Rebundling — the new mantra for financial services
Financial services industry came from eating incumbents’ lunch to having a buffet for all.
Unbundling banks
We all remember this picture from couple of years bank, right? Startups biting small pieces of a bank’s pie. It was the era when disrupting banking meant unbundling banks.
Many startups did a great job taking small pieces of banking value chain and making it more customer-friendly, cost-efficient, and digital. The problem? It was too dispersed. It suffered from poor value proposition when users wanted more than a singular product. It suffered from too much competition.
Banks tried to defend. Ultimately, it felt like a war. Until both sides started realising that cooperation (not only startup-corporate, but with the peers) and the overall financial UX is what matters. People need banking services in the most convenient ways. So the era of rebundling began.
Rebundling banks
The idea of rebundling banking is nothing new, as pundits started discussing it already back in 2015. However, only recently did it begin to gain real traction — meaning real cases.
The rebundling is happening in 2 streams:
- Incumbent-driven. Incumbents open up to startups. In multiple cooperation vehicles, they optimise internal processes, customer journey, launch joint products, and create an ecosystem of financial services around the bank. PSD2 may be a great catalyst for this.
- Challenger-driven. A number of challenger banks realised they must offer a broader range of services to satisfy their clients’ needs. N26 declared their Hub strategy. Revolut stuns everyone with hot products for our financial needs.
In rebundling banking, the most important buzzwords are platform and ecosystem. As pointed out by McKinsey, creating a platform where users can satisfy their financial needs is a prerequisite for banks to stay relevant. It does not matter who provides the single services as long as banks control the touchpoint and ultimately increase the overall customer satisfaction. In this process, it is essential to treat other financial services providers as an ecosystem of banking-related services, facilitating cooperation and open data exchange, as well as ensuring that such ecosystem covers what customers really need.
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With PSD2 coming, the nearest time will deliver a first look at the new competitive landscape for banking — where platformification will mean becoming a go-to point for banking and finance matters, as opposed to simply offering banking services. This will change incumbents’ and fintechs’ strategies. Quite probably, we will see a different team of champions in banking — composed of both incumbents and challengers.
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P.S.: Insurance following
Although the topic deserves a separate post, here is a glimpse on transformation in insurance. In many aspects, the wave of insurtech is following the pattern of banking disruption, but having already learned from the lessons. The initial talking about unbundling was much less significant — and the whole industry operates with cooperation-positive mindset from the beginning.
In this case again, McKinsey have produced a great piece of research on the topics of ecosystem and platform. The ecosystem of insurance services looks different from the one in banking. Most importantly — insurance goes beyond finance deeper into customer life. Often this translates into offering risk prevention services or embedding insurance into products, which is highly valued by customers (as demonstrated by an insurance pioneers Ping An and AXA).
