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Takeaways from the 2021 CS European Financials Disruption Conference

We hosted management from several branchless neobanks, looking to take market share from incumbents in their respective markets. Key neobanking themes we highlight include: (1) The importance of a lending product to profitability given the revenue pool available in banking; it remains challenging to monetise a customer base through transactions and services alone. (2) There is a significant and durable cost advantage of a modern tech stack which can drive significant operating leverage at low volumes. (3) Different models can lead to success. Some neobanks have built highly profitable super-apps with new product additions that drive customer engagement. Others define themselves as much by what they do not do in pursuit of cost-efficiency. Banks are also partnering in product adjacencies to broaden product offerings at a lower cost.

Among the payments companies presenting, key themes included (1) Packaging vs. Pricing: Being able to offer better service or package product adjacencies allows payments providers to compete on issues other than just price. (2) BNPL continues to be validated by the markets as a viable business model, with newer entrants focusing on a direct-to-consumer BNPL model (vs. a B2B2C merchant model for incumbents). (3) Banking-as-a-Service remains a natural extension for modern banking infrastructure, as providers move into banking services leveraging license and technological capabilities.

We hosted management in the growing insurance ecosystem. A number of presentations focused on how the development of ecosystems is key to developing new acquisition channels, new products, and better customer service. Customers acquired through this channel have more attractive long-term value. We learned how mobile devices and connected vehicles are making telematics adoption more appealing to consumers and reducing costs for insurers. A number of companies have shown significant loss ratio improvements and retention increases after adopting telematics. We also observed that better value for customers does not necessarily have to result in more competitive pricing; rather improving customer propositions is going to be key to winning new business in developing insurance markets.

@Jon Peace