The financial sector boundaries are blurring

 

The time that banking and insurance services were the exclusive domain of the financial services sector and vice-versa that banks and insurers were only focusing on pure banking and insurance services (like payments, cards, investments, credits and life and non-life insurance products) is long gone.
With customers becoming more and more demanding for end-to-end user journeys, where financial services are an integral part of, we see the rise of cross-sector ecosystems, i.e.

• On the one hand we have financial service companies building services of adjacent sectors or partnering with start-ups and scale-ups of adjacent sectors and integrating them in their platforms

• On the other hand, players from other sectors are embedding more and more financial services in their products, allowing to offer the best possible user experience. Most known examples are large retailers (supermarkets) offering all kinds of financing, insurance and even saving solutions and also telcos and big tech (like Apple and Google) becoming more and more like banks (think of Apple with Apple Pay, the Goldman-Sachs–backed Apple Card and Apple Saving account and Apple Buy Now Pay Later), but also other players like social secretariats (payroll administrators) start to offer more and more financial services (like pay-day advance and expense management solutions).

The result is that the financial services sector becomes more and more blurry with companies moving in 2 possible strategic directions:

• Some financial service companies try to become a sort of personal assistant and/or super-app, which will assist their customers with all their personal and business needs

• Other financial service companies position themselves more as (back-end) service companies (invisible to the end-users) offering best-in-class financial products and services (including all the risk and regulatory features), which are then integrated by other companies (handling the customer-facing front-end layer).

The result is a complex web of integrated services and partnerships, trying to service the customer in the most convenient way ("I want it here and I want it now and I want it personalized to my specific needs"). Today these adjacent services span already a wide variety of domains:

• MadTech (Marketing & Advertisement Tech) or more general the domain of the Personal Shopping Assistant: this is a huge domain with integrated features like:

  • Categorization of your expenses and management of budget plans(i.e. the domain of PFM = Personal Financial Management - cfr. my blog "https://bankloch.blogspot.com/2020/02/pfm-bfm-financial-butler-financial.html")

  • Facilitating the acquisition of specific products and services via financing solutions (like BNPL or more traditional consumer credits) or saving plans (like SNBL - see my blog "Is SNBL more sustainable than BNPL?" - https://bankloch.blogspot.com/2022/06/is-snbl-more-sustainable-than-bnpl.html)

  • Management of loyalty cards (cfr. Klarna’s acquisition of StoCard, the offering of a loyalty card management solution within the Payconiq or KBC banking app in Belgium or the local shopping loyalty card of Joyn)

  • Offering of all types of deals (cfr my blog "Next generation of Deals" - https://bankloch.blogspot.com/2022/06/next-generation-of-deals.html), i.e. from cash-backs to digital coupons and merchant-specific gift cards or (entrance) tickets at a discount all the way to the management of group acquisitions (cfr. platforms like Monizze Dealzz, Argenta Cake, KBC Deals, ING Deals…​)

  • Keeping track of all your purchases, i.e. where you bought what and at which price and the storing of receipts, guarantees and even the manuals

  • Facilitating the tracking of the delivery of all your goods (instead of having to track each item separately on the different websites of the many courier companies) and manage easily the process of shipping back and refunds (cfr. Klarna is heavily investing in this type of services)

  • Management of subscriptions (cfr. ING with Minna Technologies or the June service integrated in KBC app to switch automatically energy supplier) and other types of recurring payments, i.e. easy cancellation of a subscription, price comparison with alternatives and facilitate switching to other suppliers (cfr. my blog "Manage the new jungle of your subscriptions" - https://bankloch.blogspot.com/2020/08/manage-new-jungle-of-your-subscriptions.html)

  • Some banks offer even real product marketplaces, where items (typically of third-party retailers) can be bought

• Mobility Tech: more and more financial service companies are also investing in mobility start-ups and integrating those services in their apps, i.e.

