Liquidity vs. convenience vs. knowledge
How high-touch financial businesses add value in a digital environment
- How can high-touch financial businesses best add more value and how will their added value evolve in response to digitalization? To answer these questions, it is important to re-clarify the nature of the value added by financial businesses.
- We examine financial businesses’ added value through the lens of zero-commission competition among US online brokers. Specifically, we look at how US online brokers derive revenue from each of their services to identify value-additive factors in financial businesses.
- Broadly speaking, financial businesses add value in four forms:financial liquidity, market liquidity, convenience and knowledge. Inlight of the characteristics of each, we expect high-touch financial businesses’ added-value mix to become increasingly tilted toward knowledge.
- While knowledge and digitalization are often seen as being at odds with each other, the US offers at least one good example of digitalization as a lever to add more value in the form of knowledge.In essence, the example bodes promisingly for the emergence of a new, up-to-date knowledge management.
- In Japan, high-touch financial businesses (particularly full-service brokers) are far behind the curve in terms of deriving added value from knowledge, but knowledge-based business models have substantial potential. Now more than ever, management teams need a mindset makeover toward embracing knowledge as an added-value driver.