Fintech R&R ???? - Fintech's Great Rebundling Era

What is the Great Unbundling, and how did it manifest in streaming and Financial Services?

Why can using Disney+ and Netflix as part of a bank account bundle create a Retention Halo effect?

Why are streaming services are being used in product packages of all kinds?

Which FS firms are using bundling to attract & retain customers?

Why are transaction data and customer spending analysis key to creating the perfect banking package?

These questions and more will be answered in this week's edition of Fintech R&R.

Hey Fintechers and Fintech newbies ????

Another busy fortnight in the world of fintech.

Brazilian digital bank Nubank surpassed the 100 million customer mark. This is no mean feat, and based on its trajectory, it's on track to become the first digital bank to beat traditional banks to the top of local popularity charts. It's currently fourth in the charts, jumping from fifth the previous year.

Tide announced a partnership with Adyen to spearhead the expansion of their SME offering to Germany.

This fintech adjacent news, whose relevance to this edition will become clear very shortly, is the announcement from Disney Entertainment and Warner Bros. that they're launching a new bundled streaming service combining Disney+, Hulu and Max, giving customers content from Discovery, Disney, FX, HBO, Hulu, Marvel, Pixar, Warner Bros., and many more. This, therefore, gives customers "even more choice and value", says the President of the Direct to Consumer business for Disney.

And a bit of news that went under the radar that avid Monzo (and Greggs) fans would have seen is the expansion of its subscriptions with the launch of three new tiers, which include perks such as a free weekly Greggs treat, an annual railcard, worldwide travel and accessory insurance and much more.?

It was while I was at Dubai Fintech Summit last week that I read the Monzo press release, just after listening to a fascinating talk by Revolut founder and CEO Nik Storonsky on how Revolut has grown and how it 'does' product. I wrote a short post summarising the interesting points here.

These interesting nuggets of digital banking news, the Disney announcement, Revolut talk, and the timing of the discovery of the Monzo news, reminded me of a trend I've seen small shoots of in previous years that now seems to be in full bloom: The rebundling of products and services in banking.????

Although I'm talking about banking services, this trend has started to emerge in other areas like TV and movie streaming, and for good reason, too. I will, of course, outline some of the similarities between this rebundling trend in both cases, what has led to its rise, and the benefits of bundling itself.

So this week, I outline my thoughts on what I'm calling 'The Great Rebundling' of bank products and services, the previous unbundling period, give real examples and more.

As well as interesting news, puns + movie references, this edition includes the following:

• What is Bundling, and what is The Great Unbundling?
• A deeper look at why I think The Great Rebundling is here
• Making the comparison with Rebundling in streaming services
• Examples of Rebundling in FS Products
• Drivers of bundled products and services comeback in FS
• Why it makes sense to bundle?
• Two trends to watch out for as part of the Rebundling Era
• Fintech Spotlight ??:Liv:?One of the UAEs most popular neobanks

NOTE: Other than this literal one-word mention, I will not be covering any of the Synapse drama. There has already been some great analysis on it, and I don't want to rehash other folks' good work (Follow Jason Mikula for more on that). Consider this edition an excellent palate cleanser for that ongoing situation.

Let's get into it. ????

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The Great Unbundling ??

We'll start off pretty logically. Although I've used the terms Unbundling and Rebundling, we first have to define Bundling.

Bundling refers to combining multiple offerings into a single package or subscription. The main objective of bundling is to give customers better value, convenience, and simplicity by offering a variety of products or services together at a bundled price.?

Value, Convenience and Simplicity are the ideal customer benefits.

The additional benefit for the organisation offering the bundled or packaged product-service is that they encourage customers to make more purchases, and customers, therefore, have larger basket sizes and, in the case of subscriptions, a higher average purchase value and higher Customer Lifetime Value.?

More on the value of bundling later.

There are many examples of bundling that you've likely experienced first-hand and that still exist today.?

