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.
Accenture’s 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 Chief Digital Officer (CDO), Chief Marketing Officer (CMO) and Chief Strategy Officer (CSO) levels) 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.
The key to success for banks considering customer-facing ecosystems is in finding the right operating model. Before launch, banks should develop a clear strategy as to which customer segments to focus on and 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 three core domains: ecosystem partners, business architecture and technology. Banks that get these matters right will be well-positioned to attract and retain customers based on value, immediacy and, above all, trust.
As we have explored elsewhere in our Banking as a Living Business series, trust is central to strong banking relationships and is built through personalization, consistent service delivery, security of data and assets, and the ability to support customers at key moments in their lives.
- A NEW RELATIONSHIP MODEL IN AN ERA OF OPEN BANKING
After looking at a number of digital platforms, some banks have identified customer-facing ecosystems as one possible model to rebuild trust, seeking to multiply customer interactions and transforming such interactions into hyper-relevant, personalized experiences.
Accenture research finds that 88 percent of banks surveyed believe that ecosystems will be an important way of interacting with customers in the future, while 89 percent see customer-facing ecosystems as the main driver of future value creation in the banking industry.
2.DEFINING BANKING ECOSYSTEMS
Banking ecosystems often operate across traditional industry boundaries, with different players working in the same space to deliver to banking customers services they need and value.
Banks have several different options in developing and launching ecosystems.
We have identified five specific models for banks, which are: life moments orchestrator; marketplace orchestrator; third-party ecosystem participant; open banking platform and referral platform.
3. CREATING VALUE THROUGH BANKING 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). Nearly all banks we surveyed are seeking to expand the scope of primary banking relationships over the next three years through cross-selling.
Generating new revenues 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. Our research indicates that, over the next three years, most banks expect more than 10 percent of their incremental revenues to be generated by ecosystem plays.
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. Banks we surveyed expect ecosystem initiatives to help reduce the churn rate by up to 10 percent over the next three years.
4. FINDING THE RIGHT OPERATING MODEL
Although research indicates that banks know what to do, they are still not sure how to do it. Banks face barriers ranging from technology to business architecture and partner management when it comes to executing on the ecosystem opportunity. The top three challenges include technology, security and customer experience—indicating that banks are struggling to find the right operating model that ensures hyper-relevancy by offering secure and personalised customer interactions.
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 non-banking services. This is quite different from the traditional model of managing the maturity mismatch between deposits and loans.
Retail banks are looking for new sources of profitable growth. Broadening their proposition by leveraging ecosystems is a key way to stay hyper-relevant for their customers. Banks should 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.
The full report from Accenture Competing with Banking Ecosystems is here.