The way people buy services such as broadband, insurance, banking and utilities is changing rapidly with the rise of online marketplaces and comparison sites. This presents an opportunity for growth for any financial services institution bold enough to expand the services they offer and transform their relationships with customers. However, successfully making this transformation presents some tough challenges.
So, why might Banks or Insurers offer Home Phone & Broadband?
- Because consumers increasingly buy everything from digitally enabled strong marketplaces
- Because financial services customers see their suppliers as potential marketplace providers
- Because they don’t have to build a telecoms network or become a telecoms provider
- Because it is relatively easy to get into and generates a good revenue stream and margins
- Because it leverages brand strength and a strong digitally enabled Customer relationship
- Because it generates consumer data and supports Internet of Things (IoT) opportunities such as the Connected Home
Let me expand:
30% of European consumers have indicated that they would consider taking Home Phone & Broadband services, or even Energy Services from their Financial Services Company. They are increasingly turning to digitally enabled marketplace providers for a broad range of products and services and they see the potential for financial services companies to operate this way.
Building on a strong customer relationship
Customer interest alone isn’t enough though – you need good brand presence and a strong digitally enabled customer relationship. Most financial services have that already, or at the very least are currently building it at speed.
Nearly all of the Home Phone & Broadband suppliers buy in components of the service, and then either get somebody else to integrate it for them, or do it themselves. Essentially the service can be white-labelled and can be put together relatively quickly and without disruption or distraction to existing business activities.
But surely it’s a mature market, with tough competition and low margins? It’s actually a developing market, with new services and upgrades being added all the time. Organisations like The UK Post Office have successfully grown a Home Phone & Broadband Business to the point where it is now more than 10% of their revenues, replacing shrinking revenues from other more traditional lines of business.*
Digital marketplaces – driving disruptive innovation in Financial Services
Marketplace focused organisations are now successfully entering and disrupting the financial services space – the insurance aggregators (comparison sites), Tesco, Sainsburys, Apple and many others. A fifth of European consumers recently indicated that they would consider taking financial services from companies like Facebook or Amazon*.
In addition, regulators are busy introducing new regulation to make financial services organisations ‘unbundle’ and digitally enable financial services (e.g. PSD2), enabling marketplace providers to stitch together new offerings and easily swap out suppliers.
Shouldn’t financial services companies become marketplace providers themselves, using their strong brand and customer base to start disrupting other industries?
I would argue that it is only a matter of time before the consumer relationship for Financial Services is dominated by organisations that know that they are in the business of effectively managing marketplaces. The organisations that succeed in this will offer great value for money, outstanding customer service and experiences and very sticky loyalty schemes – with the customer at the centre of everything they do.
These marketplace providers may at first buy-in financial services to support their customers from traditional financial services companies but as their customer base grows these services will increasingly be replaced by their own in-house provided services, reducing the reliance on – and revenues of – traditional providers.
Disrupt or be disrupted
So, who will be first to take the plunge and get the early entrant advantage, and take the marketplace providers on at their own game?
Is this a call to arms for RBS, Lloyds, Barclays, HSBC, Santander, Aviva, Legal & General, Prudential, Direct Line and Standard Life?
Or will they wait until the marketplace disruptors have decimated their current direct customer relationship and strong brand to try and make the move?
*Source: Post Office Annual Reports from 2014/15, 2013/14 & 2012/13. Interim report 2015. Reports can be downloaded from the Post Office website.
Statement of interest: Fujitsu provide the Home Phone & Broadband Service to The UK Post Office. Please feel free to contact me if you want to know more.
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