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Banking Rebundled

Today's banks will become the "attractors" of the future--firms that RE-bundle the emerging set of banking services, providing the front-end interface and back-end integration.

It’s popular, in banking circles, to claim that banking has become “unbundled.” Proponents of this view love to point to the picture below as proof.


The noted banking expert (sarcasm) Marc Andreesen has written about the unbundling of banks. A more educated view comes from one McKinsey consultant writing in Medium:

“While some companies have multiple products that target different activities involved in consumer finance, there’s no one company that does all of this. For example, there’s no tech company that allows users to both invest in stocks and bond and also take loans. Similarly, there’s no company that both gives users short term credit (credit cards) and also let them invest in the markets. This is how consumer banking is being “unbundled” — a bank is being broken up into its key activities, and products are emerging which do those key activities better/cheaper than banks.”

Brett King had this to say:


My take: The supposed “unbundling” of banking is a huge (and positive) opportunity for existing banks.


If I may toot my own horn for a moment (after all, it is my blog), I wrote about the “unbundling” of banking 15 years ago. While working for Forrester Research, I published a report titled Atomizing Financial Services, in which I predicted that, as a result of the Internet, financial services would see the emergence of many specialists–firms that provide a narrow range (or even one) set of services. Thanks to the distribution power of the Internet, these specialists would be able to deliver a limited range of services profitably–something that isn’t (and wasn’t) possible without the technology.

The “futurists” of 2015 are now seeing these firms emerging, and calling it as it happens. Nice work, fellas!


But there was something else I included in that Forrester report. It was a call for a type of firm called an Attractor: A firm that provided the front-end to all those back-end specialists, that integrated all the services, and that had the marketing muscle to “attract” customers in the first place.

The Marc Andreesens and McKinsey consultants of the world–while clearly seeing the emergence of many new players in banking–are failing to address one important question: How is this all going to come together for any one customer?


I’m in Las Vegas for the 2015 Financial Brand Forum as I write this. I’ve got half a mind (yeah, I know–I could stop the sentence there) to take a copy of that picture above (the “unbundling” picture, not the Brett King picture) out to the casino, show it to random people, and ask:

  1. Have you ever heard of any these companies?
  2. Do you know what any of these companies do?
  3. Do you really want to do business with 50 different companies to get your banking needs met?
  4. Can that dress be any shorter? (Oh, come on, it’s Las Vegas–who do you think I’m going to stop to survey?)

I’m betting that I hear mostly “No” to those questions (especially #4).


It’s great that all these firms are emerging to leverage (and create) technologies that create new banking-related services. Monetizing and scaling those technologies–that’s a different story.

The reality is that these startups represent more of an opportunity to existing banks than they do a threat to them. Existing banks have charters, money to invest, and (for the time being, at least) access to consumers.


I’ve heard Brett King characterize the startups as “death by a thousand cuts” (I hope I’m getting that right, and not putting words in his mouth). Sorry, Brett, but this isn’t an accurate characterization because existing banks don’t make money from the products and services that many of the startups provide.

Neobanks aren’t picking off the bread-and-butter, mainstream consumers driving bank’s revenue streams. They’re attracting mostly younger, lower-to-middle income consumers who have yet their prime borrowing and investing years.

Yes, there is plenty to learn from the Neobanks when it comes to value-added banking features and user experience. But no, the Neobanks are not disrupting the mainstream banks.

Lending Club is not diverting loans away from mainstream banks. A huge percentage of Lending Club borrowers go to LC to get money to pay off their other loans and credit card debt. Where do you think that money ultimately goes? Back to the mainstream banks.


Startups don’t have the resources to create national-scale brands or become integrators of the vast array of banking-related services that are emerging. Yes, they have great design-sense, but no, they can’t pull it all together to scale it into something big.

Although…there may be one that emerges to do so. There is certainly the potential that a Google, an Amazon, or an Uber may emerge to integrate the array of emerging services and become a behemoth on the scale of a megabank (or even large bank). But I’d bet my last dollar there will be only one.

And it won’t be easy for that one company, because what makes this different from what a Google or Amazon did is a little thing the banking industry likes to call “regulation.” Google and Amazon didn’t have to deal with a bizarre and complex set of regulations to disrupt the industries they disrupted.


Today’s banks will become the “attractors” of the future–firms that RE-bundle the emerging set of banking services, providing the front-end interface and back-end integration.

In many ways, the business model of banks will shift from a pure B2C to a B2B2C model where there is revenue-sharing and pass-thru with specialists (today’s startups) who provide the core services that consumers pay for.

Amazon is a great model for what banks will become. Amazon doesn’t care what you buy as long as you buy it on Amazon’s platform.

The problem with today’s banks is that they do care what you buy–they want you to buy their products/services. By rebundling banking, banks of the future won’t care whose products/services you buy as long as buy them on that bank’s platform.