?? Games consoles and being offered a slightly discounted rate if you buy an additional control pad and two games, which works out slightly cheaper than buying them all individually

?? Booking a flight and hotel with the same travel agent and getting a slight discount

?? Buying snacks at the cinema and being offered a Large Drink + Large Popcorn at a discount to the individually priced items. NB. I wrote a bit about Popcorn/Decoy pricing in this pricing edition, and this is an example of two pricing strategies at play. Bundling + Decoy pricing.

?? Apple Macbooks used to (not sure if they still do) come with an option to bundle AppleCare for a slight discount

?? Big Mac's and pretty much every Mcdonald's burger comes with a Fries and Drink option at a slight discount

These are all simplistic examples of physical product-service bundles that have been around for decades and will remain, as they are tried and tested methods of getting customers to buy more whilst giving them broader benefits. More product at a slightly discounted rate. Convenient additional services or an added product that the customer may have been considering anyway.

The digital world hasn't been as consistent, though. Digital media and financial services, in particular, went through a phase in the 2000s widely known as The Great Unbundling.

Unbundling in Traditional Media and Financial Services

The Great Unbundling refers to a transformative trend that gained momentum in the early to mid-2000s, accelerated by technological advancements and changing consumer behaviours. While its origins can be traced back to earlier developments, such as the rise of the internet and digital media, the trend became more pronounced around the mid-2000s and continues to shape industries today.

The example I usually outline to describe the journey to unbundling and beyond is the evolution of televised content beginning with old-school analogue:

• Analogue (pre-Cable era): Traditional television was over analogue signals, with buttons you had to press or turn to change the channels. Channels were often limited to a small mix of local broadcast stations, news, entertainment, and educational programming, and viewers adjusted their schedules to match the broadcast times of their favourite shows.?
• Bundled Cable (1980s-2000s): The introduction of cable television in the 1980s (satellite in the UK) revolutionised the TV landscape by offering viewers access to a broader range of channels and content with the technology also providing higher-quality audio and video. Packages typically included a mix of local broadcast channels and specialised cable networks, such as ESPN, MTV, CNN, and HBO, and other groups of specialist channels for movies, sports, education, music and more. Customers paid a monthly fee for access, with premium channels like HBO often offered as add-ons for an additional cost but all through a single provider.
• Unbundled Streaming Services (late 2000s-present): The rise of the internet, digital technology, and faster connection speeds via Broadband's launch through the 2000s paved the way for the emergence of streaming services as a new way to consume entertainment content. Netflix, Hulu, and Amazon Prime Video led the streaming charge by offering on-demand access to curated content libraries for a monthly subscription. Disney+, AppleTV+ HBO Max and others joined the revolution, with many creating their own original exclusive content.

So there was a period of low choice through a limited distribution channel at low cost, then a much broader set of choices through limited distribution channels at a reasonable cost, and then a comprehensive set of choices through a broad set of distribution channels whose overall cost is quite high.?

The sheer breadth and costs of those choices have hit a peak, and with rates for each of these platforms slowly increasing, it's no surprise that customers are beginning to make major decisions by cancelling specific services. That's why the next logical step is to slow down this decoupling of every movie and TV show into disparate platforms with their own respective subscription and bundle groups of movies & TV shows from various studios and production houses into logical groups, making it more convenient and cost-effective for customers to subscribe.

That's what I see happening and what the recent news from Disney indicates. This is in addition to Sky's bundle that includes Netflix + Paramount. I see more of this streaming rebundling on the horizon in the interests of limiting choice overload and creating more convenient, cost effective and customer friendly packages.

