Like the telecommunications companies, global banks are in a race to ensure they don’t become a dumb utility, leaving the more agile fintechs to capture an increasing share of their digital-forward customers. However, while some banks remain fixated on owning the customer experience, banks that are best placed to win big are now focussing on improving their technical partner experience.
“Ten and even twenty years ago, digital banking was all about creating a great customer experience. Whoever had the best CX would be the winning brand. But as banking capabilities became more embedded and ecosystems grew, the need to easily partner with other brands and fintechs in order to provide new and innovative products and banking experiences has become the new competitive edge,” explains Sergio Barbosa, CIO of enterprise software development house, Global Kinetic, and CEO of its open banking platform, FutureBank. “The winning formula today is understanding that customers don’t experience your bank in a banking app, but rather in a multitude of ways in their everyday lives.”
Barbosa goes on to explain that if banks want to avoid becoming redundant, they must look at ways to partner with other brands as a means to inject their offerings into as many new brand networks as possible.
Accessing vast networks of new customers through clever partnerships
According to Barbosa, the more nimble fintechs continue to capture a growing piece of the banking revenue pie, leaving banks to simply provide the technical systems support for the customer experience, putting banks in real danger of becoming less relevant.
“Fortunately, embedded finance running on banking as a service (BaaS) platforms allows banks to easily partner with companies that offer new and exciting offerings, without having to rip and replace their old and often unstable legacy systems. What’s more, by partnering with large and respected brands, banks are able to quickly access new customers.
Embedded finance allows brands, such as big retail companies and motor vehicle manufacturers, to seamlessly offer their customers financial products and services such as branded credit cards, vehicle financing and branded insurance and loyalty products using the bank’s licence and running over their technology backbone. Examples could also include furniture stores allowing customers to pay for their new lounge suite over 24 months, or even how some HR software providers allow companies to help staff access short-term loans.
This ‘brand banking’ gives banks immediate access to vast networks of new customers, quickly boosting their lending book and revenue streams.
By using BaaS, banks are also able to partner with more fintechs to boost their digital products for their new customers. What’s more, by using BaaS platforms, rolling out new digital products can be done in weeks instead of months or years, with no risk or disruption to core banking systems. However, Barbosa says that banks looking to grow their business, either at the product development or customer acquisition level, must first review how they engage with their partners.
A great partner experience lays the foundation for success
“How current and future partners experience a banking institution is incredibly important when it comes to choosing who to work with and how effective those efforts will be. From the first time you engage with a bank, to how they integrate their technologies and even how they monitor and evaluate the quality of the development work you are conducting together, making sure you create the best possible partner experience helps you attract the best partners and ensures the best possible outcome,” Barbosa explains.
However, Barbosa points out that banks don’t have the luxury of delaying their decision to refresh their digital offerings, pointing out that the big platform players like Alibaba, Amazon, Apple, Google and others are all pushing financial products as part of their offering. “The harsh reality is that it’s not just the smaller fintechs that are making a play for their customers. The megatech companies are obviously monetising their vast networks, and financial services are a no brainer for them. When fighting off huge companies like these, banks will have to find strategic partners who are able to match that kind of scale. A smart partnership strategy has never been more important, and that depends on being able to easily and securely connect with them,” he sums up.
About the author: Co-founder and CIO of enterprise software development house Global Kinetic, Sergio directly heads its open banking platform, FutureBank. A skilled software engineer, innovative product developer, and keen business strategist, he has participated in several notable fintech milestones, including building the southern hemisphere’s first digital-only bank all the way back in 2002.