The white label refers, in essence, to a product or service that is manufactured or developed on the one hand and is marketed/sold on the other hand. This is a system used by many companies and businesses that want to offer certain products or services by leveraging other specialized companies’ experience.

Example of a credit card

An example of this is when a credit card is issued by a local business or telecommunications service provider; in this case, it would be a white label product. In the case of the aforementioned card, it would be serviced by a bank or credit card issuing company (for example, Visa). Still, it would be “renamed” and then marketed/sold by any company that owns the means (in this case, the merchant local or telecommunications service provider). Likewise, other products could also receive white label labeling, such as payment processors, central banking systems, omnichannel support services, personal finance management, customer services, various analysis tools, applications, etc. These products and services are used under white label agreements.

Why the use of white label?

This labeling means for the issuing companies a substantial saving of money and time. You can think of the usefulness of “white labeling” as a kind of “outsourcing” or using a supplier to create complementary products or services that are not part of our usual offering; offering white-label services has led providers to become more and more specialized, offering customized solutions of higher quality and short development and implementation time.

Application example for a bank

Let’s say a white-label service provider has a “smart app” that helps customers analyze their expenses. Over time, this app can automatically identify and classify more than 99% of expense items. It can even suggest to customers where to find better prices; All these factors make customers happy with the said application having high retention rates.

Suppose a bank wants a similar application for its clients… but this is not an area in which said bank specializes, then the question would be: What is better? Invest 2 or 3 years in developing such an application from scratch? o Buy or rent this application and offer it immediately to your customers? (saving a lot of time and money in the process).

To simplify this process, it is best to opt for the “purchase” or “rental” of an application already developed by a specialized provider, simply what the bank would have to do is pay for said application (either purchase or rent) and add your “brand or logo.”

Different positions in the sector

Some banks do not agree with this idea, stating that this would affect the differentiation of their products or services and make them basic and generic. Another reason could be scale and focus since not all companies want to offer a complete package of banking services or do not all want to do long-term deals; however, there is a multiple alternatives market as a result of the Fintech boom, the market that offers financial solutions supported by technology and that is quite flexible.

For example, many Fintech companies offer banking software in which a monthly fee is paid without any kind of commitment (the service can be suspended at any time); likewise, there are Fintech companies that develop specific solutions according to the needs of each bank. Another factor to consider is that you save a lot of time since instead of going through research and development processes, you can have a high-quality finished product (ready to use).

What do you think about this topic? What other similarities can you mention between white label banking and a co-branded credit card?

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