What is a Monoline

Monoline refers to the practice of specializing in a single line or discipline of the financial services business. It is often used to describe a company operating in only one industry, product or service, such as credit card issuance, mortgages or whole life insurance. The main advantage of operating as a monoline is the competitive advantage that such specialization can offer. Consumers may be more likely to do business with a company that can offer greater knowledge, skill and expertise compared to companies whose operations span many different financial services disciplines or products.

Breaking Down Monoline

Other than the advantages of expertise and focus, monoline companies in the financial services space may be able to achieve greater efficiency. This may allow them to offer more competitive pricing, more aggressive timing, or greater flexibility than a competitor that offers a full line of products and services. They may be able to accommodate unusual cases, take greater risks and offer more personalized service, as well. Monoline companies may be found in a variety of financial services disciplines, such as consumer credit, insurance, mortgages, annuities, securities default insurance and more.

Monoline Lenders

Monoline lenders are lending banks that focus on providing loans such as mortgages. They do not offer checking or savings accounts or other related services (retirement savings products, credit cards, insurance etc.). Such lenders therefore exist for one purpose and will not attempt to upsell a client to another (more profitable) product or service. Monoline lenders may have very few (or no) physical locations or branches, which may allow they to offer more competitive pricing or rates. By dint of their specialization, they may have relationships in place with mortgage insurers that allow them to be more flexible in their lending practices. Monoline lenders may also be able to provide mortgages or other loans when the bigger banks cannot.

Monoline Insurers

A monoline insurance company is an insurance company that provides coverage for a specific kind of insurable risk. For example, a monoline insurer may make guarantees to debt issuers, often in the form of credit wraps, that enhance the credit of the issuer. As such, they give investors and issuers the confidence to participate in the market by providing liquidity and financial protection in case of default. Without fully understanding the entire system and how it all comes together, a company is unable to provide its customers with quality service. Due to the expertise that monoline companies have in the industry, they are able to reduce operating cost, enhance customer service and evaluate/manage risk much more efficiently.