To bundle or to unbundle..

Its interesting that just when the trend of unbundling financial services that has been so successful in terms of growth is starting to convert into meaningful exits with iZettle being acquired by PayPal, and the apparently imminent IPO's of Adyen, and Funding Circle , some of the other early winners and newer entrants are rapidly expanding their offerings most notably Revolut, direct rival RobinHood , Transferwise and Zopa.

In many cases the investors backing the unbundling strategy are the same as those backing the bundlers. Looking to interpret why you might pursue the two different strategies I have a few thoughts but by no means the answers:

  1. Products with very profitable economic models and exceptional growth prospects provide a stronger argument for sticking with one product for longer

  2. Barriers to global expansion across geographies relative to barriers to expansion across products are a factor

  3. Some product expansions (stock trading to crypto trading) seem easier to manage than others (Zopa from lending to payments)

  4. Its easier for strategic buyers to digest single product companies and easier for analysts to assess single product companies for IPO so proximity to exit could be a factor

  5. Similiarly new product launches will yield a lower return on investment initially so proximity to funding or exit event could be important

  6. Market opportunity and competitive advantage

I’m sure there are other factors…

If you’re a supporter of the theory that fintech challenger's real advantage distils to regulatory arbitrage (ie. simpler regulatory conditions) you wouldn’t be a fan of bundling.

Conversely if you believe that financial services competitive advantage rests on the central pillars of technology expertise, customer service and global scale then you could be.

I don’t mean to suggest there is a single right answer. However it seems to me its particularly difficult to navigate this dilemma right now..

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© 2017 by Kevin Douglas.