In an era where customer expectations are rapidly evolving, the banking industry faces a pivotal challenge: how to deliver personalized, efficient, and innovative services. This article explores the transformative role of ecosystems in banking, positing that the real question is not merely about adopting new technologies, but rather understanding how to leverage these ecosystems to meet the diverse needs of customers.

By examining the interplay between traditional banks, fintechs, and emerging technologies, we will uncover the critical questions that drive successful ecosystem strategies. What are the key customer pain points that ecosystems can address? How can collaboration enhance service delivery? And, importantly, how can banks ensure they remain relevant in a landscape defined by rapid change?

Through insightful analysis and real-world examples, this article aims to provide a roadmap for banking institutions seeking to thrive in a collaborative future, ultimately answering the question of how ecosystems can be harnessed to create value for both banks and their customers.

If ecosystems in banking are the answer, what is the question?

There is a lot of talk today about ecosystems and networks. Driven by a desire for more sophisticated, more personalized products and services, a seemingly never-ending explosion in the number of players in financial services is raising the level of competitive intensity. At least that's the view from industry insiders, but what about customers? For the lucky few, those with time and expertise, this is an era of choice - a plethora of innovative offerings, often at super low prices. But for the vast majority? Baffled by endless choice - confusion leads to frustration or inertia.

Ecosystems can, and do, offer a solution, but what exactly is an ecosystem? Are they new? Is there a right way and a wrong way to leverage ecosystems for success? That's what this article looks at.

Ecosystems are not new

Ecosystems in banking are not a novel concept. For centuries, banks have leveraged the power of ecosystems to serve their customers. Established in 1973, SWIFT is an example of the cooperative approach banks have frequently taken in their business. They partnered with card system providers such as Visa and Mastercard to enable consumers to make purchases globally. Correspondent banking goes back even further. The bottom line is that banks have long used ecosystems as a means to offer a broader product set and to reach new customers in new places. It is clear that ecosystems serve a practical business purpose.

Powered by technology and globalization, and enabled by standardization and regulation, ecosystems in banking have ramped up to a new level. Whether it is fintech partnerships, or open banking initiatives, alternative networks such as Ripple or new technologies such as blockchain, the role ecosystems play in banking today has exploded. And like a snowball that gathers mass and momentum so too will ecosystems.

Getting the foundations right

As the importance of ecosystems in banking is only going to increase, ensuring that banks are optimally configured to take advantage is not merely important, it is mission critical. So how can you ensure that your bank has the right foundations? It starts with a clear understanding of the role the bank wishes to play in an ecosystem world. For example, banks operating as platform providers, leverage APIs to help fintechs integrate their services while connecting customers with third party providers. Recognizing the growing power of information, data custodians can leverage their vast stores of customer data to offer personalized advice or targeted product recommendations. Service integrators offer a one-stop shop where customers and manage all their financial needs. Regulatory partners can leverage their expertise and experience to help new entrants navigate the regulatory landscape. Innovators invest in or partner with fintechs to drive innovation. Banks focusing on enhancing customer trust and loyalty act as customer advocates.

The role you choose informs the strategic moves you make, the culture you need and the direction of your technology investments.

The consequences of getting it wrong

Ecosystems have long been a part of banking and, in for many good reasons, the pace of change in some areas of banking moves slowly. However, it would be a mistake to assume that the status quo will remain. In many respects, ecosystems benefit from network effects - where an ecosystem attracts more participants as the number of participants grow. Put bluntly they can reach tipping points, becoming 'overnight successes' by 'going viral'. However, they can also suffer from the negative aspects of today's fast-moving world, going out of fashion like the way younger people shifted from Facebook to Instagram, Snapchat and TikTok.

What this means for banking is that the ecosystems where your customers congregate today, where your business is today may not been the same tomorrow. Whether that's an ecosystem that you created, or one that you just participate in, you must be ready for it all to change. But just because something now comes along that doesn't mean that the old ecosystems will immediately disappear. Consider the fact that while Instagram is growing at 25% year on year versus Facebook's growth of only 3%, both platforms still have over 1.5 billion users each month. Indeed, the average social media user now engages with 6.7 platforms. This will apply to banking ecosystems as well - as new ones rise the old ones won't (all) die.

The solution?

From a bank's perspective, the ability to 'create and participate' in ecosystems will become ever more important. In addition to innovation and integration, efficiency and cost-effectiveness will be vital. The banks that can follow fashion fast will be the winners. Mindset and culture are clearly vital - banks need to anticipate and prepare for rapid changes. In a world where the latest 'killer app' seems to come out of the blue, dealing with ambiguity and uncertainty will be especially important.

Technology is a key enabler in this new world. Seamlessly integrated apps for smooth customer experiences, combined with flexible workflows to orchestrate ecosystem partners will deliver the tailored, innovative products and services customers expect. Sophisticated telemetry and advanced analytics will provide the insight needed for day-to-day operational oversight and reviews of strategic business performance. The ability to easily add-in, take-out or even hot-swap components without requiring time consuming, complex and costly development projects will differentiate market leaders.

Market leaders will participate in, contribute to, and consume from, ecosystems as diverse as the customers and markets they serve. Should their business demand it, they will be to create ever more focused ecosystems - a local ecosystem delivering a one-stop shop for all their home solar needs - including government grants, personal loans, local installers, advice of electricity plans. With the right technology in place, the only limit is your imagination.

In summary

In an era where customer expectations are rapidly evolving , the banking industry faces a pivotal challenge: how to deliver personalized, efficient, and innovative services, cost effectively and at scale. In an increasingly ecosystem-driven world, it is vital for banks to uncover and answer the critical questions that drive success. While, at first glance, it may seem to be mostly about technology the reality is that the foundations depend on business strategy, the culture of the bank and role it seeks to play. This leads to questions about what key customer pain points are we seeking to address, and how can collaboration enhance service delivery? Asking the right questions can help banks ensure they remain relevant in a landscape defined by rapid change.