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Structural change – disintermediation
of the retail banking value chain
The widespread consumption of digital banking services by technologically
savvy, less loyal customers and the rise of non-traditional players, combined
with the high costs of operation of incumbent banks, will eventually lead
to removal of end-to-end manufacturing and distribution entirely within a
bank. Anthony Jenkins, the former CEO of Barclays, recently said, “Large
banks will fragment as they seek to protect the profitable parts of their
operations.”
Distribution Manufacturing
Sales & Marketing Servicing Product Management Operations
Where is the value in the chain? What is the value? What is the risk of creating that value?
Sales & Marketing Servicing Product Management Operations
Where is the opportunity cost Is someone else better placed
of obtaining the value? to gain that value?
Core Business Collaborate Outsource Insource
Figure 1: Disintermediation of retail banking value chain.
Banks will need to assess which elements of their The banking value chain of the future, comprising
value chain truly add value to the end customer value elements and utility elements, will entail
and which do not, how much value is created, what a move from competition to collaboration with
are the associated risks and costs and what are other players in the eco-system and from using
the opportunity costs of divestment. Accordingly, proprietary technologies to adopting open
banks may decide to focus on certain processes standards. White-labelling products of non-
themselves, may consider outsourcing and other traditional players or even other banks will become
innovative partnership models for sections of their more commonplace, creating banking marketplaces
value chain or may in-source certain business from offering products from multiple providers. Already,
other banks, leveraging economies of scale and for example, Santander and RBS are partnering with
leading to the rise of new utility models in the Funding Circle for lending to SME customers.
industry.
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