BrazilFive best practices for successful banking partnerships
According to a new report by Oliver Wyman, a large majority of executives in the banking industry believe that forming partnerships and alliances are critical to the success of their strategies. Mastering the art and science of partnerships is however a challenge for most banks, with less than 10% of partnerships achieving their desired return on investment.
“Partnerships have become central to deliver banks’ strategies,” said Pierre Romagny, a partner at Oliver Wyman in the UAE. “It’s probably the single biggest agenda for both consumer and the wholesale business.”
“But while they have recognized the need for partnerships they are finding that executing them at scale is not easy. The majority of banking partnerships do not meet anyone’s expectations, be it the banks’ or their partners’. Partnerships have often been opportunistic or experimental, with banks lacking a clear framework of a two-way value creation.”
For banks to drive more results from their partnerships, Oliver Wyman’s experts suggest to follow five best practices:
1. Codify the demand for partners
Delineating a bank’s partners from its vendors is imperative. Banks must identify and quantify areas they want partners to come in and outline the key outcomes they want to achieve from these partnerships. Whatever the drivers of a potential partnership, banks need to be clear on why, where, and how they want to work with partners. This may take the shape of a coordinated bank-wide partner strategy.
Examples of use cases for partnerships include bringing in new technology capabilities, opening up new channels, improving the customer experience, serving new customer segments, accessing new talent, generating scale, and reducing risk.
A word of caution, banks should not make the opposite mistake of considering vendors as partners. Vendors remain as relevant as always to a successful procurement strategy.
2. Formalize the partner engagement models
A common pitfall for banks is believing that one size fits all. As banks abide by customer-centric principles, they must also view partners with a similar lens. Banks should define a partner typology that is practical to them and unique to their partners. Different types of partners bring different value propositions to the table, and partner-centric relationships should be established keeping this in mind.
Each partner archetype requires a different playbook including governance, operating model, standards, engagement journeys, partner value proposition, degree of strategic alignment, and approach to risk and value sharing.
Examples of partner archetypes:
Marketplace supplier: The partner sells an off-the-shelf solution to an end-customer as part of a bank’s value proposition (for example, ecosystem or platform). Marketplace suppliers are high-volume and require a high degree of standardization in the engagement model. For example, DBS has partnered with electricity, mobile, and broadband retailers to distribute their services through the DBS Utilities Marketplace.
Component partner: The partner enhances a bank’s value proposition by meaningfully tailoring its existing value proposition. For instance, the Bank of Montreal partnered with Blend, a cloud-based platform provider, to deliver digital mortgage/home equity solutions to its customers in the US by optimizing its lending process and reducing loan approval times.
Distribution partner: The partner helps distribute bank value propositions/products and services directly to its client base. For instance, Standard Bank Group has partnered with Pick n Pay to distribute the bank’s services in supermarkets.
Co-creation partner: The partner and the bank collaborate to develop a solution that would not have been possible in silos. For instance, Apple Card was co-created between Apple and Goldman Sachs, each party bringing a distinct set of capabilities and competencies.
Non-business partner (such as NGOs, associations, regulators): Such partnerships are not commercial in nature but can add considerable customer and societal value.
3. Adopt a partner-ready organizational structure
Partner-ready organizations have embedded partner competencies within their organizational structure. The below Exhibit shows the range of options and considerations when designing a partner-ready organization.
4. Embrace continuous learning
Banks are constantly working to enhance the Customer Experience (CX) by understanding their expectations and preferences.
A similar effort needs to be put in to measure and monitor Partner Experience (PX). Some banks even add PX scores to their internal scorecards, creating accountability and a strong incentive to abide to and improve on the standards.
Partnering is a new discipline for banks. As such, banks should ensure lessons are systematically learned and disseminated beyond silos and for the benefit of the entire organization. This is a two-way street and partners should be actively engaged to make the learning more meaningful.
5. Digitize the partner capabilities
Banks that want to stay ahead of the curve can take inspiration from other industries (such as platform-based businesses) and develop digital partner portals.
The aim is to improve the Partner Experience (PX) including the standardization and streamlining of key processes. In particular, digital partner portals can fix key suboptimal processes such as onboarding – often seen as a major pain point by partners.
Partner portals can be a powerful change management tool across the bank, creating accountability and helping overcome a siloed culture. Communication should not be limited to digitized engagements; in fact, efforts must be made to retain the human interaction and relationship that is essential to certain archetypes of partnerships.
A win-win future
The importance of partnerships is no longer contested. Despite advertised isolated success stories, banks fail to attract and retain the best partners, and offer only a sub-par experience to their partners. Banks need to learn to successfully partner at scale, institutionalizing and industrializing the partner competencies.
Codifying the demand for partners, formalizing the partner engagement model, adopting a partner-ready organizational structure, embracing continuous learning, and digitizing partner capabilities are some steps banks can take to learn to partner at scale.
A lot of the banks’ learnings around customer-centricity and experience can be leveraged towards partner-centricity. Getting banks partner-ready is key to win.
The five best practices have been authored by Oliver Wyman experts Pierre Romagny (partner), Jason Ekberg (partner), Adrian Oest (principal), and Theodore Vauquier (manager).
