Abstract

There is a crisis in financial intermediation in the United States. Traditional intermediaries (banks, thrifts, life insurance companies, and property/casualty insurers) are suffering soft pricing, poor returns, and increasing risk. This article explores the reasons for this and presents six generic strategies which financial intermediaries might pursue in dealing with this situation. Each of these strategies places a greater or lesser amount of pressure on certain change-resistant "rigidities" in these companies. Overcoming relevant rigidities is a key success factor in implementing a strategy in one's own firm. Rigidities are also barriers to duplication of a strategy by competitors. Companies able to exploit the response lags of competitors created by these barriers can enjoy superior returns despite the adverse economics that now characterize the U.S. financial services industry.