In financial services, there's a similar parallel to be made with the evolution from a single distribution point and a limited number of choices to an abundance of choices and channels:

• Analogue (Pre-internet Banking era): Traditionally, banking was conducted through in-person visits to physical bank branches. Customers had limited options for managing their finances, often restricted to basic services like depositing and withdrawing money, opening savings accounts, and applying for loans. Banking hours were rigid, requiring customers to align their schedules with the availability of branch services. The banking experience was largely centred around face-to-face interactions with bank tellers and advisors, with little scope for customisation or convenience.
• Expansion of Banking Choices (1980s-2000s): With technological advancements and the introduction of automated teller machines (ATMs), telephone banking, and online banking platforms in the late 20th century, customers gained more flexibility and convenience in managing their finances. ATMs allowed for basic transactions outside of banking hours, while telephone banking provided access to account information and certain services via phone. Online banking platforms further expanded banking choices, enabling customers to perform transactions, check account balances, and pay bills from the comfort of their homes or offices.
• Unbundled Digital Financial Services (2000s-present): The advent of fintech companies and the proliferation of digital technologies in the 21st century ushered in a new era of unbundled banking services. Fintech startups like Revolut, Chime, and Robinhood disrupted the traditional banking model by offering specialised financial products and services through digital platforms. Customers gained access to a wide range of unbundled services, including digital wallets, budgeting tools, investment platforms, and peer-to-peer lending services tailored to their specific needs and preferences. These digital-first banking solutions provided greater flexibility, transparency, and affordability compared to traditional banks, empowering customers to take greater control of their finances and giving them access to a wider array of financial products and services tailored to their specific needs.

As with the streaming service unbundling, and many other examples, when choice becomes too abundant, it has an inverse impact on the value and customer benefit as customers suffer from choice overload.?

NB. Check out this more granular breakdown of The Paradox of Choice in Fintech products.

That's not to say there aren't still considerable opportunities to create niche financial propositions for traditionally underserved demographics and solve problems that still exist, but on a broader scale, there is evidence and reasons why we're seeing the start of Fintech's Great Rebundling.

Fintech’s Great Rebundling ??

When I first pondered about this trend late last year I thought I was suffering from Red Car Theory, the experiment where folks are asked "How many Red cars did you see today?" to which participants often respond, "I don't remember seeing any". They are then asked to count red cars the following day and usually come back with a specific number, which tends to be a lot more exact and way higher. The theory suggests that our awareness and perception are influenced by our interests, experiences, and expectations.?

Try it for yourself. Think about how many red cars you saw today, then count red cars tomorrow and compare.

I thought that because I was thinking about it, I was seeing more evidence for it, but it was when I stopped thinking about it that more shoots of the rebuilding era appeared.

Monzos New Subscription Tiers

Monzo is an excellent example of unbundling. It started out as a dedicated payment card, later adding deposit and current account services, and now the rebundle has added budget tools, saving accounts and features, a credit card, and additional bundled features as part of the top subscription, such as travel Insurance, worldwide breakdown cover, and device protection (as well as the weekly Greggs, of course).?

I think what Monzo has done is great because every year, they publish an overall Trends report to show where people are spending the most. Greggs and railcards were on that list of big regular spends, and savings on these two things are now part of a bundled package subscription. I think this is an indicator of what's to come in the future phase of unbundling, but more on that later…

Club Lloyds

Sounds like a holiday resort but it's a different type of package.

Club Lloyds has been around for a while, but I've only recently noticed some of the additional benefits they offer. Similarly to Monzo, they have some lifestyle benefits such as 12 months of Disney+, cinema tickets and a bespoke magazine subscription, as well as travel insurance, breakdown cover, and phone insurance, all for a fixed monthly fee.

In addition to these bundled lifestyle products, Lloyds also offers preferential bonus savings rates, credit interest on balances held in the account (up to ￡5,000), and access to the Smart Start account for 11-15-year-olds.?

Revolut

Revolut sometimes gets a bad rap, but the product, its global expansion, and the way it's evolved with customers' needs are not to be sniffed at. It's definitely in the Everything Money + Lifestyle + Travel space, and its bundling reflects that.

At the higher end of the subscription, we see similar bundled finance and lifestyle options, including travel cancellation, medical and personal insurance, as well as additional services such as airport lounge access, car hire excess insurance, and cashback on stays booked through Revolut.?

Tide Business Accounts

The SME Banking space is where most of the rebundling growth will happen. And needs to happen.

