Fintech Trends: Unbundling and Rebundling

For years and years, it wasn’t normal for someone to have a relationship with two different banks. Any banking mission that any of us wants to finish would require going to the bank in order to get it done and normally it was just one bank. With the increased use of the internet, things started to change, providing banks and all other industries with new channels and platforms to reach more customers and provide them with banking products online.

The rise of Fintech companies has opened up new opportunities for more digital businesses to offer financial services that are cheaper, faster, and more user-friendly to customers. Now it’s normal to find 10 different financial apps on your phone that you downloaded each for different purposes/uses. And that’s what exactly Fintech companies have been doing through the past years “unbundling bank’s products”.

Unbundling

In the late 2000s, the financial landscape began to change with the help of open APIs and the growth of clouds which lowered the barriers to entry in the finance industry. This new digitised world reduced customer acquisition costs and lessened dependence on traditional banks. Fintech startups began to pop up everywhere disrupting every line of traditional finance depending on a “single service business”. And that’s what unbundling is, every Fintech startup took a single use case/product that banks are already offering and started providing it to its customers (For example money transfer). Some of those startups offered those services in the same way that traditional banks offer and some have developed entirely new ways to benefit/use those services. Over time, Fintech startups grew more and more launching new business lines, entering new markets and starting to be represented as powerful players in the financial industry.

It’s like us going to the grocery shop and getting what we need, for Fintech startups, banks were like big supermarkets to pick a product or a service and start addressing it in a different way (more digital). Revolut is a very good example, the famous disruptor started as a solution for travellers to have accounts and make money transfers easily (just a very small service out of hundreds of services offered by banks in the UK). And that is why most of us find 10 different apps on our phones each for a single service that we need from time to time. There are many examples and through the years those startups started to have more insights into their customers’ demands and spending behaviours, the thing that later opened opportunities to add more services and not depend on just a single one “rebundling).

Rebundling

Rebundling is the process of taking two or more existing products or services that are offered by banks and combining them to create new offerings. With the growth of each Fintech startup and the increase in its customer base, Fintech startups have been keen to offer a wider range of products upon reaching their initial product-market fit. Take the same example of Revolut, which started as a smart solution for travellers, now Revolut offers almost everything banks offer, from money transfers and signing up an account to cryptocurrencies. There are two main reasons behind such a change from single-business offerings to multi-business offerings, the first is to meet the increase in customer demand and the second is to reduce costs.

To wrap up

The digital transformation we are witnessing has an impact on the financial industry, same like everything in our lives, our demands, lifestyle and behaviour make banks, Fintech startups and other organisations look for more innovative ways to provide us with services the way that suits each one of us.

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