ABSTRACT
Bank product development is the presentation of a service or administration that is new or altogether improved in regards to its attributes or proposed utilizes; it often involves huge upgrades for specialized details, parts and materials, consolidated programming, ease of use or other utilitarian qualities (OF,CD Oslo Manual, 2005). The impact of product development on the financial presentation of business banks in both bank and non-bank based economy is critical to the banking business and the general population on the loose. Consequently, this paper surveys pertinent writing on bank development and its effectiveness in a non-bank based economy.
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Introduction
A product development is either radical or gradual by deciding the level of progress related with it. Radical developments produce major changes in the exercises of an association, industry or society and speak to clear takeoffs from existing practices. Steady developments, then again, simply call for minimal takeoffs from existing practices as they for the most part strengthen the current abilities of associations. Gradual developments accentuate the significance of the economies of scale and economies of extension in production and development of mass markets. Gradual developments to existing products can upgrade execution and are imperative to making all the more aggressively propelled products (Batiz and Woidesenbet, 2016).
Times and markets have changed. Many Commercial banks no longer enjoy the near-monopoly position they held even five years ago. Commercial banks are now disciplined by non-bank based economy as well as their own internal controls. This new competitive environment implies that to serve their markets effectively, commercial banks need to become more responsive to their clients’ needs and competitive threats through its products and  services, which it continually refines, to maintain the loyalty of the consumers who are key to its sustainability. The main financial products offered by commercial banks are divided into retail, business, corporate and mortgage segments both under conventional and Islamic banking.
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Effect of Product Development on Financial Performance
Developments can really upgrade the firm execution in a few perspectives. Development considerably affects corporate execution by delivering an improved market position that passes on upper hand and predominant execution (Walker. 2004).
Wolff and Pett (2004) and Walker (2004) led similar research for the impacts of product and procedure developments on financial execution. They showed that specific product enhancements are emphatically connected with financial development.
Price theory sees cost as a component that conveys first mover favorable circumstances. Building up significant expenses preceding the section of imitators permits trend-setters to recoup the expense of putting resources into developments. Then again, these syndications are transitory and are dissolved once impersonation shows up. This is the exemplary imposing business model contention whereupon Van Home (2014) depended to clarify the presentation of financial trend-setters. Berger (2003) contends that the pertinent parts of mechanical change incorporate developments that lessen costs identified with the assortment, stockpiling, handling, and transmission of data, just as developments that change the methods by which clients get to bank administrations. Humphery et al. (2016) refer to ATMs, phone banking, web banking, and e-cash as being among the huge developments influencing the banking dispersion framework that impact banking execution fundamentally. Goddard et al. (2007) include that customer connection the board frameworks, bank the executives advancements, and different innovations are among the significant changes in inside banking frameworks that likewise have exercised a positive effect on banking execution and benefit.
The first institutions to adopt successful new products earn extraordinary profits because of the high prices they impose or the increased market shares they acquire. Other commercial banks follow their lead in order to avoid losing market share. If the process of development continues, innovative commercial banks can continue to earn high profits on the various new or improved products. However, extraordinary profits will dwindle as developments are adopted widely (Berger and Mester 2003). Consistent with the results of other studies that support the hypothesis that the first mover advantage offers the enterprise better performance, the examination by Dos Santos and Peffers (2015) of the introduction of ATMs by American commercial banks demonstrated that the competitive advantage and performance that is associated with it were not realized by those who subsequently adopted the technology. In their examination of the dynamic of product development in the banking industry in the U.K. Batiz-Lazo and Woldesenbet (2016) stipulated that product developments have a market focus and are effectiveness driven.
The era of financial development and emerging financial instruments witnessed emergence of new products such as Islamic banking, ATMs, plastic money and electronic-money (e-money) amongst others within the banking sector. ‘The number of ATMs has increased steadily indicating reduced demand for cash at hand because they improve access to cash to those holding them with the use of debit and credit cards having  increased steadily from the late 2010s. The cards have facilitated the use of electronic means of payment and sometimes substituted for the use of physical cash. More importantly, payment cards have also enabled the issuance of electronic money (e-money), which not only directly rivals physical cash in small value payments but also bank deposits through holding e-money balances. This reduces the amount of money that an individual can hold at hand at any particular time, thus affecting the demand for money (Misati et al.,2010).
Top-line performance of new products has been extensively studied in the diffusion product development (Mahajan and Wind 1991). Two major findings are that new product success (1) may take considerable time to materialize, and (2) depends on several factors, including the development characteristics . Interestingly, recent studies using persistence modeling have identified new-product introductions as a key driver of permanent sales and profit benefits, in contrast to the price promotions, which typically produce only temporary benefits (Nijs et al. 2011, Pauwels et al. 2002, Srinivasan et al. 2000). Therefore, any assessment of new-product success has to consider the potential for both short-term (immediate) and long-term effects, which could be temporary (dust settling) or enduring (permanent).
Bottom-line financial performance may benefit from new-product introductions in several ways (Bayus et al. 2011). Beyond increased demand, firms may increase their profit margins by targeting high-margin segments, and lower their costs by targeting their current customers with “new and improved” products instead of acquiring new customers. Recent empirical work has begun to assess the effect of new-product introductions on the bottom line (Geroski et al. 1993; Bayus et al. 2011). Two observations emerge. First, the introduction of new products has a significantly positive, though modest, immediate effcct on profitability. Second, there are no conclusive findings on the persistence of the effects of ncw-product introductions on firm profits.
Bayus et al. (2011) report that new-product introductions increase firm profit rate for two years, but not beyond, and that they do not influence “profit rate persistence” operationalized as the first-order autoregressive coefficient of profit rate. However, in an evolving environment, persistence implies that profit rates have a unit root, which is not analyzed by the authors. Geroski et al. (1993) note that  an  development  could  have a temporary effect on  a  firm’s financial position due to the specific product development, or could have a permanent effect because it transforms competitive capabilities.
Empirical review
In spite of an extensive descriptive literature on product development, there is a
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