Published in the Huffington Post USA.
Mr. McGuire: I just want to say one word to you - just one word.
Benjamin: Yes sir.
Mr. McGuire: Are you listening?
Benjamin: Yes I am.
Mr. McGuire: Plastics.
Benjamin: Exactly how do you mean?
Mr. McGuire: There's a great future in plastics. Think about it. Will you think about it?
Benjamin: Yes I will.
Mr. McGuire: Shh! Enough said. That's a deal.
This dialogue is from the film classic, "The Graduate" (1967). Mr. McGuire, an old family friend, tries to give the young Benjamin Braddock, played by Dustin Hoffman, some business advice about the great future in plastics.
With this in mind, I propose the Efficient-Banking business model, a new innovative business model that can solve most general banking and insurance client needs with fewer staff members, best-in-class partners, and more business success.
The cost-to-income ratio of this financial institution will be substantially below industry standards. Thus, a higher business valuation will be achieved over time.
The partnership with many best-in-class service providers also increases cross-selling business that results in a win-win situation for all involved parties.
The cost savings through Efficient-Banking will translate into better terms and higher returns on clients' investments and savings.
There will be no investment banking, branch network, or traditional branch support offered.
This is a trend that is long in coming, as can be seen already in the business models of direct banks that serve their clients via online banking, which is also known as Internet banking or with FinTech companies.
However, what is the difference between Efficient-Banking and the direct banking business models?
1) The use of a crowdsourcing platform to propose and evaluate investment ideas.
2) The reimbursement of any sale of client data to third parties (of course, clients will have agreed to the sale beforehand).
3) The possibility to participate as a client in the overall success of the new business model.
The primary services offered will be similar to what is expected of direct banking and insurance services, but with the promise to always try to exceed competitors' offerings.
Not all clients will be attracted to the online banking and insurance services that Efficient-Banking provides, where there will be no face-to-face, personal relationship with an advisor, banker, or insurance agent.
Classical personal relationships as we know them from traditional banking and insurance partners also have their advantages. For instance, providing clients whom they got to know over the years with better terms and services. In addition, those banking and insurance partners can deal better with complex transactions where more than one expert is required to solve an issue or request.
This contrasts with the Efficient-Banking business model. However, despite the above-mentioned drawbacks, it can provide clients with better terms through significant infrastructure and overhead costs savings, and thus can achieve better overall returns for the clients.
Clients who need to speak to an expert will have access to the Help Centre, the internal crowdsourcing platforms, or the best-in-class service partners who stand by to answer clients' respective questions.
Clients who feel comfortable with such an innovative financial institution business model and its internet-related services will be rewarded with benefits on many levels:
1) The full advantages of the crowdsourcing platform, the cost savings, and true best-in-class products.
For clients who seek their investment advice through the crowdsourcing platform of the new financial institution, the platform will provide a rating system that objectively evaluates the quality of the recommendations of the platform members.
The crowdsourcing platform will also serve as a source for the development of desired new services. In other words, the financial institution can respond to client needs faster and in a more personal manner.
2) The new financial institution will provide clients with the opportunity to participate in the success of the new business model. The fact that they can participate in the success without being shareholders is an additional innovation in itself, as well as a yield optimiser.
3) In addition, clients can opt to allow their information and data to be sold anonymously to third parties and receive a refund for it. This is an innovative approach that is new to the financial industry and is a return enhancer for clients.
The advantages for banks and insurance companies in establishing such a financial institution are that they gain early experiences and build know-how for a future that is coming whether we like it or not.
The financial institution that implements Efficient-Banking early will likely take a leading role in shaping the future of the financial industry. No management should try to fool itself by ignoring it. It will happen with or without them.
“I just want to say one word to you - just one word.
Less is more.
- Mies van der Rohe