What Is Monoline?

Monoline is when a firm or individual specializes in a single line or discipline of the financial services business. It is often used to describe a company operating in only one industry segment, product, or service. Common monoline examples would include companies that only deal with credit cards, 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 service disciplines or products.

A monoline business can be contrasted with a full-service or multiline operation.

Key Takeaways

  • Monoline is the practice of specializing in one definite area of expertise in the financial services sector.
  • Types of monoline businesses include credit card issuers, mortgage lenders, and insurers.
  • Monoline companies can operate at an advantage due to their specialization and specific skill, but cannot be a one-stop shop for their clients.
  • Due to their deeper knowledge, monolines can offer greater efficiency, which results in more competitive pricing for consumers.

Understanding a Monoline

Specializing as a monoline confers the advantages of expertise and focus, and monoline companies in the financial services space may be able to achieve greater efficiency as a result. This often allows them to offer more competitive pricing, more aggressive timing, or greater flexibility than a competitor that offers a broad and full line of various products and services.

Monolines often are better able to accommodate unusual cases, take greater risks, and offer more personalized services due to their niche specialization.

These companies may be found in a variety of financial services disciplines, such as consumer credit, insurance, mortgages, annuities, securities, default insurance, and more.

Some Types of Monolines

Monoline Lenders

Monoline lenders are banks or loan originators that focus on providing a specific type of credit such as mortgages, car loans, or personal lines of credit. They do not offer checking or savings accounts or other related services (e.g., retirement savings products, credit cards, insurance, etc.).

Such lenders, therefore, exist for a single purpose and will not attempt to upsell a client into another, often more profitable, product or service. Today's monoline lenders may have very few, if any, physical locations or branches, which allows them to offer more competitive pricing or lower rates. Due to their specialization, they tend to have relationships in place with mortgage insurers that also allow them to be more flexible in their lending practices. Monoline lenders may thus be able to provide mortgages or other types of loans when the bigger banks cannot, and consumers typically get better rates in the process.

Monoline Insurers

A monoline insurance company is an insurance company that provides coverage for only a specific kind of insurable risk. For example, a monoline insurer may only offer whole life insurance. Another will only make guarantees to debt issuers in the form of credit wraps that enhance the credit of the issuer. As such, these specialized firms give investors and issuers the confidence to participate in the market by providing liquidity and financial protection in the event 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 costs, enhance customer service, and evaluate and manage risk much more efficiently.

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