Tide's Business Banking accounts are offered at a few different price points, but even the free version has some great bundled features, including the ability to set up a company and open a bank account within a single flow at a discount to the normal company registration fee. This is a genius bundling option as most providers require you to verify your company (if operating through an LLC) as part of the account onboarding.?

They also have in-built account accounting functionality, the ability to create a virtual office address, in-app invoicing and tracking, VAT return preparation, a connected business savings account, and much more. For SMEs, many of these functions are separate, and folks will have a range of accounting providers, invoice platforms, and cash flow analysis software to use, but Tide brings them back together in a single app.?

And although not strictly part of the bundle, they offer member perks such as credits for co-working spaces, discounts off legal and funding support through SeedLegals, access to business support tools and more.??

Apple

A very quick shoutout because when Apple does something people tend to follow. Even they have realised the pain of choice, disparate subscriptions and the simplicity of a single bundled subscription as they launched AppleOne combining their Cloud, TV, Music, Games, News, and Fitness offerings into one single bundle.

Not all of these bundles are financial services.?

Some are a mix of Insurance, Savings accounts and lifestyle options.?

The point of highlighting these is to show that the culture of having completely unbundled, decoupled products and services has gone a bit too far and that customers no longer want 30 different options to pick from when looking for a banking service provider, or savings account.

Unlimited choice is debilitating.?

Using the SME example, to set up a business, you have to register your company, select an account provider from the 100s available, find an accounting software service from the 20+ out there, pick an accountant or agency from 1000s, find company insurance from the 100s of options etc etc.

The unbundling and creation of so much choice has come at the cost of convenience, simplicity and in some cases a financial cost which is why some of the rebundling we'll see over the next couple of years will redress the balance a little while innovation in key underserved areas and for unsolved problems continues.

Why now?

There are a couple of reasons why this has started to happen over the past year or so and especially with bigger traditional and neobanks.?

These exclude the obvious choice overload and improvement to customer convenience benefits mentioned earlier.

The Rise of Embedded Finance ??

This is one of the big levers enabling rebundling to happen on a broader scale.?

During the Unbundling era, a great product would be built that solves a key problem for a specific demographic, built with the customer in mind, with a digital-first approach. That means full digital onboarding, offboarding and management of that product, whether it's an account, a digital wallet, a lending product or whatever else. Products were also built using modern principles and with an API-first approach, and individual services within that product were built in a modular fashion.?

That meant that a big bank's SME banking team could partner with a fintech SME Lender and leverage their ability to provide asset finance by simply including that option as part of their SME lending package with a seamless technology integration, improving the customer benefit while making the SME bundle much more attractive at a low-cost basis.?

I use this example because this is something I worked on.?

That means that Tide can leverage the Companies House API to create a company and instantly create a bank account off the back of that setup.?

Or Revolut can partner with a business insurance platform, integrate with the insurance provider, offer that insurance as part of their business bundle, and simplify the setup through the Revolut onboarding channel. The insurance provider benefits from Revout's growth and ability to attract leads, and the insurance partner can offer a volume-discounted product, which Revolut can offer as part of an attractive bundle. The customer wins. Revolut wins. And the insurance provider wins (until Revolut create their own bespoke insurance product).

Now, although I've said 'The Rise of Embedded Finance', this has more to do with the rise of the decoupled backend service architecture and building with APIs than the broader rise of Embedded Finance. Still, there is no doubt that it's led to many products being built with the possibility of embedding into another organisation or service down the line. Hence the title.?

A Pain in the CASS: Rebundling as a mitigating against switching ??

This is logical speculation, but stick with me.?

CASS is the Current Account Switching service provided in the United Kingdom that facilitates the switching of current accounts from one bank or building society to another. CASS was launched in 2013 by the UK Payments Council, now known as Pay.UK, to make it easier and more convenient for consumers and businesses to switch their bank accounts.

