Will the marketplace strategy shake up the financial services industry?

As we all head to marketplaces to pick up those last minute gifts for Christmas, it seems like a good time of year to talk about the growth and shake up of the financial services industry with market place strategies. Online marketplaces are fast-becoming the favourite destination for online shoppers, with almost 70% of Australians visiting an online marketplace or auction site like eBay or Amazon every month. Marketplaces have boomed in recent years, growing by 74.8% in 2017 alone (Roy Morgan research Jun 2018). With the increased uptake of marketplace sites like Etsy, Uber and AirBNB we have to look at the reasons why these sites are so popular with consumers. What are the benefits of creating an online marketplace?

The marketplace model is based on carriers realising you cannot be the best at everything and resources are too scarce to keep up. In the marketplace model, brands give their customers access to third parties with the best products, the most pleasant customer experience and the lowest costs.

The marketplace business model cuts both ways. Customers get continuous access to the best products and services in the market and costs can be kept at a minimum through connecting (or disconnecting) parties almost in real time to key in on new customer wishes and anticipate other market developments.

Retailers such as Catch and Myer have recently opened marketplaces, recognising the benefit of increased customer traffic and expansion into other categories.

myer market place

“It’s about enabling customers to move freely between brands, channels and product solution,” says Suncorp’s chief executive for Customer Marketplace, Pip Marlow. Suncorp Australia has recently launched a $100 million digital marketplace platform. Users can now view all banking and insurance products in the one online portal from all their brands – Suncorp, AAMI, GIO, Bingle, Shannons and Vero. “We really wanted to move to a level of aggressive transparency across the brand, making sure customers knew what was available to them – and had that choice as part of it.”

suncorp marketplaceThis marketplace model is in direct contrast with the strategy of other financial brands such as Commonwealth Bank and Westpac, which is to keep customers contained to the one brand.

Monzo, Starling, N26 (challenger banks) and TSB are all launching a marketplace offering. This banking business model is on the basis of shared value where the provider creates value for the customer. Value is passed to the customer and the provider takes a referral fee from the beneficiary. Examples include foreign exchange fees, switching energy providers and switching telco providers.

N26 has partnered with TransferWise to let customers make foreign currency transfers, and with vaamo to make investments, all from within its mobile app.

n26Starling Bank recently launched its current account, the only product it will build in-house. Through its marketplace it will give customers access to P2P loans, investments, and has partnered with TransferWise. In the longer term, it plans to offer customers a choice of multiple products in each sector, and to partner with companies in the retail and lifestyle sectors.

starling bankOther companies adopting the marketplace model are Amazon, who is looking to offer bank accounts and already offers loans, along with Google, Facebook and Apple who either have banking licenses or are looking to acquire one.

The big sell for marketplace is that the customer journey and experience is both a satisfying and convenient one allowing for easier navigation and management from a central location. This new approach offers more competition through transparency, choice and better pricing.

We see marketplaces playing an even bigger role in the future.

Who will be next to implement this strategy?

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