I think this is a key point that James makes here.

BankerVision: The long tail of banking

I can’t help wondering if the long tail opportunity for banks is rather more substantial than manufacturing product for niche customer segments.

8 +/- years ago someone at Forrester coined the phrase “Open Finance” to denote the idea of selling others’ products. The idea was that distribution through internet was so disruptive, that unless you could offer various alernatives to customers, your offer would be immediately discounted. This also intrduced the separation of distribution from product.

The Net creates a new financial services environment that Forrester calls Open Finance. In Open Finance, consumers enjoy best-of-breed financial services combined with rich advice and the easy electronic movement of money.

I think that Open Finance is coming to pass now. Products such as mortgages particularly are so commoditised, margins have gone, and that there is little loyalty associated with the product. The loyalty tends to lie with the service, speed, convenience etc, and those attributes are all distribution related, not product related.