Future Trend In Banking: Gold Labeling

The practice of white-labeling — offering products developed by a third-party, but branded under the distributor’s name — is common in banking.

No, I’m not talking about this:

Although, come to think of it, that might be more common in banking than I realize.

PFM providers like Geezeo and Money Desktop “white label” their offerings through banks and credit unions. White-labeled mobile banking, P2P solutions and remote deposit capture capabilities are all commonly found in the world of banking.

The next few years will see the emergence of a new trend in banking: Gold-labeling. Banks and credit unions offering already branded products and services.

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The popularity of white-labeling isn’t hard to understand. On one hand, it takes a fortune to create a nationally recognized consumer brand. And the other hand, most banks and credit unions are hard pressed to find the funds to develop new products, services, and technology solutions that are speculative in nature.

The PFM market is a great example. Geezeo and Wesabe both started life with the intention of becoming a direct-t0-consumer brand. Both ran into the brick wall called reality. Geezeo made the transition to white-labeling early enough, Wesabe didn’t.

Not only did banks and credit unions not have the funds (patience, or insight) to develop PFM on their own, but the core apps providers didn’t either, and partnered with the Geezeos, Money Desktops, and Lodos of the world. Similar story on the mobile banking side with mFoundry and M-Com.

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The core premise underlying white-labeling is that the distributor’s brand is stronger than the manufacturer’s.

In the world of banking, this is changing.

The branding power of start-ups and newcomers in the world of financial services will create opportunities for banks and credit unions to flip the white-labeling model on its head and create the opposite: Gold-labeling.

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There are two current examples of Gold-labeling, an emerging one, and one further out in the horizon:

1) Kasasa. The notion of a checking account created by a third-party non-bank entity, but offered by a bank or credit union seems antithetical to the mindsets of most traditional bankers. But that’s exactly what Kasasa is. And it’s proving to be highly successful for the community banks and credit unions that offer it — even though some of them are in similar geographies. It’s not just the brand power of Kasasa (the product) that helps bring in new customers to the FIs that offer it. It’s the underlying marketing competencies that BancVue, the company that developed Kasasa, brings to the table — marketing competencies that many community banks and credit unions could never develop on their own.

2) Mint. When Intuit acquired Mint in 2009, I (as I imagine many of my fellow analysts) believed that the firm would gradually phase FinanceWorks out and offer Mint to FIs as its PFM offering. That didn’t happen. Yesterday, however, Intuit announced that it would offer Mint to FIs (not just those running their online banking platform) as an integrated part of FIs’ online banking offering. Many banks and credit unions now have an important question to address: Can the branding power that Mint has help drive PFM adoption, deepen relationships, and/or even bring in new customers?

3) Mobile apps. There’s no question that mobile apps are big. Piper Jaffray estimates that iPad/iPhone app sales will reach $14 billion by 2015, and that about 8% of those sales are for finance-related apps. Firms like PageOnce are quietly building greater consumer awareness recognition, while some mobile wallet providers are doing it more noisily (although perhaps will less success than a PageOnce). As mobile app providers build brand awareness and affinity, it’s conceivable that banks and credit unions will benefit by becoming distributors of those apps, integrating them with their core banking offerings.

4) NeoChecking. Firms like Simple and Moven who provide a new type of account — not quite a checking account, but similar — may find some success in developing their brand and acquiring Gen Y customers. They may still find it worthwhile, however, to ratchet up their reach by distributing their products through established banks and credit unions looking for an entry-level product strategy.

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Yesterday’s announcement that Intuit will offer Mint to FIs is big news. But it’s a kickstart to a potentially bigger trend: Gold-labeling.

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