One of the most prominent trends of the fintech revolution has been that of unbundling.
Nimble, innovative upstarts have developed targeted specific markets, such as wealth management and lending, traditionally dominated by banks and large financial institutions that bundle these offerings with others across the spectrum of financial services.
Many consumers have embraced unbundling, and why shouldn’t they? After all, if a dedicated non-bank lender can offer you a personal loan on better terms and through a quicker, more efficient process than your bank, why would you borrow from your bank?
But is the unbundling trend waning?
A number of successful fintechs are expanding their footprints in an attempt to leverage their customer bases and generate revenue from new services. And now LD Holdings Group, the parent company of loanDepot, the second largest non-bank consumer lender in the United States, is pursuing something even more ambitious: a vertically-integrated platform called mello Home.
Starting this quarter, the platform will help connect pre-approved homebuyers with real estate agents.
As Anthony Hsieh, Founder and CEO of loanDepot, explained, “We spend hundreds of millions of dollars to connect with homebuying consumers each year, and increasingly, these home shoppers are not yet working with a real estate agent. Mello Home unleashes our digital marketing power to real estate agents by connecting them with homebuyers who’ve been pre-approved by loanDepot’s local loan consultants and are ready to shop and close with a local real estate agent.”
Later this year, loanDepot plans to add a home improvement loan product that contractors will be able to offer financing at the point of sale. Through mello Home, consumers will also be able to obtain referrals to local contractors who can help them make home improvements.
The drive behind loanDepot’s vertical integration is simple: the company cites research indicating that 97% of U.S homeowners are frustrated working with multiple vendors during the home ownership experience. The same percentage “expressed appeal in the concept of a trusted/branded network of vendors to choose from for home ownership needs”, and 81% indicated a belief that lender referrals to real estate agents were valuable.
It’s all about customer experience
While loanDepot’s efforts don’t totally impeach the unbundling trend, they are a reflection of the fact that in many cases, consumers are willing to trust a single brand to offer multiple solutions if that brand delivers a good enough customer experience.
With that in mind, it seems possible that the unbundling trend was more a result of the fact that consumers wanted better experiences and were willing to accept the hassles of dealing with multiple providers than it was a result of a desire to work with multiple providers.
A lot has changed since the fintech revolution began. Many upstarts have grown into bigger players that have tapped out their initial markets and are looking to grow revenues by expanding beyond their initial offerings. And a growing number of entrenched financial institutions, including big banks, have upped their games and now offer more competitive customer experiences. They’re also investing heavily in technology like artificial intelligence, which they’re using to better predict the needs of their customers and offer them more relevant products and services.
While developments like Open Banking will continue to encourage unbundling to some extent, all indicators are that the trend will face increasing headwinds, creating new challenges and opportunities for fintechs and large financial institutions alike.