Unbundling, Rebundling & Personalization of Financial Products

Over the last few years there have been well-documented shifts toward fragmentation and “unbundling” of individual banking relationships across multiple financial services providers. This mirrors three wider trends taking place across all aspects of online behavior in both consumer and social spaces:

• Digital Ubiquity – Particularly in the last two years, client engagements for all types of services are seeing greater use of digital channels across all demographic segments. Interactions are becoming bite-sized, instantaneous and “train-of-thought” driven.
• Proliferation – Consumers are increasingly adopting a wide variety of digital services that are constantly changing to meet their everyday needs. This includes everything from food delivery, subscriptions and product or service rentals (i.e., scooters, cars and clothing) to cryptocurrencies, non-fungible tokens (NFTs) and other investments. In each category, multiple incumbents and challengers are competing for the same limited attention span of the audience as convenience and barriers to service adoption are constantly lowered.
• Personalization – From the customer perspective, the benefit of personalization boils down to making life easier. Personalization can help users find the right products that suit their needs and help connect them to the right information, at the right time, proactively anticipating needs and highlighting next best actions. The trade-off for customers is also the enabler of this convenience, the widespread use and sharing of customer data, insights and profiling across digital services. Customers themselves have become valuable commodities (or at least, their data has).

Fueling this shift toward multiple service providers are the:

• Convenience of mobile app stores
• Rise of cloud infrastructure as a mainstream hosting platform for data and applications
• Open APIs enabling connectivity across providers
• Modern regulation

What this convenience and fragmentation introduces are new opportunities for challengers looking to help customers aggregate their financial services products – and by proxy, their data. Because each disparate financial service provider only possess a “slice” of the consumer’s wallet, it is only that slice that can be presented via their own digital channels. The consumer lacks a holistic picture of their financial situation and, most importantly, their overall financial health, which leads to mounting frustration and a demand for readily available aggregation services.

One aspect that can suffer in this environment is personalization. In a fragmented world, each service provider struggles to achieve a highly targeted analysis of comprehensive customer data, ending up with only a partial picture of the customer. The quality, timeliness and accuracy of personalization and recommendations can suffer, reducing customer satisfaction and possibly impacting accuracy-dependent revenue streams.

Focusing in on aggregation, or “rebundling,” these services provide a point of consolidation for client data, offering a unique opportunity for these providers to gain deeper insight across the entire spectrum of customer activity. What do they buy, how do they invest, where do they spend, how much and how frequently? By tying together cards, bank accounts, investments, cryptocurrency, buy-now-pay-later services and the like, the resulting customer insights can open opportunities for a new wave of challengers to enter the market.

Given just how prolific this movement toward unbundling has been within recent years, now may be the perfect time for these challengers to strike while the proverbial iron is hot.