The ecosystem imperative
Banks facing slower growth are on the lookout for a new relationship model. The new imperatives for banks include rebuilding trust in the era of Open Banking and transforming customer interactions into hyper-relevant, personalized experiences. Our survey of 120 global banks shows that nine out of 10 banks are strongly interested in customer-facing ecosystems, with banks participating in a network of interlinked companies, working together to deliver value propositions to meet customers’ core needs.
Banking leaders (at the CDO, CMO and CSO level) have multiple options in developing and launching such ecosystems—as marketplace orchestrators, third party ecosystem participants, open banking platforms or referral platforms—with all paths leading to increasing revenues, reducing customer churn and/or expanding customer engagement.
Key to success
The key to success for banks considering customer-facing ecosystems is in finding the right operating model. Before launch, banks should look in depth at how value is to be delivered, as new capabilities are needed to support the ecosystem operating model. They should be aware of considerations related to the three core domains of ecosystem partners, business architecture and technology.
Banks have multiple options in developing and launching ecosystems:
Typically, there are three ways that banking ecosystems create value:
- Expanding primary relationships.
By offering hyper-relevant experiences through ecosystems, banks can increase the value of an extended relationship with other financial products, increasing cross-selling (such as adding a consumer loan for home appliances to mortgage holders).
- Generating new revenue streams. Banks can offer ecosystem partners access to their customer base and data in exchange for fees, by orchestrating an ecosystem or by opening their infrastructure.
- Reducing customer churn. By orchestrating or joining third party ecosystems, banks can deliver more meaningful customer experiences and can follow customers beyond the boundaries of their traditional relationships.
When launching an ecosystem, banks should look in depth at how the value of hyper-relevant experiences is to be delivered, as new capabilities are needed to support the ecosystem operating model. Operating an ecosystem is different from running a bank; a banking ecosystem generates value by delivering hyper-relevant experiences — either from banking or from nonbanking services. This is quite different from the traditional model of managing the maturity mismatch between deposits and loans.
- Develop separate partnership models with tactical and strategic partners
- Effectively manage and monitor performance
- Equip the ecosystem with intelligent marketing capabilities
- Set up an agile ecosystem management organization
- Move towards an API-enabled architecture
- Take ownership of ecosystem security
Retail banks are looking for new sources of profitable growth. Broadening their proposition by leveraging ecosystems can be the way to stay hyper-relevant for their customers. Banks can orchestrate ecosystems to cross-sell financial services and generate new revenue streams. They can also become partners in third-party ecosystems extending their presence into the non-banking aspects of customers’ lives.
Taking on the challenges
Banks should be aware, however, of the many challenges related to creating and maintaining such ecosystems. These range from choosing and managing the right partners to resolving difficult issues related to organization, marketing, technology and security. The banks that get these matters right will be well-positioned to attract and retain customers based on value, immediacy and, above all, trust.