White Label for the Win

The re-emergence of white-label strategies to unlock growth in financial services.

Driving trust & growth through white-label

White-label and embedded finance approaches are the result of a breakdown in customer trust.

As competitive intensity for customers in financial services continues, market dynamics are changing, in part spurred by the re-emergence of ‘white label’ offerings. These offerings bring brand partners into the value chain to deliver services on behalf of incumbents, providing access to new markets and customers. White label propositions have become a natural response to a number of factors including declining customer trust, stringent go-to-market regulation, and product commoditization. – all factors that make it increasingly challenging to achieve growth. On top of this, increasing digital maturity has raised customer expectations around value and experience, making it increasingly attractive to switch providers when these expectations are not met. As a result, incumbents have turned back to white-label approaches as an avenue to growth and protection of existing share.

By leveraging partner brands via a distinctive proposition, incumbents can increase market share. Industry analysis suggests that in coming years, significant numbers of consumers will access financial services indirectly, via brands that provide a greater sense of trust. In many cases, these partner brands offer greater incentive to purchase – “a better deal”.

Growth in finance services is increasingly challenging – especially for incumbents

The rise of consumer expectations, commoditisation of products (driven by regulation), and the erosion of trust have created challenging market conditions for FS players.

The rise of consumer expectations: Seamless end-to-end digital experiences are expected today as a minimum. Consumers are also increasingly savvy in prioritising value when selecting services. While the digital landscape has driven innovations in customer experience, it is now easier for consumers to switch between providers making them harder to retain.

Service commoditisation: Industry regulations significantly hamper product, price, and marketing differentiation, making it difficult for service providers to stand out nd deliver distinctive customer value in a highly competitive environment.

Erosion of trust: Trust is critical to underpinning a strong and competitive brand position. Larger incumbent brands have lost trust in recent years, with highly publicised examples of industry malpractice, findings from the Royal Commission and large-scale data breaches. At the same time, the entry of challenger brands, with targeted propositions and new technologies like Buy Now Pay Later, are attracting segments of the market (in particular, the young) at the expense of established incumbent players.

So, what is meant by “white-label”?

A “white-labelled” product is a re-brandable and re-sellable product or service, produced to be sold under another brand. It is commonly seen in customer retail, with large retailers re-branding plain packaged goods for sale under their own label. For retailers, this presents opportunities to expand their portfolio of branded products and leverage their own distribution networks to drive revenue and capture greater market share. These products offer a different proposition to incumbents, often at lower price points, enabling major retailers to drive growth, particularly among price sensitive consumers.

Exhibit 1: How White labelling works

White label is growing – and this looks set to continue

Strong growth of white label within FSI has come at a time when consumers are increasingly preferencing brands that they trust, brands they are more engaged with and therefore willing to purchase.

Consumers are becoming increasingly comfortable with these programs – and in some cases incentivised (e.g. through rewards and Hollard Holdings is a pure white label player in the general insurance industry, underwriting policies for major retail and financial services providers including Bupa, Commonwealth Bank, HCF, Australia Post and Woolworths loyalty). All signs point to white label continuing to evolve and mature.

First-movers in the space, like nib and Hollard can expect to face increasing competition in the market as more FSI players seek to use this avenue to growth.

What is spurring refreshed growth in white label?

Although it’s not new – white label deserves another look.

White label is not a new phenomenon in FS – and has grown in prominence as the industry has undergone its digital transformation over the past decade.

White label allows savvy providers to circumvent structural obstacles in FS, enabling new and distinct value propositions to consumers with brands they already know and trust outside of the FSI sector.

In markets such as Europe – the application of white-label (or in some cases, a variant known as “embedded finance) is growing at a considerable rate.

Over time, white label has become a legitimate lever for driving retention and growth in a largely commoditised industry.

Exhibit 2: Drivers of white label growth

What are the benefits of white label?

White label propositions present clear benefits for providers and partner brands alike, driving increased competitiveness, customer growth and retention.

3 factors can drive your white label strategy to success

For financial services providers and third-parties interested in driving customer growth through white label, 3 key success factors must be considered.

4 Steps to getting underway

Capitalising on white label growth opportunities must be done quickly while the channel is still in its growth phase, although the path to market is not straightforward. There are four immediate next steps which must be considered.