WORKWEEK

Was chatting with someone new to the fintech industry the other day and mentioned rebundling—something I’ve written about since 2019 but seems to be very popular nowadays, judging by the number of analyst reports I’ve been getting mentioning rebundling, and everyone talking about becoming a “fintech super app” (a phrase I absolutely loathe, btw. I hate it almost as much as “fintechs,” which I’m adamant isn’t a real word.) 

But what does it mean and why is it important? For that, we first need a little history lesson. 

Back in the day, about a decade ago when fintech was just starting out and moving past marketplace lending, a bunch of startups popped up focusing on one specific use case on consumer or business banking. Each startup was trying to digitize their specific product—whether it was checking accounts, wealth management, or personal loans—and create a more mobile friendly product focused on younger audiences. (In the past, I called this phase “Fintech 2.0.”)

Back then, everyone was raving about how fintech was “unbundling” banks. The theory was, by attacking banks by focusing on specific products rather than trying to rebuild an entire bank’s product suite, startups could capture market share from banks over time. 

And it worked—to an extent. But eventually a number of factors led startups to consider adding more financial products under their umbrella, ushering in a new era of “rebundling.”

1. Profitability: Competition in fintech has risen dramatically—more venture dollars in the sector means more new companies getting funded. That also means a higher rising cost of acquisition for a new customer, and a higher cost of retaining those users too. First, unfortunately, a lot of fintech startups have figured out great wedges to get customers in the door, but not make that much money off of them. The profitability of a fintech customer is much lower than a customer of a traditional bank. One way to rectify that problem is to add more products, and ones that generate more revenue, so that the CAC to LTV ratio starts evening out. 

2. Ease Of Creation For New Financial Products: So many infrastructure companies have popped up over the past few years that it’s become much cheaper and easier to add new financial products. Apex and Drivewealth make it easier to add wealth management products. Banking-as-a-service companies make it easier to add checking accounts, debit cards, and credit cards. More recently, lending-as-a-service companies have made it easier to add lending related products (we haven’t written much about this but it’s a really hot sector of fintech right now.) This drop in costs for new products also plays a factor in profitability too. Because its cheaper to develop new financial products, you don’t need a massive engineering team to build things from scratch. 

3. Shifting Consumer Demands: Gen Z represents a newer generation of users with different expectations from their digital lives. When it comes to digital financial products, users now expect a full suite of products and services—they don’t want to use 10 different apps for 7 different services.
4. Organization Efficiency: Fintech startups already have robust compliance, legal, customer service, and finance departments that know the ins and outs of running a digital-first financial institution. Adding a new financial product on top of the one they’re already running efficiently is a relatively easy task when you already have the back office in place.