Product development in UK retail banking : Developing a market‐oriented approach in a rapidly changing regulatory environment

Purpose – The paper examines how product innovation in the UK banking industry has been affected and is likely to be affected by changes in regulation and in government policy. It considers the issues faced by banks in pursuing a market‐oriented approach in this environment. Design/methodology/approach – The rapidly changing regulatory environment in the UK is described and analysed, primarily in the context of the market for mortgage products and medium‐ to long‐term savings products. The paper describes the main events of the last 20 years and analyse their immediate impacts. The paper examines the most recent changes, identify the direction of policy change and consider the implications. Findings – Empirical evidence suggests that the development of mortgage and pensions products has been closely linked to changes in regulation and government policy. This has resulted in an adverse impact on the brand values and reputations of banks. An analysis of the most recent events identifies two different regulatory approaches which banks now have to manage. Research limitations/implications – A review of the literature shows that very little detailed research has been carried out into the impact of regulation and government policy on banks and financial services companies. Practical implications – With this lack of systematic research and analysis, and in the absence of a theoretical framework, it is difficult for banks, regulators and government to make informed decisions. Originality/value – The paper highlights and analyses an increasingly important issue which has not been addressed in any detail in the literature. The paper puts forward an agenda of research questions and propositions for further research.