Responding to increasing volatility in financial markets and consumer demands for convenience, online brokerages around the globe are adopting a convergence strategy that includes adding banking services to their product portfolio, says a new report from Meridien Research.
"We believe an expanded product portfolio is imperative for online brokerages to survive," say authors Christine Barry and Jennifer Schmidt. "This strategy is ideal for them to strengthen customer relationships and improve the stickiness of their sites. It also reflects a consumer preference for convenience and a shift back toward a full-service model."
Online brokers have three choices to expand services to include banking: merging, allying with or acquiring a bank; creating their own technology inhouse; or licensing banking platforms from outside vendors. Surprisingly, suppliers of online banking solutions, not online brokerage solutions, have taken the lead in providing the technology needed to integrate brokerage and banking services, says Meridien.
To illustrate the potential, the report provides case studies of Ameritrade's alliance with NetBank, Banque Bipop (France) with i Bourse, and Citigroup.