2 minute read 9 Aug 2019
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How to create value through third parties when banks are a marketplace

By

Fabio Gasperini

EY EMEIA Financial Services Office Advisory Banking & Capital Markets Leader

Thought leader in financial services. Always pushing for innovative strategies. Striving to live life with passion.

2 minute read 9 Aug 2019

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Banks can offer an amazing experience by strategically shifting to marketplace platforms with bundled services and tailored offerings.

Today, Digital superstores are disrupting consumer retail with value propositions that are changing the dynamics of business.  The good news for banks is that they have an opportunity to compete through bundled services and tailor-made offerings that create an amazing marketplace experience.

FinTechs, InsurTechs and other third-party providers have already been attracted to this concept, developing online apps for insurance, pensions, mortgages and investments. They’ve recognized that customers prefer to buy these products via a marketplace rather than directly from a supplier – especially when they can be assured of a better customer experience and more choice in relevant services.

Why are marketplace platforms so attractive?

The marketplace is based on a technical platform that offers additional functionality, such as price comparisons, discounts and rewards. Most of these are available through apps that can be accessed by both customers and providers. What’s more, there’s a wide choice in products and services from more than one vendor – and customers benefit by only having to register once.

The bank derives its income from usage fees from participating providers, as well as the revenue it generates from its own products and services. Optimal returns are based on a high volume of transactions across a large geographical area, with the potential for global expansion.

Partnerships come with risks

New value propositions may also lead to challenges. The cost of building and maintaining a marketplace platform can be significant. Banks need to cover the large fixed costs associated with the core platform, as well as those that are passed on through third-party providers.

Relationships and business models must be developed with each provider. Outsourcing and the use of vendor services adds another dimension to the process. It’s essential to make the right selection while ensuring governance and a risk management framework that works for all parties. Needs and roles will change based on the bank’s infrastructure, how it defines its future and how it adapts to a new ecosystem.

Bank as a marketplace

Banks need to make a strategic shift toward developing marketplace platforms. To be successful, they must integrate their services with those of third parties and provide customer benefits that rival those of the retail industry.

EY is positioned as an enabler to create a well-functioning and profitable marketplace. Banks do not necessarily gain market share because their customers had the best experience. That will change as banks propose platforms with components that add value. The ability to integrate innovation into their operations will ultimately make a difference – and EY has a role to play in that dimension.

EY has identified five ways that banks can reshape their future: as an experience, marketplace, service provider, facilitator and producer.  This article is part of a series that highlight the features and benefits of each. Under this new direction, none of the five ways are vertically integrated.  Banks could adopt one approach or a combination that will help them truly differentiate their bank from others.

Summary

To succeed as a marketplace, banks must integrate their services with those of third parties and provide customer benefits that rival those of the retail industry. Outsourcing will add another dimension, with needs and roles changing to adapt to a new ecosystem.

About this article

By

Fabio Gasperini

EY EMEIA Financial Services Office Advisory Banking & Capital Markets Leader

Thought leader in financial services. Always pushing for innovative strategies. Striving to live life with passion.