Like companies in other industries, banks are increasingly integrating their core business functions with digital ecosystem platforms as they seek to manage broadbased customer relationships in a fragmented value chain. In fact, banking executives are more likely than average (36 percent of bankers, versus 31 percent of all respondents) to believe that it is very critical to adopt a platform-based business model and engage in ecosystems with digital partners. The Digital Relationship Manager, for example, will make money from financial products delivered through their own personalized customer-centric ecosystems (such as for home buying or retirement planning) as well as from financial transactions like payments that are embedded in other non-bank transactions.
Seventy-six percent of bankers agree that competitive advantage will not be determined by their organization alone, but by the strength of their chosen partners and ecosystems. Platforms, like Uber, WeChat and Amazon’s Alexa®, are where much of the transaction banking of the future will take place. However, being a platform player does not necessitate being the platform owner. Consumers expect banks to be there, regardless of who owns the platform.
Bankers understand and are responding. Twenty-three percent indicate their organization is leading one or more digital ecosystem(s). For example, BBVA in Spain is opening up its core platform and services upon which others may build their companies and services which, in turn, will help the bank build new businesses. It is already giving authorized third parties access to account data and aggregated card profiles to benefit customers, for example by enabling intelligent consumer lifestyle choices like timing of restaurant visits and recommendations.13 Its US bank, BBVA Compass, opened its payments API to digital payments startup Dwolla to allow real-time money transfer between bank accounts in the United States—a process that typically take a few days.14 This mirrors our survey findings. Bankers cited the top three benefits of participating in digital ecosystems: improved customer satisfaction (53 percent), increased speed and agility in developing solutions (52 percent), and access to a new customer base (47 percent).
Effectively leading or participating in a digital ecosystem means new challenges. Along with cybersecurity (36 percent) and uncertainty as to how industries will be disrupted (21 percent), banks will need a strategy for protecting their brand positioning and deepening their influence in the customer’s life. Seventy-six percent of bankers agree that ecosystem participation involved giving up control in favor of an overall better outcome (such as speed, agility, access, lower costs) while 69 percent agree that ecosystems are creating an environment for unlikely partners. Slightly more than 70 percent agree that their organization’s API strategy is instrumental to their brand and 73 percent believe that in five years’ time ecosystems will have shared responsibility for a brand.
Of course, being an Open Platform Player is not the only way for banks to play in the digital economy. As banks are experiencing signs—from open banking regulation and fintech explosion to low market valuations and digital native competitors—that the traditional banking model is coming to the end of its growth curve, most are looking to jump to the next curve to survive. Some banks may seek to create platforms that offer predominantly third-party products; others will choose to become Digital Relationship Managers that manage most of the value chain while enabling transactions on other platforms. Some may only serve a narrow set of needs as a Digital Category Killer, or as a Utility Provider that provides product solutions or regulated entity services to other players. In any case, banks must evolve to digitally-fit business models.