Client-stickiness is something all fintech firms strive for.

A recent trend has emerged in which fintech firms are becoming a ‘one-stop-shop’ for the full financial lifecycle, aiming to achieve customer loyalty by offering a full range of products and services. These players are taking previously unbundled services, and rebundling these offerings under their own brand.

The growth in e-commerce has been a driving factor behind this trend, especially after PSD2 allowed for non-financial businesses to offer financial services. As a result, rebundling has been described as the next stage in the fintech evolution.

Furthermore, payments companies are diversifying their product ranges by adding adjacent services for their clients, such as lending or compliance. Examples include SumUp’s acquisition of Tiller, Thunes’ acquisition of Limonetik, and Rapyd’s acquisition of Valitor, while Stripe has also partnered with businesses such as Klarna, Visa and Alipay to expand its proposition.

The rebundling trend

Traditionally, financial services have been bundled under one roof. The fintech boom changed this, as highly specialised competitors started to offer better, unbundled services. However, that trend has now evolved, and these improved individual services will be rebundled under one roof once again.

David Jarvis, CEO of Griffin, highlighted this in an interview with Finextra. “Historically, bundling was standard in financial services. Incumbent banks and firms argued that because they provided traditional banking services to consumers, they were best placed to offer all kinds of financial services to everyone. But over the last decade, the rise of fintech has dramatically changed the landscape - a wave of agile, tech-first companies are rapidly unbundling the capabilities of the legacy firms to deliver a better, more contextualised customer experience.”

Jarvis went on to say that these players have a “relentless focus on specialisation and achieving perfection within a single vertical. Their goal is to nail a specific offering and provide customers with a more convenient and modern experience than they can get at legacy firms. But now, as the space matures and many of these companies achieve significant scale, we’re seeing a shift back to bundling adjacent services in an attempt to increase margins. For example, most neobanks now offer travel and phone insurance as part of their current account products.”

Søren Mogensen, chief growth officer at Banking Circle Group, also pointed to the rise of rebundling. He said in an interview: “Being a fintech ourselves, and working with fintechs every day, we've come to find that there is sort of a new evolution within our sector, which is that the fintechs that started perhaps 10 years ago, unbundling the universal banks’ propositions by finding one feature to be really good at, they've grown to become platforms of their own. And those platforms have become huge.”

This trend is not new, and should be perceived as part of the ongoing improvement of financial services, rather than the unbundling that came before as being a mistake.

Mogensen offered a similar success story from a different industry: “If we go back 20 years and look at software, this exact same thing happened. In software, Oracle, SAP and Microsoft created very strong platforms, and then they added on applications to their core systems. It was an inevitable part of the evolution in software. Now it is an inevitable part of the evolution in fintech. I think that's perfectly okay and healthy.”

Jarvis emphasised the impact of this trend: “There is no right or wrong approach. The key shift is a renewed focus on the value each offering brings to the user. Having multiple competitive options in the market gives customers the choice to decide what works best for them.”

How does rebundling happen?

There are several different ways in which a company might approach rebundling. In Finextra’s impact study, titled ‘Rebundling: The next stage of the fintech evolution’, the following two routes to rebundling are outlined:

1. Incumbents are opening up to fintech startups and are optimising internal processes and customer journeys, launching joint products, and creating an ecosystem of financial services around the bank following the implementation of PSD2.

2. Challenger banks are realising that they must offer a wider range of services to satisfy their clients’ needs.

However, Clare Gambardella, chief customer officer at Zopa, offered three different examples of how companies might rebundle.

The first of these is through being bought and owned, which she explained “is the model that Zopa is using. We create and own all our products at this point in time, and that's been the right thing for us because it's enabled us to be sure that we are controlling the product end to end in a way that is simpler, better value and fairer for the customer.”

The second route is through being bought and brokered, which is “creating a kind of marketplace and white labelling, or offering up external products. That has the advantage for many providers of allowing them to offer a high degree of choice. And also, to do that quickly and fluidly without having to create each of the products end to end.”

The final example Gambardella gave was of companies like mobile money transfer service Monese, which are “focusing on specific audiences and providing a coherent offering for them.”

She added: “I think each model has its advantages and disadvantages. For us, we feel very strongly that focusing on saving, lending, and offering products, which work better for customers, is the right way to go forward. And certainly, the feedback we've had from customers is that where they find products that work well for them, they want more of them.”

