THE MARKETPLACE BANK
A marketplace bank is a type of platform business (a platform business is one that usually matches buyers with sellers) that creates value by facilitating exchanges between two or more participants. Unlike other types of platform businesses, they attract individual and SME customers through their own core banking products and services that complement their marketplace offerings, such as financial advice, product comparison and personal financial management tools (B2C) or accounting and bookkeeping tools and ecommerce (B2B).
It is fully digital from the ground upwards and usually does not have branches, salesforce, or the call centre that a multi-channel traditional bank uses to offer its services to customers.
Its services are delivered via a mobile phone app that includes account opening, on-boarding (including know your customer and anti-money laundering processes), card ordering and PIN delivery, product maintenance and secondary product or service opening.
It may have a customer service function that relies upon in-app robotic mobile phone chat capabilities, augmented by artificial intelligence and human supervisors.
Third-party financial services providers in the marketplace are usually chosen based on their technology fit and business values. To protect the Marketplace bank’s reputation, its financial service providers are subject to due diligence.
One of the key objectives is to facilitate a two-way flow of data that mutually enhances each party’s business by understanding their mutual customer and improves their ability to create sustainable value.
Marketplace banks focus on ‘re-bundling’ financial services in a way that is more intuitive and valuable to consumers.
| Marketplace Bank | Characteristics |
| Target customers | Individuals; SMEs; Third-party financial services providers (one or many per product). |
| Services | Transactional account with debit card for payments and mobile phone app-based channel; Broad range of other products such as simple borrowing, savings, investments, pensions, and general insurance; Integration with tax, accounting/bookkeeping, legal and project management software, and services. |
| Value proposition | One-stop shop for a variety of financial services; Contextual banking and ecommerce integration; Value-added services such as financial advice and comparison tools; Efficient, advanced, and nimble customer-facing processes and service; Customised experience; Back-end financial service providers offer access to new market segments that a fully digital bank may not reach; Low-cost delivery channel for scaling up; Potential access to customer data. |
| Revenue Model | From customers, from their own products: Debit card interchange fee from card scheme; Fees and interest from packaged account or additional products. From third-parties, options include: Commission on referrals; Fee per API call; Product revenue share; Subscription model. |
| Business logic | Helps digital banks grow through a range of products; Potentially attractive to potential customers to be offered a range of complementary digital products and services; Combines breadth and depth of B2B and B2C operations through its marketplace to rival traditional banks, without the cost infrastructure; Marketplace bank focuses on marketing, customer acquisition onboarding and CRM rather than competing across a variety of products; Potentially, it can increase customer loyalty and stickiness by offering market leading products. |
| Dependencies | If it operates like a traditional bank, it will require a banking licence but can offer simple transaction services under other regulations; Dependent on mobile phone technology providers approving their mobile banking app; Reputation and customer experience of third-party providers; Third-party products either integrated with core products e.g. co-branding or offered under another brand. |