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Netflix and the Future of Banking

Netflix and the Future of Banking

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Banking moguls looking to extract more value from their businesses might take a leaf out of the media industry.

Netflix is a huge media success. But it is far from unique. The media industry has long made more money through aggregating and distributing content than by creating it. Distributors provide scale and customer reach without the costs associated with making films or TV programs. The glitz and the glamor may be in movie making, but the gold is in aggregation and distribution and the customer stickiness as well.

Netflix doesn’t have to pay for James Bond’s cars or Q’s gadgets.

Social networking is a similar model. – offering scale and customer reach. Google’s new social network is already oversubscribed.  

Could we apply the same logic to financial services?

The traditional banking business model is more about insourcing than outsourcing. Content distribution and creation takes place in the same shop.

But does that make sense anymore? Would customers be better served by having access to their choice of financial services from any provider through a single source?

Financial consumers have relationships with more than one provider, sometimes with several. But there are costs associated with this. Information is difficult to aggregate across multiple firms. Executing transactions can be even more so. Add geography to the mix and the complications may accelerate.

Is there a market for a multi-bank aggregator and distribution model that consolidates everything from our bank accounts to our 401 (k)s? Could we pass all our instructions through one interface to all our financial providers (MINT, Bundle, PayPal are interesting examples of value extraction through aggregation).

This isn’t an argument for breaking up banks, but it is a suggestion for considering a different model even within the bank where there is a customer facing business with its own P&L buying products customers demand both from within and outside the firm.

Banks are treading carefully with social networking.

But could that be the future face of the industry driven by the cloud? Movie making in financial services may never be the same again.