Catfish Effect

Adding a strong competitor to a market can sometimes motivate others to compete. This phenomenon can be described by term "catfish effect," coming from the supposed practice of Norwegian fishermen, who put catfish into containers with live sardines to keep them active. This keeps the sardines alive long enough to reach market, where they can fetch a higher price than frozen sardines can. The catfish effect can be used to describe a new employee prompting existing ones to work harder or a new and innovative market entrant challenging incumbents to improve. Supporters of new e-investment products appearing in China argue that they are the catfish to the banks' sardines, forcing the established financial institutions to offer better services and products to avoid losing customers.

Catfish Effect In the News

Yu E Bao and other similar services have created a significant catfish effect, motivating banks to better themselves in the face of competition, said Liu Shengjun, deputy executive director at China Europe International Business School. Internet finance and banks are both providers of financial services and fiercer competition among service providers will only benefit investors and borrowers, he said.