The Bundling Dilemma – Effective Bundling Strategies for Modern Banking

 Banking was once a stable landscape but has transformed today. Fintechs and BigTechs have revolutionized the banking industry. When it comes to financial needs, banks were formerly the only choice. However, customers today have a wide range of fintechs and technology-based financial services businesses to select from, many of which promise increased personalization, on-demand access, and tech-powered solutions. Above all, fintechs have altered customer experience. The question today isn't whether traditional banks must change their product bundling tactics, but rather how must they do so to best fight competition.


What is Bundling?


Bundling is the process of grouping or bundling similar products and services into a single customer offering. It aids retailers in spreading costs over several products and ensuring customer value and loyalty over time. In the banking industry, this is a tried-and-true marketing method for increasing sales of slow-moving products. By providing a single platform for all of their requirements, product bundling in banking helps build deeper customer connect and improves connections.


The Bundling Transformation


Customers are used to putting their in traditional banks rather than fintechs. A bank's connection with its customers is long-term, involving a variety of products and services that were frequently packaged based on wide segmentation methods. Fintechs unbundled banking products in order to carve out a place for themselves. They used their technological expertise to revolutionize certain banking services such as loans and payments, giving clients a completely new method to manage their financial needs. They were able to expand their services to embrace the whole banking portfolio with the implementation of open banking legislation. In reality, open banking legislation now mandates that banks exchange data and provide API access to customer accounts. This will spark a new wave of product innovation, further transforming the industry.


Building Successful Bundling Strategies


Awareness of customers to create a compelling bundling value proposition requires a deep understanding of customer behavior, interactions, and transactions. And only cutting-edge technology like Artificial Intelligence, Machine Learning, and data analytics can provide this level of insight. Fintechs are leveraging modern technology to create and deliver appealing offerings in addition to providing a highly customized customer experience.


Banks must now focus on speeding up their digitalization initiatives in order to better understand customer behavior and provide far more tailored, relevant, and intuitive offerings. They could even take a page from the telecom playbook and provide a basic account with a few value-added services and an a la carte menu of services. Many banks have already begun to offer flexible offerings. Customers can design their own checking account from a variety of alternatives at MUFG Union Bank in New York, for example, giving them complete flexibility and transparency in pricing.  Online or with the help of a personal banker, customized accounts can be set up. 


Bundled deals, at their most basic level, are based on broad segmentation catering to homeowners, families, or regular travellers. Bundling methods, on the other hand, must go deeper to anticipate the lifetime monetary worth of each customer to create bundles that meet all of their demands. Bundling must also be a dynamic process that evolves in real time based on ongoing customer behavior. Traditional banks are hampered by their legacy core systems, which are either too slow to manage constant change requests or too powerful to support the adoption of new technology. It's critical to keep pricing systems separate from core systems. However, in order to do so, the systems must be upgraded, which may be a dangerous, time-consuming, and costly process. Working with third-party solutions that can establish an agile middle layer capable of orchestrating the banking ecosystem of the future.


Bundling has shown to be a highly effective technique in a variety of industries, including e-commerce and telecom, and it has enormous promise in the banking industry as well. The new generation of banking will be built on hyper customized product and service offers to clients, with technology at its center. Banks already have a high level of customer trust and a gold mine of information at their disposal. With the appropriate technology, they can unleash the value of this data and create dynamic, customized offerings.

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