Friends forever? Banks learn to cooperate while competing
In today's constantly evolving financial services marketplace, with new technologies and services emerging at a dizzying pace, maintaining market share has become a challenge for established banks. Often lacking the agility and entrepreneurship of their upstart rivals, banks have needed to find new strategies to win new business and keep customers happy, writes Sascha Breite
In today’s constantly evolving financial services marketplace, with new technologies and services emerging at a dizzying pace, maintaining market share has become a challenge for established banks. Often lacking the agility and entrepreneurship of their upstart rivals, banks have needed to find new strategies to win new business and keep customers happy, writes Sascha Breite
One approach that is proving increasingly popular in the banking sector is ‘coopetition’ (or cooperative competition), with traditionallycompeting banks partnering togetherto provide the same service to their customers. Following recent high profile examples in the UK and Poland, this spirit of friendly competition may help to define a new era of innovation in financial services.
It’s no secret that the banks are currently feeling the squeeze. Every day sees new competitors emerging from the start-up and tech space (with Google and Paypal the best known examples of tech firms encroaching on traditional services such as payments), as well as from the retail sector, with supermarkets starting to provide banking services (Marks & Spencer in the UK is the latest to launch a bank account). Although banks could respond by investing heavily to develop new technologies and innovations, this could prove expensive and ultimately ineffective if customer pickup isn’t strong – always the risk with any new tool, gadget or service. Hence the trend towards cooperation. By working together to implement the same services, banks can cut the cost of innovation and boost its chance of appealing to customers, by increasing the overall customer base targeted.
Zapping the competition
In a recent example, five UK banks announced that they would incorporate the Zapp mobile payment service into their own mobile apps fromautumn 2014. HSBC, First Direct, Nationwide, Santander and Metro Bank will all integrate the new service, providing their customers with access to an innovative payment toolthat can be used in shops and online, eliminating the need for cash or credit cards.Through collaboration, these banks can share in the innovation associated with Zapp while ensuring a huge customer base for the new app. Given this large install base, merchants will be quick to seize the opportunity to incorporate Zapp into their payment systems, providing consumers with multiple chances to use their new technology.
By harnessing coopetition, these banks have increased their ability to provide their customers with innovation, in a cost- and resource-effective way.
Coopetition across Europe
In fact, examples of coopetition have been emerging across Europe. In Poland, for example, a group of six banks have come together to collaborate on a project to encourage mobile payments. Alior Bank, Bank Millennium, Bank Zachodni WBK, BRE Bank, ING Bank and PKO Bank Polski have built a common infrastructure which is open to all market participants, including other banks. Consisting of standard authorisation and settlement, the system supports abilities such as 4G mobile banking and mobile shopping. By working together to build a cohesive and collaborative standard, the banks could potentially reach 70% of banking customers in Poland, according to estimates provided by Bank Zachodni WBK. If achieved, this will make their open platform the standard for the Polish banking industry, driving demand, reassuring consumers and making it an integral part of the banking experience.
Let’s all just be friends?
Competing successfully in a crowded marketplace means making strategic choices as to when to fight your enemies and when to team up with them. Banks, long accustomed to dominating the financial services industry, have had to adapt quickly to the new banking landscape as their customers are increasingly willing to try out banking alternatives and use new services provided by non-banking firms. For banks seeking to gain a competitive edge and retain market share, efficient innovation is the order of the day. The winners will be those that concentrate on the battles that count – those that allow them to define their USPs, and ensure they stand out from the crowd.