The future of banking: collaboration and co-creation in ecosystems
When to buy or source new capabilities and how to do this
The current speed of transformation forces banks to consider whether to build or reinforce new capabilities, or buy and source them through collaboration within their ecosystem. So what are the benefits and points of consideration when you engage with fintechs and other new players in an increasingly more open ecosystem?
Roeland Assenberg van Eysden - 3 April 2018
The benefits of collaboration and co-creation
In the last few years, there has been increasing attention for collaboration and co-creation within the banking ecosystem. In Europe, the most likely scenario is a one-way type of collaboration, with banks requiring services from smaller tech companies. Why? On the one hand, because such a collaboration allows for faster innovation – at the edges of the banking organisation, so the innovation process does not require lengthy internal discussions and it does not impact IT legacy systems or the workforce. On the other hand, because collaboration can reduce costs. Some tech companies have developed services that have become too expensive for banks to offer – either through stricter regulation or because these services are not considered “core” anymore.
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Example of open banking: TransferWise
Take, for instance, TransferWise, which offers a more affordable solution for international payments than most banks. Therefore, collaboration with this tech company for this particular type of service is an attractive alternative for many banks. Another successful example is a digital bank in Germany. Their portfolio of products covers retail and business banking, from basic bank accounts and saving bonds to lending – all accessible from the same bank account.
Points of consideration
Of course, collaboration and co-creation require careful preparation, both on a strategic and operational level. Strategically it is key to consider how critical these services are for your competitive position. For instance, are country coverage or speed of processing key for your clients? What type of collaboration or co-creation will be most successful and what processes are most suitable for collaboration? On an operational level for instance, many tech parties are small businesses that rely on a handful of employees. If banks start to rely on them for particular services, can they keep delivering? Also, can they deliver particular local products? Because even though SEPA has harmonised European cross-border payment, there are still a few local differences, such as giro cards. Are these companies able to support such products or able to invest in capabilities to do so? Finally, banks are expected to be available 24/7. If there is a breakdown, can this be solved in time? And how to compose service level agreements, how to arrange security and compliance? Issues like these should be covered up-front.
Making the right choices
The need to collaborate and/or co-create will only increase in the next few years. Clients expect integrated and seamless services and availability through social media, search engines, voice, apps, and innovative use of new technologies such as VR/AR, robotics and AI. Also, regulation like PSD2 makes information that is now recorded at banks accessible to more parties, which encourages new start-ups to develop new services. Recent research among banks and fintechs shows that especially services for the mass retail market and SMEs are expected to transform dramatically. Therefore, it is crucial to make the right choices now, based on potential benefits and the points of consideration mentioned above. The future of banking is now.
The Future of Banking
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