Product Life Cycle In The Banking Industry

Igor Izraylevych

4 min read

Product Life Cycle In The Banking Industry

There is a constant stream of innovative products in the banking industry. Product software from as recently as five years ago is often outdated and ineffective. This means it has reached the end of its product life cycle.

But what is a product life cycle in banking? 

Simply put, it is the series of stages that a product passes through in its time in a marketplace. Because of the rate of innovation in the banking industry, newer and more successful products always push older ones out of the market.

This article will describe the product life cycle in the banking industry and show how you can know when to upgrade or replace products.

What is a product life cycle?

The life cycle of a product refers to how that product moves through the marketplace from its introduction, adoption, and decline. Many products become redundant over time and lose their usefulness, leading to their replacement.

Very few products have an endless lifespan. A simple product like soap has changed little since its introduction. Besides a few additions and alterations, the standard bar of household soap has proved durable against disruption.

But this is not the case for technological products, which have a high ceiling for personalisation according to customer requirements. For mobile banking products, consumer demand for maximum mobility and always-on services means that products are constantly moving through stages of their life cycle.

Knowing where your product lies in its life cycle allows you to make strategic decisions around marketing, pricing, expansion into new markets, and redesign.

Product life cycle stages

1. Introduction stage

When a product first hits the shelves, it will be an unknown entity and it will not have much market traction. Profits are often low, as the product is trying to establish a hold on the market.

At this stage, companies must put a high emphasis on marketing the product. This is because there is no loyalty or affinity with the product just yet. The big goal is to make consumers aware of the product and its benefits.

As far as pricing, companies can either start with a high price and reduce it over time as their subscribers increase. Or, they can start low and win market share first, then slowly claw back their investment through gradual price increases.

2. Growth stage

As the product becomes more popular over time, it is now in the growth stage. Through word of mouth or because of marketing efforts, the sales numbers increase. Economies of scale come in line as unit volumes increase.

Availability of the product is increasing, but there is also an increase in competition as copycat products appear from competitors. In the growth stage, consumers see the benefits of your product and pricing does not need to be too low to make the product attractive.

3. Maturity stage

This is a highly profitable stage. Marketing costs are down as the product sells itself. Even though there is more competition, the strongest players in the market will continue to dominate as they saturate the market.

Growing product loyalty will drive sales. This is where companies think about continuing the viability of the product by developing upgrades and alternative versions to ensure its continued success.

4. Decline stage

In this stage, sales fall and so does profitability. By now, rival products have found innovative ways to cut into the market share of the product. There might be advancements in product technology that other firms have been better able to capture.

To survive in the decline stage, companies have to systematically reduce their distribution channels in areas where the product cannot compete. They have to rationalise and even cut out marketing on a dying product. If a company chooses this moment to plan an upgrade, then they are already too late.

Product Life Cycle In The Banking Industry - photo 2

Product life cycle examples

In retail banking, having a wide branch network has been a product on its own for many years. But with the rise of online banking and mobile banking apps, branches in all major markets are declining. In the period from 2000 to 2016, branch coverage in 12 major nations has reduced by 38%.

The decline of the branch network, which has been the bedrock of retail banking for decades, results from a rise in mobile banking. A recent study showed that in a five-month period in the US in 2020, mobile banking usage grew by 34%, while branch coverage reduced by 12%.

This example shows how new technology can make an old one redundant. 

But competition among mobile banking products is so fierce that earlier versions are being replaced by newer versions. A Building Society in Australia recently had to phase out an old banking app due to negative consumer feedback.

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Product life cycle management in banking

Product life cycles in banking are slightly different to other industries. 

This has a lot to do with the rapid change that brings about different considerations. Product life cycle management in banking must note these factors:

1. The introduction phase is combined with incubation

The banking product introduction phase is part incubation and part R&D. Banking is a tightly regulated market, and it can only test some product elements in the real world. This means that phases blur together, and product owners should know this.

2. Prepare for rapid growth

When banking products take off, they can skyrocket. The pace of acceleration can be like that of a digital start-up. 

Because of this, the growth phase can be quite short, and product owners can find themselves in the maturity phase without knowing it. Missing this crucial sign could mean a loss of revenue optimization opportunities.

3. Maturity stage is a time to clean house

The maturity stage in banking is about keeping a clean house. 

With so many high-powered analytics available, it’s easy to spot underperforming customer segments. This is when banks can switch off certain segments more rapidly than in other industries.

4. Decline, but not as we know it

Mobile banking apps decline because of technological advancements. 

However, because the churn rate within banking, in general, is rather low, there is an opportunity to take a longer-term view with certain banking app architectural decisions.

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When is it time to update your product or create a new one?

It is up to product owners to systematically review the performance of their products. By using smart indicators, you can know when to upgrade product versions and introduce innovations.

High-quality data insights are in endless supply, so banks can throw resources behind market research, consumer sentiment, and longevity forecasting. It is important to know this because you can plan your resources ahead of time.

But even before performing high-level analysis, product owners should understand that the maturity stage is not the time to rest. This is often the best time for a bank to invest in an upgrade or plan a total replacement.


Mobile banking products can exist in each of four stages of a product life cycle for differing lengths of time. 

Market trends can send a clear signal customers desire apps with alternative solutions, be they always-on, integrated account access. It’s up to banks to capture this market intelligence and use it as best they can according to the life stage of their products.

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Igor Izraylevych