It allows customers to switch their current accounts quickly and seamlessly within seven working days without experiencing any disruption to their payments or direct debits, and the process is automated and managed by participating banks and building societies, ensuring that customers can switch accounts with minimal effort. It also offers a guarantee that customers won't be financially disadvantaged during the switching process and that any payments and direct debits that are pointed to old accounts are automatically redirected appropriately.?

It means customers can switch between banks easily and jump to the bank that offers the best rate or biggest switching bonus.?

The numbers show that switching is on the rise after a slowdown during Covid, and CASS's latest data shows that between April '23 and March '24, there were 1,436,454 account switches made, an increase of around 300,000 on the previous year with Barclays, Nationwide and Lloyds the biggest net gainers through switching.?

Much of this switching is driven by switching cash bonuses and introductory offers. But it's not sustainable to continuously offer bigger and bigger bonuses.?

This is why there will be a lot more growth in the rebundling space as a tactic to mitigate against switching.?

Firstly, you create an attractive bundle that is more experiential and lifestyle-focused than purely cash-based, which leads to greater retention.

But mainly because you're adding peripheral products and services like adding a bundled Netflix or Disney+ subscription that feels connected to the entire bundled, creating a psychological barrier for customers thinking about switching. It's not technically part of the account, so it is outside the domain of CASS. Still, because it may be a product or service you enjoy and get value from, you are less likely to switch because now the cash benefit of switching to another account is balanced by the day to day value you get out of these bundled, non-financial products.?

Retention Halo effect ??

This leads me to highlight the two overarching reasons why these FSs and Fintechs are leading the charge on rebundling and why others should consider it as part of their product strategy.?

Because of two of the vital metrics that product folks in fintech have to think about and that make bundling an exciting option:

1. Acquisition: Giving customers an incentive in addition to cash to switch to their current account or service
2. Retention: Creating a package that facilitates a small amount of friction that makes it a little more difficult to leave the organisation

Creating an attractive package with complimentary products that fit the Ideal Customer Profile (ICP) and fit together at a discount vs as individually priced products is a great way to lure customers to your product in addition to that standard ￡200 switching bonus.?

However, tailoring a package that means keeping those customers over an extended period is more important.?

That's why many companies include streaming services like Disney+ and Netflix in their bundled packages. These two streaming services, in particular, have unbelievable retention rates.?

This shows Disney's retention rate, which, granted, was over the COVID-19 period. However, the latest numbers show a consistent 78% customer retention rate after using the platform for 6 months. Netflix is around the same.?

For reference, anything closer to the 80% mark is considered excellent retention.

Organisations that use a product with extremely high retention as part of their overall package offering are hoping to experience what I call a Retention Halo effect. This means that by tethering a high-retention product, they will benefit from an increased retention rate because customers do not want to lose their Disney or Netflix subscriptions.

It doesn't have to be Netflix or Disney. Organisations looking to create valuable and cost-effective bundles can use other high-retention and complementary products to create this Retention Halo effect and keep customers longer.?

This is what a great product person should be investigating or at least given the time to explore.

This is why strategic bundling could be the answer for both big banks and neobanks in attracting and retaining customers.

Future of Bundling ??

There's still a way to go, and we'll see a lot more bundling occur not just in Financial Services but across the industry, with streaming and music leading the charge.?

I think we'll see a couple of areas of even greater rebundling innovation very soon, both of which I hinted at earlier.

Insight-driven bundles

Monzo is the poster child for London fintech (or at least one of them) for good reason. They create customer-centric products, slowly move the UI & UX needle, and stay on the pulse of customer needs and the next big trends.?

So, it's no surprise that their 'Year in Monzo' campaign made headlines and included some great insights.?

I'm sure that the broader insights they created helped inform how to build the packages as part of their new tiers. The popularity of Greggs among Monzo customers in 2023 for example was used as a direct benefit to entice customers to subscribe to one of the tiers.?

I hope broad transactions and customer habits are what they used as input into the decision anyway.?

