The Attractiveness of Being an “Ultra-Commodity” May 27, 2010
Posted by nichebanking in Commodity banking, Niche banking.4 comments
Today’s banks and credit unions live in a weird type of commodity limbo-land. They’re too generic to break free from being commodities…yet too proprietary to embrace the benefits of being a real commodity. As a result they’re constantly beating their heads against the wall, not enjoying the perks of being one or the other.
Our plans for the long tail of banking involve utilizing banks in an “ultra-commodity” way. Take an example outside banking: Think of the manufacturing plant that gets hired by food companies to make and bottle ketchup under their brand names. The manufacturer is expert at making ketchup. Yet you don’t see them obsessing over making their own brand of ketchup, and trying to compete in the retail space. Instead, they’re happy being the focused, experts in making ketchup. In other words, they’re happy being the commodity: unbranded ketchup. They know what they’re good at, they know their role, and they are happy simply being the company that produces the private labeled product. That’s their business, and they’ve got a successful model around it.
We don’t see much, if any, of this approach in banking. Please correct me if I’m wrong here, but generally speaking, every existing chartered financial institution has its own name and brand, providing banking services direct to consumers. How could you embrace ultra-commoditization and make a banking business model out of it?
A Terrible Fit For Most People May 15, 2010
Posted by nichebanking in Bank customer segmentation, Niche banking, Problems with traditional banking.1 comment so far
One of the fairly universal things about today’s banks is that–while they may not admit it–they generally believe they can be everything to everyone…all varieties of needs, and all varieties of values.
Serving All Varieties of Needs…: You’re unbanked? We’ve got products to help you build a credit history. You own a small business? We can help you grow. You’re affluent? We’ve got private banking services! Etc.
…And All Varieties of Values: You like to bank remotely without talking to anyone? We’ve got all the latest in remote deposit capture, mobile banking and more. You like a lot of in-person hand holding? Great, because we’re relationship bankers! You’d prefer better rates over personal service? Guess what, we can give you both! Yada yada.
When you’re a niche bank, it’s an understatement to say you don’t want to serve everyone. In fact, you know you’re a flat out TERRIBLE fit for 99% of people…and even if those 99% wanted to bank with you, you wouldn’t let them. You’d turn them away, because you know you’re not a fit for them, and that ultimately they’ll only be so-so customers at best.
But guess what? Those 1% of people who you ARE a good fit for? You’re not just a good fit, you are an AMAZING fit for them. You are their dream come true, and they’re better customers than you could ever hope for.
