Niche services in banking - It's the icing that matters
For years together, any product innovation in the banking world was focused around same or similar segment of customers. A significant shift in the target segment for financial services was brought about by the advent of mobile money in the developing world, about a decade back. Telcos used mobile wallets to target a segment of users, hitherto considered as an unviable segment by the traditional banking industry. Nevertheless, the user segment targeted by wallet services bring in inherent roadblocks like choice of UI, distribution channel, customer education etc.
Banks have also started and rightly so, looking at creating niche value propositions over and around the segment they have been traditionally operating in. For example, banks have started looking at specified services for Youth or the new generation, which forms a significantly large user base. Engaging with this generation also brings about the advantage of a long term relationship. Women and SMEs form other such segments, which warrant for focused value proposition and offer services differentiated from the generic bouquet. Although, the user segments targeted here are new, they are strongly coupled with the existing banked users. While the customer base here may not be as large as at the bottom of the pyramid for the wallet services, it certainly is a significant chunk and it's a whole lot easier for the banks to address.
Banks will increasingly try and identify such segments and create niche services. This may need the banks to engage with specialists dealing with these segments, who may or may not be from the banking domain. However, the new set of infrastructure or people required, will only be marginally incremental unlike in the case of creating a wallet ecosystem. The increasing innovations from FinTechs will also partly share the burden of launching the niche services, with the banks.