Marketplaces: what opportunities exist for banks?

Amazon, Airbnb, Uber… brand names that everyone recognises. What do they have in common? They are online marketplaces. This model applies in very varied fields, and is also emerging strongly in the banking ecosystem. Boursorama, BPCE, BNP Paribas and many others have adopted this model. How can we explain this phenomenon in which traditional players and fintech companies combine their respective interests? What products and services are concerned by this market? Is it destined to continue in practice? Arnaud Frémont, Senior Management Consultant at Square Management, explains this model in which banks and customers can meet.

Although different marketplace models exist – for contacts between consumers, businesses and consumers or between economic players – it is above all a tool for managing a change in banking paradigm, and consequently a means of boosting the digital transformation: “The marketplace is a tool for transformation, and this is all the more true for so-called traditional banks,” confirms the expert, “whether they are dealing with consumers or professionals.” A lever of change favoured by several trends: firstly, according to a study by Exton Consulting, a decline within traditional banks who calculate that more than 8 million customers were lost between 2013 and 2018; secondly, an increase in competition with the arrival of fintech companies in the banking and financial sector, and finally, the rules, and in particular PSD2, which obliges banks to open up their data and questions the opportunities for traditional establishments. It is therefore an opportunity for banks to adopt this tool which meets their new requirements.

Marketplaces: a win-win tool?

Banks and financial institutions must adapt to market trends. They must show they are unique by providing differentiating offers which also meet the new expectations of customers. For Arnaud Frémont, the creation of marketplaces is currently an essential means of boosting the digital transformation for banks. “It enables them to upgrade their business model and provide new value propositions, both in terms of the diversification of the services and products shared, and to improve the customer experience.” Proximity, simplification of exchanges, information and transparency… all these qualities are sought by the final customers. Another aspect to be taken into account: the phenomenon of multi-banking. Customers have several accounts in different banks at the same time, both traditional and fully online banks, and want to have more remote exchanges.

By introducing a services hub via a marketplace – like a caretaker’s lodge, for works and repair services or equipment rental – the challenge is to create a single entry point to redirect customers to a set of needs. A significant gain for all concerned: “On the one hand, consumers find an answer to all their needs for a whole life course, for example to buy their first apartment, with all the related needs, for a mortgage, and on the other hand the bank obtains new data and information on its customers, enabling it to increase its product and service offers”.

Banks, a trusted third party for partners and users

Although at first sight marketplaces are above all intended for consumers who are used to digital tools, especially in the 18-35 age bracket, other populations are destined to adopt this use. “Certain products, whose existence we are not always aware of, could be proposed by banks which act as intermediaries, for example for undertaker’s services which are more relevant to elderly people,” emphasises Arnaud Frémont. Banks and financial institutions no longer hesitate to offer other types of services, like building equipment rental, works and repair services, as well as concierge services. Diversification of products and services appears therefore to be a means of achieving customer engagement. And for a very good reason! Traditional banks have several significant advantages: a relationship of trust that already exists with their customers, which can be based both on their reputation and the security of the payments; and their ability to deploy a marketplace thanks to their capacity for investment and mobilisation to upgrade their IT infrastructures. At the same time, they also represent a big advantage for younger players in the market. “The emergence of marketplaces is transforming the relationship between banks and suppliers. In particular it enables fintech companies to grow more quickly, while also boosting the business of traditional banks,” explains the consultant, referring to the increasing need for responsiveness in customer relationships.

Deploy a marketplace as part of an overall strategy for change

To successfully deploy a marketplace, it is necessary to define each stage of the project and provide monitoring to assess its effectiveness and its benefits. For Arnaud Frémont, the first requirement is to have players in the required market: the more offers there are that meet needs, the more they will attract consumers. In addition, the user experience is also crucial: the user experience must be designed to make the interface pleasant and easy to use. Third requirement for this transformation:  perfect command of marketplace liquidity, i.e. the ability to assess the level of demand and carry out the transactions on the technical and financial levels. Also, the choice of the technology used to deploy the marketplace is crucial, it will be structuring for deployment of this tool. The marketplace project requires comprehensive analysis of the issues, from agility to methodology: “For it to work, you need to carry out change management both upstream and downstream, i.e. from the choice of technology to deployment and communication,” specifies Arnaud Frémont. Whereas banks have both the financial and human capacity to meet the emerging needs, in particular by setting up a marketplace, the challenge that remains is one of adaptation. “It must be prepared, organised, managed and completed!” concludes the expert.”