  • Car leasing was already a traditional domain of the banks, but where in the past this was mainly a financing solution, this is becoming more and more an end-to-end "fleet/mobility" management solution, covering all aspects related to your car or even your mobility needs in general. Additionally where professional car leasing solutions used to be the privilege of larger companies, today this is becoming more and more accessible to the smaller SMEs (e.g. Lizy in Belgium) and even to individuals via private leasing (e.g. JustLease in Belgium).

  • Bike leasing: just like car leasing, bike leasing offers an end-to-end solution for acquiring and managing your bike, i.e. from acquiring the bike (and the associated accessories) in a fiscally interesting way and properly maintaining and repairing your bike all the way to securing your bike via built-in insurances. Many parties are active in this domain, e.g. Cyclis, Ubike, B2Bike, O2O, Lease a bike, CycleValley, KBC Fietsleasing, Velobility…​, with many of them having strong links with financial institutions.

  • Consumer credits on all vehicles (like cars, motors, bikes…​), becoming highly embedded in the acquisition journey

  • Route planners and MaaS solutions to easily plan your mobility and reserve and buy public transport and shared-mobility services. Also those companies are heavily integrated with financial service companies, like SkipR with Belfius, Olympus with KBC or Moveasy with Baloise.

  • Parking services which are directly integrated with banking apps, allowing to pay in a frictionless way (like the integrations of KBC and Belfius with 4411 or QPark)

  • Automatic filling at petrol stations, e.g. cardless refueling at Q8 via the KBC app or at Lukoil via the Belfius app

  • The rise of usage-based insurances, based on your yearly car-mileage or even based on your driving profile tracked by sensors in your car or via a specific app, but also micro-insurances to insure your car for a very short period or even a specific trip.

  • Finally there is the integration with all kinds of car-related data providers to fully automate the insurance origination and claim handling process, i.e. from providers offering catalogues of all car brands (to properly identify the insured vehicle), to providers offering a value estimation of a car, based on model, options, age, mileage…​ all the way to sharing info about the persons on a black-list for car insurance (e.g. due to fraud in the past) and sharing the claim history of a person wanting to become insured.

• Real Estate Tech: for real estate, the link with the mortgage and home insurance is of course very obvious. Thanks to partnerships with companies in the real estate sector, financial service companies can provide a much smoother experience on those products, e.g.

  • Simplify and digitize the valuation of real estate (e.g. the start-up Rock.Estate is offering an interesting service in this domain)

  • Partnerships with immo-websites where users can immediately simulate and even request a mortgage loan, based on specific offers showed on the immo-website. Nice examples of this are the Immovlan partnership with Belfius, the Immoscoop partnership with KBC or the Immoweb partnership with Keytrade.

  • Management and coordination of renovation works and energy-saving investments, e.g. the link of Belfius with the Jaimy-platform (i.e. a marketplace to find craftsmen).

  • Coordinate the efforts to obtain the necessary documents required to sell a property, like energy certificate, electricity inspection report, environmental report, report of existing mortgages on the property, building file…​

• HealthTech: for this sector the link with life and health insurance is pretty obvious. Several partnerships can also be envisaged here, i.e.

  • Integration with smart watches like Fitbit, Apple Watch, Garmin…​ to collect activity data. Based on this data, the bank or insurer can push its customers (via gamification) to live healthier, which is a Win-Win for the customer and for the insurer.

  • Management of joint sports activities, e.g. someone could post he will be running at a specific location on a specific time and people can register to join (if their speed/distance track record matches)

  • Supervision of elderly via sensors and cameras, which track the movement and behavior of elderly persons. As soon as anomalies are identified, there will be an automatic contact taken with family members (e.g. children) or with health professional (cfr. the Jane offering, put in the market by Belfius).

