Strategic partnerships have become a catch-all term for a variety of strategic collaborations, which could be as ‘light’ as a referral agreement with an emerging SME lender, to white-labeling the underlying credit risk engine, to the co-development of the overall platform. Banks have always relied on strategic partners. But the scale and pace of technology change, and the diversity of sources from which it can now emanate, make it more difficult than ever.
Listed below are the top strategic partnerships predictions, as identified by GlobalData.
In 2020, leading banks will partner judiciously, provide overnight access to millions of new customers, and neutralise disintermediating threats. Others will partner promiscuously but without purpose or process and create cyber vulnerabilities, service outages, and potentially business-ending reputational damage.
The strategy of new digital banks throwing partners under the bus in the event of service issues will meet with consumer backlash. Understanding how likely such an outage is and who is liable if and when it does occur, as well as establishing an agreed process for recovering performance, will become the critical part of service-level agreements and the foundation of effective marketplace strategies.
Banks will continue to partner deeper outside of banking to tap into ‘lifestyle.’ In December 2019, Tinkoff Bank in Russia launched a super-app that claims to meet any financial, lifestyle, or leisure need by partnering with an ecosystem of providers for offers, discounts, and personalisation. The app also includes Tinkoff’s marketplace. New digital banks like Emirates NBD to Liv have done the same.
Incumbent banks will look closely at how to disaggregate their assets to monetise them through B2B strategic partnerships and/or diversify into other industries. For example, JPMorgan Chase has moved to bolster its valuable wholesale payments business by building an e-wallet that lets e-commerce and gig economy firms such as Amazon and Airbnb offer their customers virtual bank accounts.
The well-established trend of adjacent verticals partnering with banks for BaaS will continue. This will create a messy and complex ecosystem of possible partners. Traditional industry, product, and service categories will blur. Incumbent banks will continue to optimise technology, strategies, and processes for quick and easy partnerships. Rather than one-off partnerships, banks will seek to become orchestrators of vast ecosystems.
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Part of this will be offering BaaS to early-stage fintechs by vouching to regulators that the firm is a ‘trusted third party.’ In time, large banks will extend their banking license and integration into payment processing systems to bring these propositions to market more quickly. For example, HSBC launched a digital lending platform, partly built with technology from fintech Amount.
This is an edited extract from the Banking & Payments Predictions 2020 – Thematic Research report produced by GlobalData Thematic Research.