Kyle Ferguson, CEO
Why the pace of technology is generating an ecosystem approach that the banking industry needs to learn how to navigate
As far back as 2015, a Computer Weekly’s headline warned “Banks risk losing payments business as third party providers muscle in”. Certainly, new companies with the technology and the skills do appear to be challenging established businesses’ ability to keep pace.
In fact, regardless of sector – when faced with nimble, digitally-native startups, the impression is that these disruptors have the ear of the customer, appear more attractive and are able to do more with less.
In contrast, established global businesses seem hampered by archaic systems, outmoded workflows and a simple intractability when it comes to serving the customer.
In reality, the ability of upstarts to topple the leaders is possible in only a tiny minority of cases. In the consumer banking sphere for example, Monzo founder Tom Blomfield has admitted that his smartphone only bank is likely to attract only a fraction of one per cent of established retail banking clients.
Demands and expectations
But it is undeniable that these startups, even with their limited actual reach, are influencing customer demand and expectations. Customers expect banks of every shape and size to move with the times.
Embedding new systems or changing departmental priorities is often not an option for multinational institutions with other challenges to face. The solution is found in third parties.
Startups or small, specialist vendors or service providers have the advantage of being nimble and able to onboard new skills and technologies rapidly. Immersed in the world of technology and solutions rather than finance and customer management, they can adapt quickly to new customer demands.
As a result, we are seeing the growth of the ecosystem business model as even large companies with huge resources and access to internal specialists realise that it’s no longer effective to try and go it alone. In the IoT sphere there are hundreds of new service providers popping up every week. In marketing, the growing use of marketing technology to deliver real time personalised advertising has resulted in a multi-faceted market of specialist providers and experts.
If the argument for partnering with startups is clear, how to do it is perhaps less so. Looking back at marketing for example, the chaotic realm of the Lumascape demonstrates how hard it can be to navigate a third-party provider ecosystem.
First and foremost there is the question of choice. Working primarily in the digital sphere, these companies don’t need to invest heavily in infrastructure or physical product. This means the market is already full of providers in what is still a very young industry.
Picking the perfect partner
To decide, it’s important to find a company that matches both capabilities and the partner’s appetite for risk. Is the provider known for experimentation and a fail-fast philosophy? Perhaps this is why they are attractive – the opportunity for an otherwise staid organisation to get involved in the bleeding edge of sector innovation.
Or perhaps the concern is to find a subject expert who can deliver a single experience seamlessly and reliably. In which case, providers need to show consistency, a high level of industry expertise but less appetite for pivoting whenever the opportunity presents.
For some, aligning with less established providers of either stripe is not ideal. Organisations that lack confidence in digital experiences as a whole may prefer to engage other established but more specialised providers to lead them through the maze.
One thing is certain, there is a partner for every taste in the third party ecosystem. Making the right choice depends less on their prospectus and more on understanding your own business’s set of needs and attitude to risk.
The Third Party Provider Landscape for Marketing Technology: Could this be the same for commercial banking in the near future?