• FoodTech: a number of banks have also started to integrate services in the FoodTech industry, like:

  • Reserving and reviewing restaurant (e.g. TableBooker)

  • Food ordering via a food delivery service

  • Food box ordering (like Foodbag integration with KBC)

• HR Tech: in the battle for talent, employee compensation becomes more and more personalized, allowing for employees to choose from a menu of employee benefits. As many of those employee benefits require financial services and many SMEs are searching for parties who can help them in settings up those benefit plans, some banks are jumping on this market opportunity. Banks can not only offer their own employee benefit-related financial services, like group insurances, payday advance, bike/car leasing, expense management (expenses made by the employees to be reimbursed by employer) or bonus plans (paid out in financial interesting constructions like long-term options/warrants…​), but they can also integrate partners for other types of benefits, like social vouchers (like meal, eco or gift vouchers) or telco providers (for smartphone and/or telephone and internet subscriptions).
  This domain also overlaps with the Mobility tech domain, as mobility is obviously an important domain in Comp&Ben management. We see therefore the 3 sectors (i.e. financial services with the banks and insurers, HR compensation Tech with the social secretariats, but also with start-ups like e.g. Payflip and Officient and Mobility Tech with start-ups like Mbrella or SkipR) blurring into each other.

• AccountingTech and more in general all services of a Finance and Treasury department: banks try to become more and more an end-to-end partner for the "Finance" departments of companies. This includes features like:

  • Invoice management, like offering options to generate invoices, submit invoices (both on paper and digital, via mail but also via platforms like Doccle, UnifiedPost or PEPPOL) and to offer easy ways to the customer to pay for those invoices (like pay buttons or direct debit options, like offered by Isabel, POM, Digiteal or Twikey)

  • Debt (invoice) collection. This can go from offering features to help the collection of outstanding invoices (like sending reminders and partnering with specialized debt collectors), all the way to accounts receivable financing and invoice factoring.

  • Offering services to assess the trustworthiness, solvability and liquidity of a customer of the company. Obviously banks have access to enormous amounts of data and expertise to assess the risk of a customer. This expertise used internally to assess credit applications can also be offered to business customers to assess their financial risks.

  • Expense management: managing all expenses made by employees, i.e. from registering expenses in a frictionless way, to the validation of those expense all the way to the reimbursement of the expense. But apart from managing the expenses made by employees, there is also the expenses made directly by the company, like e.g. efficient management of all subscriptions (with recurring payments and invoices) of a company.

  • Communication with accountant, i.e. many SMEs work with an external accountant, with which a lot of financial information needs to be shared, i.e. from all expenses and account information, to changes in company structure and management to specific financial constructions. At the same time the accountant has to provide access to financial reports and insights based on the last processed financial info. Banks that can assist in this flow could get near "real-time" financial reporting info, which can obviously improve the quality and speed of their credit assessment and decision process.

• Document Management: financial service companies can also assist their retail and business customers with document management services, like:

  • Centralizing the collection of all important digital documents (like invoices, but also reports, guarantees, contracts…​), creating some kind of Digital Vault

  • Integration of those documents with payment flows

  • Digitally distribute documents in a secure way (like giving access to documents in your vault via a secure link, but also via EDI, WEB-EDI, SFTP…​, and also registered emailing)

  • OCR features on documents

  • Digital signing of documents

  • …​

• Government Tech: financial services can also offer a trusted and convenient gateway to services exposed by the government. This can be services like founding a new company, changing your personal or business address, requesting specific attestations, tax filing (e.g. personal taxes, company taxes, VAT filing…​), tax reclaim handling…​
  At the same time a close integration between the financial services sector and the government can bring a lot of added-values, like:

  • Cooperation in AML, KYC, fraud detection and prevention

  • Offer a Digital Identity (cfr. cooperation between banks and Itsme in Belgium), allowing to authenticate and identify yourself digitally, but also to centrally manage your personal details (like address, phone number, email…​) and manage which party is allowed to consult (and be notified of updates) which personal data.

  • Provide details of the driver for vehicles owned by a company or vehicles operated in a shared-service and rental model.

  • Direct integration between the police and traffic (ANPR) cameras and insurers to assess if a car is properly insured and to offer a Digital Insurance card.

The above shows that in the coming years it will become harder and harder to speak about THE financial services sector. Instead we will have complex eco-systems, where many companies from different sectors will work together to service the end-to-end journey of the customer. Some financial service companies will play a leading, orchestrating role in this journey, while others will play an equally important invisible role behind the scenes.