Tectonic shifts are happening in the banking world. With the rapid growth of agile fintech’s In 2021, digital banking penetration in Europe reached 58%, with the top five challenger banks posting a combined valuation of over $50 billion. In APAC, non-bank fintech apps are being used by nearly 50% of the banked population. In India and China, real-time online payments are set to surpass 70% of all transactions by 2025.
But as disruptive as they seem for brick-and-mortar banks, these developments hint at larger changes down the road.
The platformification of service delivery as a competitive differentiator is picking up speed. And banks recognize that they cannot deliver on the spectrum of open banking solutions and digital banking solutions that today’s consumers demand. To thrive in today’s retail banking products landscape requires a different approach altogether. Today, nearly 90% of bankers believe ecosystems represent the next great banking evolution.
What makes ecosystems essential?
Most consumers don’t see intrinsic value in banking products; rather, they look at them as enablers – consumers don’t really want an auto loan; they want the car that the loan lets them acquire. Creating an ecosystem to support every aspect of this purchase is key to making a real impact in customers’ lives. In this context, the smart banker knows that bringing stakeholders like auto manufacturers, dealerships, vehicle insurance carriers, and service centers into a Unified customer experience represents the future of business growth.
In today’s tech-driven economies, well-designed ecosystems allow for:
- Tailored consumer experiences as banks can dynamically choose which vendors and product offers to bundle into their own
- A steady stream of insights on consumer purchase and ownership behaviour to fuel innovation and personalization
- Accelerated go-to-market cycles by offering curated product and service bundles instead of having to build new offerings from scratch
- Improved revenues and liquidity via ecosystem-driven commissions and instant credit/BNPL services
The smart route to ecosystem orchestration
In orchestrating an ecosystem, bankers also retain the lion’s share of customer ownership. And at the same time, they create a sustained pipeline of conversions across many verticals. Here, the bank’s role evolves from a mere financial services provider to a creator of an end-to-end purchase and ownership experience. But actually, building an ecosystem means checking the right boxes.
Find partnership models that work for everyone: To find the partnership models that work best for your ecosystem, it’s useful to align partner categories with ecosystem goals. For example, technology acquisition is often easier in the context of equity alliances or joint ventures. On the other hand, straightforward contract agreements are often more flexible and work well with service expansions and product portfolio growth.
Measure partner performance: Giving your partners clear KPIs and setting relevant service benchmarks will help all stakeholders understand and measure value creation in the ecosystem. Considering that ecosystems are complex with many metrics to capture, AI-powered analytics tools can be immeasurably useful here.
Integrate with APIs: Using open banking solutions APIs to quickly integrate, onboard, monitor and manage partner services within an ecosystem is essential. APIs also make basic features like support, geolocation, mapping and logistics much easier to integrate and deliver.
Fortify your cybersecurity infrastructure: With multiple new customer touchpoints, come just as many new threat vectors. This is especially true for ecosystems, given the near-constant levels of data sharing between participants. Banks looking to orchestrate an ecosystem need to keep a leash on customer data and consider partner security audits as well as their own.
Finding the right IT partner is half the struggle
Creating an ecosystem is far from child’s play. Orchestrators will need powerful IT support and resilient digital banking solutions that offer seamless data porting. But more importantly, it requires an IT partner that creates a holistic solution to digital ecosystem building.
| Ask your tech vendors these six questions | ||
|---|---|---|
| Can they build the tools to capture data across the ecosystem for insights, governance and compliance? | Can they extend security coverage to every ecosystem stakeholder? | Can they map and visualize impacts across complex decision networks? |
| Can they run simulated business scenarios to predict product performance? | Are they specialists in financial services integration using APIs and microservices-based architecture? | Can they quickly build and launch products & services mapped to the entire customer lifecycle from a set of composable business components? |
The best outcomes are often tied to IT solution providers with a record of efficient modernization projects and financial services transformations. For banks, being able to create successful ecosystems is a cornerstone of financial future-proofing. Especially if they are looking to shape the next wave of retail financial services and retail banking products. But to do that, they’ll need the right partners on every front.
In this pursuit, banks must prioritize aligning with IT solution providers that understand the intricate landscape of open banking solutions, digital banking solutions, and retail banking products. These partnerships are instrumental in navigating the evolving financial ecosystem. An effective partnership not only ensures technological compatibility but also offers innovative solutions that cater to the dynamic needs of modern consumers.
By: K Srinivasan, President & Regional Head- Europe & UK, iGCB, Intellect Design Arena