GlobalData Plc

Collaboration with non-bank competitors is a must

Collaboration with non-banking competitors is fast becoming a necessary prerequisite to serve new and existing customers. Banks should focus on their core competencies and keep abreast of technological advances.

The range of attitudes towards collaborating with non-banking competitors varies greatly among banks. Some banks now class themselves as IT providers, while others question the very idea of collaboration. As polar opposites they share one thing in common: they are not gaining the optimum benefits of collaboration. For banks that have wholeheartedly embraced technology and created internal processes to harness external innovation through hackathons and accelerators, there is still a disparity in the willingness to source ideas from the outside, and the number of tangible examples actually being applied to products and services. Conversely, those providers that view non-banking competitors with suspicion, or are just very conservative, are not adapting to changing market dynamics.

In order for banks on either side of the spectrum to gain more from collaboration, it is prudent to revisit the question: why should banks collaborate at all? Simply put, and unlike before, non-banking competitors are in a position to affect the banking market through the applicability of their technology. Take for example Google’s Project Loon, which has developed helium balloons that will provide internet access to consumers in remote parts of the world. Google has being trailing the technology and rapidly improving the life span of the balloons, which are now at the point where they are commercially viable to operate.

Crucially, this technology will offer internet access to millions of underserved consumers at a fraction of the cost of hard infrastructure. In effect, a non-banking competitor is providing the rails for the 2 billion underbanked consumers to adopt mobile and online banking propositions at a serviceable cost. Capitalizing upon this new opportunity will likely be more efficient and profitable if banks collaborate with non-banking competitors that have experience or technology applicable to serving the underbanked. One such example is BanQu, which provides economic identities to underbanked consumers who lack formal credit histories using blockchain technology.

Aside from the market-changing capabilities of non-banking competitors, it is important that banks appreciate that the technological prowess often lies with the non-banking competitor, however small. What is important here, particularly for banks that have created their own internal innovation ecosystems, is that collaboration partners should be treated as equals, not just vendors. Banks should focus on their competencies and value what they bring to the table, in what should be a mutually beneficial collaboration.

Collaboration, by definition, is mutually beneficial, but for banks to get the most out it they need to focus on their core competencies and layer these on top of the technological advances brought about by non-banking competitors.

By Sean Harrison, Retail Banking Analyst

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