Why companies want to rebundle

The customer desire for varied services under one roof, alongside simplicity, appears to be behind the rebundling trend. “The driving force for us in introducing products is always consumer need,” Gambardella explained.

Mogensen’s view is that with rebundled services, customers receive a “more holistic set of propositions.” He continued: “Sometimes we will react to clients’ requests for new solutions, and we will go back and see if we can deliver. Other times we will approach a customer to say - have you thought about, for example, business to business Buy Now Pay Later (BNPL)? […] We believe that our clients benefit both from us having the solutions they look for, but also sometimes in taking inspiration from us as to what they might want.”

Gambardella agreed: “The big advantages for consumers will be simplicity, as they don’t have to manage multiple relationships across multiple different providers. That also means having their data and information in one place, which is helped by open banking. This will hopefully allow providers, especially fintech providers, to generate better insight for them so that they can be more proactive in taking the right action on their finances.”

She went on to say that when consumers “consolidate with a fewer number of providers that they have a high degree of trust in, that enables them to select products in a simpler and easier way.”

Jarvis shared a similar sentiment: “When done well, rebundling allows customers to benefit from a trusted relationship with a partner and manage all their finances in one place. Sometimes bundled services can be streamlined based on customer data held by the provider - such as credit underwriting based on income information - so there is a natural synergy there.”

He went on to explain that Griffin’s motivation for rebundling is centred around “providing a central platform that will revolutionise how early stage fintechs operate, innovate, and scale. We are not bundling because it allows us to get extra margin, we are doing it because we genuinely believe that it delivers a superior customer experience. Our business model puts us in a unique position to benefit from other companies' continuous bundling, unbundling, and rebundling of financial services.”

Zopa started off as a peer-to-peer lender, and for the last two years as a digital bank, Gambardella said that they have been focused on savings and lending in the form of personal loans, credit cards, auto loans, and recently BNPL. “The driving force for us in introducing products is always consumer need. Our consumers actively told us that they wanted products from us in more segments.”

She continued: “We see a very high number of people coming back to us for loans and we also have them asking for more products. […] Our experience has been really positive. We’ve seen very strong uptake of our new products from existing customers, which has been brilliant because it’s really proven out the theory that actually customers do want more, and to give a higher share of wallet with providers that they trust and have a good experience with.”

Summarising the benefits of rebundling, Mogensen said that “a strong, compelling platform adds on a richer proposition,” which contributes to the fintech sector as a whole delivering more value.

Mogensen continued: “What we find is that the companies that we serve […] get an opportunity to, in turn, offer a richer set of solutions to their merchant clients because we enable them to do so. We can tell a payment company - don't just do payments, enrich your proposition towards your merchants so that you create more stickiness, and solve more problems for that merchant.”

Lessons learned and warnings of overbundling

Rebundling is not without its flaws. All those interviewed by Finextra said that there is a risk of overbundling products where they are not needed, and that having a clear strategy is essential.

Mogensen warned of this: “What we should be aware of is avoiding the development of overly diversified conglomerates, where the rebundled solutions are not complementary and not relevant to the core of what the company does.”

On strategy, Gambardella agreed. “I think it's important to be clear on the strategy that you're going after as you bundle, whether it's attracting new customers, or serving your existing base, and getting the balance right there. […] We’ve very much had a strategy of not prioritising growth at all costs, but rather driving profitable growth from the start to make sure that the company is sustainable, and also making sure that we're properly meeting customer needs once they're within Zopa.”

Jarvis shared this view: “In the end, the key to good rebundling is executing in a sensitive and contextual way. If companies are just trying to squeeze every drop of margin by pushing inappropriate products, customers will wise up and go elsewhere - and in the current and highly competitive market, they have the option to do so.”

Another risk that emerged is that some non-bank players that are offering bundled services are not protected in the same way as banks. Gambardella explained: “There are platforms out there looking to bundle quite extensively that are not regulated as banks. Therefore, I think customers need to be somewhat careful about where they are bundling. Because it is possible that they bundle with a provider that is not a fully regulated bank, and therefore give up some of the protections that they may have had in the past.”

Gambardella concluded that, “rebundling needs to not only bring things together, but bring things together better than it was before.”