And I think this is one of the trends that will shape theirs and other bundles. Analysis of customers' usage of the platform, regular purchases, and broader spending habits to build bundles that are more tailored to customers. For example, giving a customer the option within a bundle to choose between Disney+, AppleTV+, Netflix, or AmazonPrime Video. And picking between Pret and Greggs.?

Building bundled options and adding peripheral products & services under a single discounted subscription based on real data.?

Of course, building this en masse and at scale is where the challenge comes.

Example: Based on my transactions and trending report, an ideal Monzo package for me would be a modified version of their Max Plan with Netflix + Spotify + Grind Coffee as bundled options at a discount.

Bundles of Joy for SMEs

One area I often reference in these editions is how underserved Small & Medium businesses are. For a deeper dive on SMEs, check out my previous JTBD edition here. There has been A LOT of innovation in fintech for SMEs, as the article outlines, but there is still a long way to go.?

This is where SME banking options can improve and where Tide and others like Allica Bank are starting to do more. Rather than just offering a paid for Business Bank Account with a card, creating a business banking bundle that covers much of the early and ongoing journeys that a customer goes through.?

Setting up a company, opening a bank account, understanding finances, chasing invoices, filing & paying tax, obtaining finance, hiring and paying employees are all part of the SME journey but only some of these are served by solutions and very few offer bundled options that help with the entire lifecycle.?

Example: A banking option such as Tide for some of the core SME processes and an embedded bundled option for SMEs who also want to hire employees, manage payroll, and obtain finance. Tailored to businesses in different sectors and also those who are just starting out vs growing and scaling

I've outlined some of the small shoots of The Great Rebundling with clear examples, reasons for its growth and why others should pay attention.?

The bloom is coming, and it's clear that rebundling is one of the next big trends reshaping the landscape of banking services. It will offer customers more refined choices, convenience, and value while still providing best-of-breed products.

Product folks should look at Retention Halo effects as part of bundling to reduce churn but do so strategically so as not to dilute their own brand and offering.?

And anyone looking at bundling should look at the data, review their pricing strategy and really understand the entire customer journey, and get to the heart of consumer habits to create a truly valuable Rebundled proposition.

Everyone else, watch out for more of those shoots of The Great Rebundling and let me know as and when you see them ??

As always, see you in two weeks for another edition ????

J.

P.S. If you've seen any other recent examples of a streaming service used as Retention Halo anchor OR a customer-centric rebundling, add them in the comments or DM me.

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Fintech Spotlight ??: Liv Digital Bank

As I was in the UAE recently I’m putting a popular UAE fintech in the spotlight this week and one that I experienced a few years back.?

Liv Digital Bank is one of the rare success stories of a fully digital bank sponsored and incubated by a traditional bank, EmiratesNBD, frequently voted the best bank in the UAE.

Liv’s main account stack includes a debit card, payments, a transaction feed and all the normal access to products you’d expect but they also have segregated goal accounts with smart saving rules and 4% annual interest. There’s also a big focus on rewards and bonuses with deals on restaurants and hotels as well as a dedicated bonus structure when customers keep a steady balance in their account, deposit their salary into the Liv account, and spend a certain amount per month.

As of 2022 it had 660,000 customers across the UAE & KSA and growing fast.

It’s one of the poster child apps for the MENA neobanking landscape and has clearly been designed not just for UAE residents, but to serve customers looking for digital banking solutions across the MENA region.

Favourite bits of news ??

Visa lucky number seven launch - I haven’t fully had time to unpack this news but Visa announced the launch of seven new products this week including expansion of Pay by Bank through Tink, extended Tap to Pay functionality, Visa Protect for A2A Payments and more. There’s a big focus on tokens in this launch and one of the really interesting products is the Visa Flexible Credential allowing a single card to toggle between payment methods, so customers can create rules on whether they use debit, credit, “pay-in-four” with Buy Now Pay Later or even pay using rewards points through the card product. This announcement deserves its own deep dive and I wrote a short LinkedIn post here about it here but there's a lot more to unpack in a longer edition