The potential losers of all the change going on are not the big banks. They have the resources to make the investments in new technologies and startups. They have the resources to acquire design firms and figure out what to do with them.

The banks that are threatened by all this are the smaller institutions. Relying on friendly, branch-based service isn’t likely to produce the level of revenue and profits needed to sustain a retail (i.e., consumer) banking business.

Ron ShevlinRon Shevlin is Director of Research at Cornerstone Advisors. Get a copy of his best-selling book, Smarter Bank: Why Money Management is More Important Than Money Movement. And don't forget to follow him on Twitter at @rshevlin.

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  1. “The banks that are threatened by all this are the smaller institutions.”

    How small are we talking?

    In some sense, more than 98% of the total financial institutions in the United States could be considered “smaller institutions.” If such a sizable number are threatened, this shift to digital represents a pretty big threat to the overall industry.

  2. Jon: Great point. I don’t know that there’s a certain cutoff point, but banks below a certain asset level (say $1b) will certainly be challenged to become Attractors (or Rebundlers). But that doesn’t mean they couldn’t be specialists.

  3. Great article Ron! What’s intriguing though is that if the future turns out as you predict, every player needs to change almost radically: the specialists, today’s startups should become B2B providers that requires different strengths than what they have today: instead of great design sense and (retail) service, they need scale. To be attractors, banks would need exactly what they don’t have: great design sense and retail service.

    Today, I’d argue banks are more ‘retainers’ than attractors: they are keeping customers not because they are so good at it, but because customers don’t see compelling alternatives and changing is not easy. (in my country, established wisdom says one will only change banks when one gets a mortgage from an another one)

  4. I wonder what these new Attractor companies will look like. Because these startups outdo the bank by streamlining simple processes that the banks have become too large and unwieldy to competently deliver. Prosper doesn’t have to worry about satisfying a deposit base, for example, while Loyal3 doesn’t need to allocate resources to insurance underwriting. If you have a company that brings deposits, investments, lending, and insurance together under one roof, wouldn’t that just be a bank? And wouldn’t that just bring us all back to square one?

    Are you predicting something like a company that would shop around and get you the best loan rates and handle the process for you, or find the best insurance policy and facilitate the opening and payments for you, etc, all while taking a monthly fee or a cut of the loan payments or what have you? That’s the only way I can imagine a “financial Amazon” being structured without actually being a bank as we know it today.

    ARB–Angry Retail Banker

  5. This concept of a bank becoming an aggregator of third party services is steadily gaining traction among industry watchers and analysts, where it goes under various guises such as component banking or marketplace banking. My preferred interpretation is “the bank as app store”: Fidor Bank in Germany (and soon to launch in the UK and US) is perhaps the best exemplar of this trend right now:

    But the impact on consumer attitudes and the ownership of the customer relationship will be interesting. Who will consumers view their primary relationship as being with – the bank or the third party service providers? And who gets access to the flow of data?

    And it will certainly be interesting to see how the balance of power between the banks and the third parties ends up being divided.

  6. Daoud,

    I think if the banks are doing the front end work, customers will still view them as being their primary relationship. You see shades of that now. Customers call or go to their bank when they have a problem with their credit cards, not Visa or MasterCard. If they have a Vanguard mutual fund in their bank investment account that’s doing poorly, they go to their bank to complain, not Vanguard.

    It’s always the front end that the customers view their relationship with because that’s what they see. After all, if Fraud Department or Corporate Security holds your check or closes your account, the customer complains to the branch or call center, right? Because that’s where the relationship is even back office and retail have two totally different policies, procedures, and mission statements. To me, even though we’re talking about different companies rather than different departments of the same company, it’s no different to the customers. And it’s their perception that matters.

    ARB–Angry Retail Banker

  7. bankalchemist says:

    In a week of many surveys released there was one regarding the top banking apps which in the top 5 published MOVEN was not included…complaints are rising concerning onboarding of accounts. Is this the promise delivered by someone who always has something to say as evidenced herein?

  8. Great piece. I agree about the Neobanks. I’m a member of Simple and Moven, and they’re nice, but they won’t be competitors until they have an integrated suite of products and an experience that can compete with USAA.

    Reading the tea leaves is always dangerous, but I agree that the most likely outcome is more pain for the small banks and credit unions and the tech startups getting absorbed by the big financial institutions.

    Nice new cover to the book!

  9. patrick says:

    “The banks that are threatened by all this are the smaller institutions.”
    I dont entirely agree with this because earlier you said : “the business model of banks will shift from a pure B2C to a B2B2C model”

    my rationale being virtually every institution will shift to a B2B2C model, imho, the banks that aren’t threatened are the ones that can scale and at the same time provides more bang for the buck. Regardless of the size.
    For me, the reason smaller institutions are threatened is because some wont be able to scale rapidly/easily/.. either horizontally and/or vertically.

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