By 2006, Celent predicts that 60% of top US and European banks will sell competitors' products, in an "ineluctable" surge towards a new model of 'open finance'.
In a report, 'Open Finance in the US and Europe: A Perfect Storm in Retail Banking', Celent examines the long term drivers forcing a shift from a proprietary distribution model in retail banking towards an open finance model.
The surge of open finance, which involves the delivery of third party products, as well as the sale of products via non-proprietary channels, stems from fundamental changes in the banking industry, including the disruption of traditional banks’ value chains.
"Banks are experiencing the same forces which reshaped consumer retailing in the 60's" comments Gwenn Bézard, the author of the report.
For decades, the banking industry has escaped the fate of the food, music, and consumer electronics industries, which are now dominated by global distributors. Because of the complexity of their products, low automation, and regulatory issues, banks have maintained a stronger integration of manufacturing and distribution, says Bézard.
Over the past decade, however, multiple forces have encouraged banks to unbundle manufacturing and distribution, opening their delivery networks to non-proprietary products, as well as relying on third-party manufacturers for best-of-breed products.
While banks are still keeping discount retailers at bay, they have begun to use their distribution networks to offer products from other financial institutions.
Celent predicts that 60% of top US and European banks will offer competitors' products within the next four to five years, up from 15% in 2002; 100% of them will offer complimentary products, up from 60% in 2002.
"Banks are being pulled into open finance faster than they may realise" concludes Bézard