I was at a recent bankers’ conference where the debate over bank brand recognition grew heated. Well, not really heated, but definitely spicy. We were discussing Banking-as-a-Service (BaaS) and embedded finance, which led to the inevitable topic of customer ownership, which then led to concerns over bank brand anonymity.
No doubt, bank brand equity has commercial value. It can drive consumer adoption of a banks’ financial products. It can fuel customer loyalty and power cross-sell opportunities. And if you’re clever enough to name your bank brand with a moniker that a future tech giant will covet, then your brand could bank you a cool $60M—just ask MetaBank.
The inevitable impact of the internet is that it disrupted supply chains by eliminating distribution barriers. With industries like telecom, entertainment, publishing, and music being the first to weather the storms of digital supply chain disruption.
Before the internet, suppliers who created a product needed to find distributors to make their products available at scale to end customers. These suppliers would invest in brand marketing initiatives, but their strategies were two-fold. They would market to end users and distributors. Because if the distributors didn’t know the supplier’s brand, then their ability to reach customers at scale was eliminated.
Banks have always enjoyed the preeminence of being both the supplier of financial products and the distributor of those products. In truth, it’s a safer model since the financial industry is so highly regulated. This regulatory barrier to entry is the reason the industry was able to stave off digital supply chain disruption as long as it did.
Most would agree that the financial services industry has been in the throes of digital disruption for years, which is true. Changing the last-mile delivery of financial products from physical branches and IVR (Interactive Voice Response) banking to internet-powered distribution channels like web and mobile is digitally transformative, but it is not disruptive to the supply chain. Because the bank still owns the last-mile delivery channel.
BaaS and embedded finance are the embodiment of digital supply chain disruptions in financial services. This is the fragmentation of last-mile delivery of financial services. Though it seems to have reached critical mass in the past few years, it has in fact, been occurring for over two decades in prepaid financial products and over four decades in commercial fleet cards.
For those early bank adopters, whose origins began in these products, the ability to capitalize on this disruption was an easy pivot. For others whose bank brand embodies a deep customer commitment and a culture that is fueled by service to one’s community, embracing embedded finance is more than just adopting a new business model. It must feel like a departure from a bank’s core brand values.
While I don’t know for certain all the beliefs and passions that fueled the lively debate among bankers at the conference I attended, I do empathize with any organizational change effort that threatens the cultural values that organization has built their brand upon. Leading people through change is never easy, but if you have a noble cause to fight for, then it gives team members a rallying cry to unite around.
So, how do banks inspire internal commitment to surrender last-mile delivery to a sassy new tech provider? The cry of “evolve or die” is less than motivating, but there is something to be said about a bank brand having both roots and wings:
Under the roots business model, the bank is a services organization, under the wings business model, the bank is a product organization. Combined, you have a bank that stays true to its brand ideals while making the most of the tools and networks available.
Building a bank brand with roots and wings is critical amid digital supply chain disruption. And for those worried about brand anonymity, perhaps the perspective should be, not if someone knows your brand, but rather, who knows your brand. Because trust me, those sassy new tech providers whose software will be the catalyst for your bank’s financial products…they know the bank brands out there that are open to partnering with them. They are your distributors in a world where industry specific platforms are evolving to become the predominant business model.