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Motive Insights - The Next Generation of Banking: Marketplaces

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February 27 · Issue #294 · View online
Motive Insights
The Next Generation of Banking: Marketplaces
 
The Problem
Big tech, such as Google, Amazon, and Alibaba, are making increasingly bold forays into the financial sector threatening traditional financial institutions by making full use of their ability to reroute asset through their platforms.
Customers are moving away from traditional financial institutions to new financial entities for their financial needs by meeting customers at the point of sale. An example of this is Klarna, who provide buy-now-pay-later financing, who have now diverted up to $10 billion in annual revenues away from banks.
 Banks and financial institutions’ traditional revenue streams are being threatened, and they need to find alternative ways, using entirely new business lines, new revenue streams, partnerships and ecosystems to better engage their customers. 
 
Move now or be left behind
 A common belief within incumbent financial institutions is that because of their brand and existing scale, new entrants will never be able to out-muscle them. While that may be true for the smaller new-comers, leading tech companies and fintechs such as Ant Group are steadily building scale and engagement with an aspiration to become one stop shops, where they offer shopping, payments, financing, and banking products in a single platform.
 These large providers already monetize consumer engagement through offerings other than financing (for example, affiliate marketing, cross-selling of credit cards and banking products). If traditional banks and financial institutions fail to acknowledge this and don’t build solutions that drive engagement through the entire journey, they will find it tough to compete with these established new-comers. And there becomes a very real issue for banks, as they reduce their position to just custodians and lending books, while fintechs win with ancillary products on top of these services.
 
The solution
 To protect from this situation, Banks could look to curate end-to-end propositions that are not necessarily financial in nature, but utilise their existing customer base (SMEs) or partners, to meet the needs of what their customer might use financing to purchase, but critically presenting their financial products within the purchase journeys and ideally at the point of sale. 
To do this, banks and financial institutions need to become marketplaces, offering customers a range of services from the ability to find what they’re looking for through to the financing to purchase what they’re looking for, leveraging their position as trusted custodians by becoming the central point for all product requirements and transactions.
 Spoke marketplace, a Motive Partners company, has created a platform to enable financial institutions to become platform businesses by allowing them to create marketplaces. It provides financial institutions with a ready-made, scalable marketplace platform that supports financial and non-financial products from 3rd party product providers and their own product catalogue, enabling them to quickly spin up, rapidly test, scale and manage multiple marketplace propositions.
 Over the last 3 years we have worked with several banking clients to create marketplace ecosystems. These well-known banks have recognised that they could better serve the needs of their customers by helping them through their digital experiences as well as providing them with banking services. Spoke allows them to enable third party partners to sell through their digital experiences enriching offerings and stimulating growth in their financial products.
 The irony? The next generation of banking is ecosystem economics, like Amazon, Alibaba or even Google…
About the Author:
Ed Carey, is Head of Product at Motive’s innovation business, Motive Create.
If this piece has sparked any questions or interest, Ed would welcome hearing from you on ed.carey@motivepartners.com

Quote of the Week
This week SoFi announced the acquisition of banking-infrastructure firm Technisys for approximately $1.1B. The deal is aligned to roughly 10% of SoFi’s market value. The transaction gives SoFi control of Technisys’ own core-banking platform, comprised of technology that banks use to run mobile-banking apps, open accounts and keep track of customer deposits.
Anthony Noto, CEO of SoFi:
“Technisys has built an attractive, fast-growth business with a unique and critical strategic technology that all leading financial services companies will need in order to keep pace with digital innovation. The acquisition of Technisys is an essential building block in delivering on our member-centric, digital one-stop-shop experience for SoFi members and our partners through Galileo, our provider of fintech cloud services. Under the leadership of co-founder and CEO, Miguel Santos, Technisys has emerged as a proven leader in Gen 3 multi-product banking core technology. We are excited to bring their technology offering under the SoFi Technologies umbrella and deliver it to hundreds of millions of customers worldwide.”
Under his leadership, SoFi has looked to M&A opportunities to branch out beyond its origins as a lender that focused on refinancing student debt. SoFi plans to capitalize on Technisys’s platform to grown new a personalized financial services segment for its existing customer base. The company estimates that the Technisys acquisition has the potential to create $800 million in new revenue through 2025.
Motive Portfolio Highlights
  • Wilshire - CEO Mark Makepeace on stage on Tuesday at the Trading Technologies Summit 2022 in London, where he’ll make an appearance on the much anticipated digital assets panel. He and an incredible panel of experts will be discussing advancements in technology and process foundations for this disruptive and exciting emerging asset class.
  • InvestCloud - Cheryl Nash, CEO of InvestCloud’s Financial Supermarket Division discusses how cloud technology is changing the way the industry shops for financial products: We enable the asset manager and the wealth manager to securely access data all from one place to operate more efficiently and seamlessly transact or buy a new strategy.”
  • Insurify - The Tech Tribune spotlights Insurify CEO and Founder Snejina Zacharia. Read the full story here.
  • FNZ* - FNZ announces partnership with Momentum Wealth to reshape the South African investment platform landscape and to open up wealth, together. Find out more about how this partnership will shift the landscape and benefit the entire industry. Access the full press release here.
Upcoming Industry Events
Select M&A Activity
Source: FT Partners
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Source: FT Partners
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What We're Reading This Week
Orbital launches digital asset platform for multinational treasuries
Small-business owners struggling to get approved for loans
Pipe expands into media and entertainment financing with its acquisition of Purely Capital
London Stock Exchange to acquire Tora for $325 million
Finastra seals reseller deal with DataGear to help corporate banks in Egypt optimise core processes
Regulators’ ‘junk fee’ complaints not backed up by data
Walmart Deepens Livestreamed Shopping With Regularly Scheduled Programming
Acquisitive credit unions have Georgia banks on their mind | Credit Union Journal
Home Depot Touts Agility in Ever-Changing Economic Landscape
CU Partnership With FinTechs Help Digital Push
Uzbekistan SMEs to Benefit from US $15 Million Financing Facility from ITFC
Singapore Crypto Firm Amber Group Hits $3 Billion Valuation In Funding Round Led By Temasek
Regulation, Protection & Privacy
Small businesses still face $28 billion of unforgiven PPP loans
Radha Suvarna, Citizens’ head of enterprise payment strategy and innovation, joins Bank Automation Summit
Portugal Securities Regulator Vows Crypto Rules
NYC Council Moves to Ban Grocery Apps’ 15-Minute Delivery Guarantees
Key Hires & Talent
Corelation appoints new CTO and COO
JPMorgan’s Blockchain Network Liink Head Christine Moy Exiting Company
Food for Thought
“There is nothing permanent except change.” 
~ Herodotus
*The FNZ transaction is projected to close at the end of Q1 2022.
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