Challenger brands are banding together to provide more innovative and flexible banking services. Eventually, the industry has to accept that there’s a new and better way of doing things.
Uber recently ended its partnership with Santander and commenced collaboration with P2P lender Zopa, to offer its London-based drivers finance for new cars. This is an example of how financial challengers are unbundling products or services and repackaging them to fill the gaps left by banks.
The Uber-Zopa partnership helps Uber drivers reduce their costs each month by replacing rental fees with a lower monthly repayment that eventually results in vehicle ownership. Drivers are also given the flexibility to repay their loans early if they choose to. This is a good example of how disruptive business models are finding greater synergies with each other as opposed to the incumbents’ existing models.
It works the other way around, too
Entrepreneurs constantly seek collaborators to create their own value chain, and an important factor in this decision is that the new partner understands their business. New financial providers are disrupting the market with simpler, faster, and more flexible and transparent services through a focus on creating value across the chain as well as for customers.
Furthermore, some traditional providers are now waking up to the potential of alternative finance. RBS’s partnership with Funding Circle, for instance, provides an alternative source of credit to customers in the event that their loan application doesn’t meet the bank’s criteria.
This approach is a win-win for both sides: banks gain access to an agile, innovative, and credible collaborator, and the collaborator gains access to the bank’s customer book, improving scale. This is less risky for incumbents than starting from scratch, enabling them to build – or buy as a service – highly scalable systems and compete with controls and analytics, thereby unlocking the potential in superior customer value that banks have hitherto been unable to uncover.
– This article is reproduced with kind permission from Datamonitor Financial. Some minor changes have been made to reflect BankNXT style considerations. You can read the original article here.