Dynamic Theory of Evolutionary Process of Constrained Contract Optimization and Adaptation to Evolving Shocks and Blockers, During the Agent’s Employment in the Firm

This paper examines some of the implications that technological innovations have had on the retail side of the commercial banking industry in the recent decade. These innovations enabled financial institutions to overcome previous constraining “blockages” to growth and costs savings, such as geographic distances and volume processing obstacles but at the same time also removed many of the previous “blockages” that prevented competitors from invading their turf. The nature of such constraints (or “blockages”) has changed as technology changed, and the financial intermediation delivery has changed with it. Although this paper focuses on the innovations relevant to retail banking, many of the implications can be of interest to other aspects of the financial services industry outside the scope here. While enabling a greater variety of services and improved productivity, technology poses challenges to society since non-banks are often less regulated, compared to depository institutions. As noted in recent studies, despite the free spill-over of information, technology has the potential to increase monopolistic powers of institutions that develop advantages in the use of propriety information and technology. This paper reviews some recent innovations in the financial services industry that have a further potential role in the continuation of the transformation process. One needs to become familiar with them before one can proceed with further contemplation of the challenges that they pose to the banking and non-banking industries. This paper also addresses ongoing dynamic exogenous challenges that corporate boards and CEO's face with continually changing economic and socio-political and technological challenges that make “yesterday's conventional wisdom and strategy actual “Blockers” to risk taking and growth going forward. The paper is suggesting a theory model that is undoubtedly far from being perfect or free of to challenges, but nevertheless can hopefully stir further research into new applications and empirical tests that can be relevant to financial markets stakeholders and policy makers and regulators