Financial Services redefined: the new competitive landscape
What do telecoms, supermarkets, airlines, insurance providers, car manufacturers, social media giants, travel companies and BigTechs have in common? The answer is that they are redefining how finance services will be delivered in the future. Let’s take a look.
The financial services competitive landscape is being re-drawn as an increasing number of players from other industries are entering the game and claiming a pie from a global revenue pool that amounts to trillions of dollars. The main reasons can be summarized as follows:
— The use of technology has put traditional capabilities and infrastructure in the background, placing emphasis on brands and their ability to build trusted customer relationships that will expand far beyond their original, core offering.
— The decoupling of the customer experience from infrastructure and the ability of a variety of players to re-position themselves in a value chain that is becoming more industry agnostic and brand depended.
— Embedded finance is changing the name of the game in terms of enabling any company to offer financial services using BaaS capabilities. Examples such as taxis integrating payments, retailers offering BNPL at check-out or SMEs opening an account or getting financing from their payments’ provider are typical use cases.
— The platform-based, ecosystem model has surfaced as the dominant business model of the new economy. Network effects, control of the customer experience, reduced disintermediation, new revenue streams and multiple interaction touch points as part of wider, end-to-end, digital experiences are at the main triggers behind this new reality. It is indicative that all of today’s top 10 financial institutions in terms of market capitalization are platforms.
— As the APIsation of financial services continues, so does the industry maturity in the direction of Open Finance and the Open Economy. This, in turn, is a critical enabler of platforms controlling and enabling customer access to varying combinations of products and services, often going beyond banking.
— The increasingly number and complexity of financial services' offerings has led to the so-called re-bundling, i.e. the need of servicing multiple customer needs under a single digital roof. The race for a western SuperApp champion acting as single access point for an interconnected layer of products and services, going far beyond banking and payment, is wide open.
Going forward, immersive, seamless, and frictionless customer experiences with a strong hyper-personalization focus and open data at their core are three elements that will collectively define the next evolutionary phase of an increasingly borderless, cross-industry competitive landscape where traditional competitive advantages come under pressure.
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