The end of the vertically integrated bank

A basic tenet of the bancassurance model is cross-subsidisation. That is, more profitable lines in one part of the business are used to offset less profitable lines in other parts of the business. Whilst not a new way of doing business, it does distort the real cost of doing business for the consumer.

For bank customers, this may all about to be unearthed!

Any would be purchaser (and the regulator for that matter) will no doubt expect the wealth business units to carry on under their own steam. Without the ability to cross-subsidise from other areas of the bank there is arguably only really one likely outcome, an increase in cost for the consumer.

Is this the price of disintegration?

However, it may not be all doom and gloom for bank customers. The hope is the new owners will be a little more willing to invest in solutions which provide better outcomes for customers, if they do, those customers may well be willing to pay a little extra for the additional value. If they can’t, then there will be plenty of smaller, technology savvy and more customers focused firms willing to help.

In any event, any new owners will be hoping the bancassurance customers’ inertia is greater than their disappointment.

Having had to clean up the mess left by the of the demise of the bancassurance model in the UK we know how painful the windup can be. For the bank and it’s customers – many of whom don’t remember the name of the teller who sold it to them in the first place!