Banks have been under pressure for some time. This pressure has come from regulators, from customers and from new competition and there is no one front on which banks can focus to combat this.
In a good new White Paper it notes that, Regulations are becoming more stringent, new entrants, both challenger banks and the threat from the likes of Google, Amazon, Apple and Facebook, are forcing a rethink of what banking is, and customers, now mobile-first, are accelerating this evolution and banks have struggled to keep up. Regulations apply equally to all, so the real threat comes from changing customer demands and new competition.
Unbundling has happened already. We are now in a post-challenger, post-FinTech world where historic banking models do not work. This much is clear from the fact that growth in the number of accounts held at alternative financial institutions far outstrips the growth rate of those held at traditional banks. The types of services used also continues to diversify signaling a fundamental erosion of the loyalty that many consumers have felt for their bank.
This loyalty is not simply being broken. In younger consumers, it’s not being formed in the first place. Instead, this unbundled world is forming, and is in turn being formed by, consumer behavior. Consumers are free to choose whichever service they want to from any provider. They are no longer tied to their bank, or subject to lengthy application processes involving branch visits and intrusive questions. They choose their bank account in the same way they choose insurance or broadband provider.
This choice and diversity has led to a confusing landscape of services, with seemingly little to separate them. Factors such as user experience, brand affinity and convenience now play a part in service selection as well as the more usual factors – price, functionality and simplicity. Managing these services also seems to be proving a headache for many, understandable given that each service will require a different set of user credentials to access. The frustration is such that a sizable proportion of consumers have thought about closing accounts.
It’s this confusion and frustration that points to an opportunity for banks to regain some of the ground lost. As the number of accounts held increases, consumers are demanding a simpler way to manage and understand their ever-more complex finances. The majority of respondents want a single, integrated dashboard to manage all their
financial relationships and it’s banks they trust to deliver that. The larger opportunity lies not just with providing the dashboard but creating a marketplace for consumers to access the services which the dashboard manages.
Banks can continue to offer international money transfer, credit cards, personal financial management and investment services, but they don’t need to build these services themselves. By partnering with those companies who originally sought to disintermediate them, banks could begin to re-establish the dominance in the market they once had. They could rebundle themselves.
To read the White Paper click HERE