Who does your bank compete with? October 12, 2010
Posted by nichebanking in Commodity banking, Future of banking, Niche banking, The Long Tail of Banking.add a comment
If you are an existing traditional financial institution, who are your competitors? Other banks and credit unions, of course…right? Not to mention those pesky “alternative” banking sources such as LendingClub, Prosper, brokerages, and many others.
Our founders are famous for arguing that any financial institution’s biggest competitor is not any other financial company, but is rather apathy. Americans care about nothing more than their money it seems, but care about nothing less than their banking services. Apathy.
When you’re a niche bank, you don’t really compete with other financial companies. Instead, you compete with other sources of engagement for that customer segment. For instance, if you’re a fishing enthusiast, you have multiple resources you can turn to, to scratch your itch for needing to be part of that community. You can join an online social networking community, join a local fishermen’s group, join a trade association, or subscribe to a magazine. All of those channels are competing with each other for your engagement.
So when you’re a niche bank, you’re competing with other ways the customer can engage with their passion. Other banks? They are NOT a way the customer can engage with their passion. If you’re a bank for fisherman, your biggest competitor is other ways people can get their fish on.
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?
