Connect with us
Finance Digest is a leading online platform for finance and business news, providing insights on banking, finance, technology, investing,trading, insurance, fintech, and more. The platform covers a diverse range of topics, including banking, insurance, investment, wealth management, fintech, and regulatory issues. The website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website.

FINANCE

By Pat Patel – Global Content Director Money20/20

When I hear the word bundle I tend to get catapulted back to my childhood, back to the school playground, when the word ‘BUNDLE’ was shouted and you ran. You either ran to jump on the poor soul who was about to be bundledor ran away from the scrabbling mob bundlingyou. Now onto financial services. This story is about whether we are heading to or from (or in fact back to) a good old-fashioned bundle.

The Financial Services playground has experienced a movement towards, then away and then towards bundling in recent years all driven by insurgents. While the majority are scaleups such as Zopa, TransferWise, Robinhood or even Square, some are consumer internet companies such as Amazon and Alibaba (via Ant Financial). Moving from specialism to diversification in the quest for scale. But how do these insurgents make the unit economics stack up?

Bundling since the dawn of banking

In the beginning, banks built out their product offerings akin to ‘a supermarket’ for all financial needs (within reason). Cross-selling and cross-subsidising were key and banks capitalised on their strength of brand and the consumer and political need for trust. Scale and unit economics could be achieved and large players dominated their domestic markets and grew internationally.

As this trust deteriorated during the financial crisis, alongside a demand for better products and choice, the door opened for startups to offer niche products that were either cheaper or easier to use, leveraging their agility and new technology. By leveraging mobile app stores, open APIs, cloud infrastructures and banking regulation,startups focussed on single experiences and markets.

Now we are in the early phases of rebundling as customer acquisition costs have risen, due to increased competition and a desire from customers for contextual and seamless experiences. The advent of more APIs, disruptive technologies like artificial intelligence and the ability to leverage structured and unstructured data is meeting these needs, enabling greater insight into customers.

To combat this increasing competition and customer acquisition costs, growing scale or providing more services to existing customer base become essential for insurgent survival.

New models are evolving

The key question is what’s next? Is this insurgent model sustainable? In recent years, marketplaces have been enabling a new form of rebundling for those insurgents that have built scale as a niche unbundler. A great example of this is N26 as it connects with niche players to offer a broader range of services to its customers. The best of both worlds if the commercial model can stack up!

Source: N26

 

To bundle or not to bundle?

There seems to be two business models emerging, firstly those that build their own product capabilities themselves, largely traditional banks and some scale ups and then those that build a platform to connect to third parties and take a commission of every product sold to its customers. There are certainly parallels with how app stores operate and in the domain of financial services, Ant Financial, via its Alipay product has managed to achieve this providing a range of products starting with payments and then moving into savings, lending and much more.

At present the driver seems to be scale. The next consideration needs to be whether the unit economics stack up as the cost to acquire customers are increasing and the competitive playground is changing.

Continue Reading

Recent Posts