Why is product unbundling accelerating?

Product unbundling in financial services is accelerating because digital technology has pulled apart two jobs that used to live under one roof: making a financial product and selling it. For a century the bank, insurer or asset manager did both; today a retailer, a car marketplace or a payroll app can do the selling, while the regulated firm quietly does the making in the background.

In plain terms, product unbundling means that the manufacturing of a financial product (holding the risk, committing the capital, carrying the licence) is separating from its distribution (the customer experience, the channel, the moment of need). Open banking, embedded insurance, robo-advisory and banking or insurance as a service (BaaS and IaaS) have each made it cheaper and safer for a third party to distribute a product it does not manufacture. The consequence is a fight over profit pools: whoever owns the customer relationship tends to capture the margin, and whoever only owns the balance sheet risks becoming a utility. Incumbents cannot stop this shift, but they can decide which side of it they want to win, and how to re-bundle value so they remain the obvious choice.

1. Two jobs, two economics

The acceleration makes sense once you see how different the two halves of a financial product are. They reward different capabilities and different kinds of investment, so it was always somewhat artificial that one firm did both.

Once an API can connect the two halves cleanly, each side can specialise. That is the structural reason product unbundling is not a passing fashion: it follows the economics rather than the hype.

2. The four accelerants, and why each one matters

The page’s original brief named four forces. Each has moved from pilot to infrastructure, which is why the pace has picked up rather than levelled off.

The numbers show how far this has travelled. Open Banking Limited reported 15.16 million UK user connections in July 2025, close to one in three adults (the figure counts connections to reporting brands rather than unique individuals). A year later, UK open banking passed one billion cumulative payments, with more than 40 million made in June 2026 alone.

On the demand side, customers increasingly meet finance inside journeys they already use (a checkout, a booking, a payroll run) rather than in a banking app. We explore where that leads in The Invisible Bank: When Financial Services Disappear Into Daily Life: a future in which most everyday financial interactions happen outside traditional banking channels. That shift in where the customer lives is the prize over which product unbundling is being fought.

Regulation is pushing in the same direction. The European Commission’s framework for financial data access (FiDA), proposed in June 2023, would extend data sharing beyond payment accounts to products such as savings, investments and insurance. It is still being negotiated, but its direction of travel is clear: more data will be portable, and portability favours distributors.

3. How product unbundling plays out by sector

The forces are shared, but the pressure lands differently in each part of financial services.

4. What most firms get wrong about product unbundling

The popular story says distribution wins and manufacturers become dumb pipes. We think that story is half right, and the wrong half is expensive.

• Distribution without a sound manufacturer is fragile. When the US middleware firm Synapse filed for bankruptcy in April 2024, its partner banks identified a shortfall of between $60 million and $90 million between what consumers believed they held and what was available, and many customers lost access to their money for weeks or months. Product unbundling does not remove the need for strong ledgers, reconciliation and oversight; it multiplies it.
• Treating it as a channel project. Many incumbents respond by launching an API portal and a partnerships team. That is necessary but not sufficient. Product unbundling changes pricing, risk appetite, capital allocation and conduct obligations, so it belongs on the strategy agenda, not only the technology roadmap.
• Assuming the customer relationship is binary. A firm can lose the front end of one journey and win the front end of another. The question is not “manufacturer or distributor?” but “where do we have a right to win, and where should we be the best partner in someone else’s journey?”
• Underpricing the balance sheet. Firms keen to win distribution partners often accept thin margins for carrying the risk. Capital and compliance are scarce; they should be priced as such.

“Product unbundling does not make the licence worthless. It makes an unpriced, invisible licence worthless.” Optimizium, Tech & Core Modernisation practice

5. How incumbents defend profit pools and re-bundle value

The original brief ended with the right instruction: defend profit pools and re-bundle value. In practice that means making deliberate choices rather than reacting deal by deal.

• Choose your posture by product. Some products are worth owning end to end; others are better distributed through partners. Map each against margin, strategic importance and your ability to own the experience.
• Industrialise manufacturing. If you will be a manufacturer for others, you need modern cores, real-time APIs, clean data and automated compliance. Product unbundling rewards the manufacturer that is easiest to plug into.
• Re-bundle around outcomes, not products. Customers do not want a mortgage, home insurance and a savings pot; they want a home that is financed, protected and paid for. Bundling across the outcome is where incumbents still have an edge, because they hold more of the pieces.
• Price risk and compliance explicitly. Partner contracts should reflect the capital consumed, the conduct risk accepted and the oversight required.
• Keep the data flowing back. Distribution partnerships should return usage and outcome data so the manufacturer keeps learning about the customer it no longer sees.

Example: a mid-sized European insurer that sells home cover through two mortgage lenders and a property portal might keep its own direct brand for high-value homes, where advice matters, while becoming the preferred embedded partner for standard cover. It prices the embedded business on the capital it consumes, requires claims and retention data from partners, and uses that data to build a joined-up home protection offer for its direct customers. It has not resisted product unbundling; it has chosen where to sit in it.

Product unbundling is accelerating because the technology, the data rules and the customer habits have all lined up at once. None of the three is going into reverse. The firms that come through it well will not be the ones that try to hold every part of the value chain, nor the ones that retreat into being cheap capacity; they will be the ones that know which parts of their business are worth owning and build the infrastructure to be an excellent partner for the rest.

That is where Optimizium works. We act as an innovation partner for banks, insurers and wealth managers, helping them decide where to compete, modernise the cores and APIs that make them easy to distribute through, and redesign propositions around customer outcomes. We start from the knowledge already inside the organisation, because decades of underwriting, credit and client judgement are exactly what new entrants lack. And we bring risk, compliance and finance into the design from day one, as co-authors of the model rather than a final checkpoint, so that product unbundling becomes a source of growth instead of a slow leak of margin.

Explore how we approach this across Banking, Insurance, Wealth Management and Beyond Banking, browse the FAQ Hub, or read the related question: How do APIs enable ecosystem distribution?