Torrance… an executive member of the World Economic Forum’s… believes that the way financial services companies sell products and services is no longer viable due to increased competition and higher consumer expectations.
“At the moment, financial services organisations ‘manufacture’ products and then try and sell them, either directly to customers or to distributors for resale… This still accounts for around 90% of business in banking and insurance. What they’ve tried to do is digitise the interfaces, but the business model is fundamentally the same.”
There are numerous alternatives to this model that could prove more profitable and offer greater growth… Financial services organisations should be looking to create demand for their products at a low ‘cost to serve.’
“Normally, if a bank or an insurance company does a deal with a retailer or a car company, for example, it is a very convoluted process” … An embedded or fully integrated model, however, allows this to happen instantly, as developers within retailers and other companies are able to harness platforms that connect to the bank, insurance company’s products and services.
This allows a bank or insurance company to become more of a platform that offers an array of financial services, resulting in a number of intriguing business models.
One option is for a bank to mix its products with those of other parties, solutions and data to solve problems for customers in a more sophisticated way than any institution can do independently.
Another model is … “digital enablement” or “developer support”, whereby banks make their assets available through APIs that third-party can integrate or embed into their own products, such as a payment plan on a car, a holiday or an online experience like an educational course or magazine subscription.
A third option is that of becoming a marketplace and acting as a pure intermediary for the services of different services, akin to what price comparison sites do.