach:
Using qualitative data collected from interviews with bank managers and analysts in the UK, this paper develops a grounded theory of bank intangibles.

Findings:
The model reveals how intangibles and tangible/financial resources interact in the bank value creation process, how they actively respond to environmental changes, how bank intangibles are understood by external observers such as analysts, and how bankers and analysts differ in their views.

Research implications:
Grounded theory provides the means to further develop bank models as business models and theoretical models. This provides the means to think beyond conventional finance constructs and to relate bank models to a wider theoretical literature concerning intellectual capital, organisational and social systems theory, and ‘performativity’.

Practical implications:
Such development of bank models and of a systems perspective is critical to the understanding of banks by bankers, by observers and for their ‘critical and reflexive performativity’. It also has implications for systemic risk and bank regulation.

Social implications:
Improvement in bank models and their use in open and transparent processes are key means to improve public accountability of banks.

Originality:
The paper reveals the core role of intellectual capital (IC) in banks, in markets, and in developing theory and research at firm and system levels.

Key words: bank models, knowledge, intermediation, external observers, systems.