How the world’s best banks are reinventing partnerships: 5 critical success factors

Which bank is the best in the world right now? According to Forbes, the answer is Berlin-based, N26, whose name comes from the 26 smaller cubes that make up a Rubik’s Cube. Fitting, really, when you consider the Rubik’s Cube was originally designed as a maths tool to teach group theory, and N26 bank plays so very well in a group, excelling at creating and maintaining partnerships.

N26, for instance, has established a partnership with Stripe to offer frictionless account top-ups within the N26 app and, staggeringly, their minimal viable product with Stripe was set up in just six weeks.

Russian bank, Tinkoff, and Lithuania’s, Revolut, are doing similarly impressive things with partnerships. While in the insurance space, China’s Ping An makes excellent use of partnerships, with five ecosystems in financial services, healthcare, auto services, real estate services and smart city services. 

Ping An and the others offer global, best-practice examples of partnerships and ecosystems – and partnerships and ecosystems are increasingly important in the financial services space. In fact, when it comes to growth, and to delivering on customer experiences, partnerships and ecosystems offer a win-win for financial services institutions, so long as you choose the right partners, and you manage these relationships for long-term value and sustainability. 

And yet, despite the benefits, Australian financial services companies lag their overseas peers on the use of partnerships, and still come at them in a (relatively) primitive way. Which means at best they are leaving value on the table and at worst destroying value/capital. What, then, should Australia’s banks be doing differently? How can Australia’s financial services institutions establish world-leading partnerships and ecosystems? Here are five critical success factors.

Five steps to a successful partnership or ecosystem

1) Select the right partners

When it comes to partnerships, choosing the right partners is crucial. One common concern is brand devaluation. (Will your partner reflect well on your brand? Are they a good fit for your brand?). From applying different lenses, to considering your customer value proposition, it’s important to have the right processes in place to vet potential partners. 

At the same time, agility is important when choosing partners (see point five, below). Gone are the days of bi-directional partnerships requiring a perfect marriage between all aspects of two organisations. Today’s ecosystems are much more dynamic and flexible, created quickly to capitalise on synergies and dissolved just as quickly and effortlessly if not delivering value for all parties. It all comes down to having a shared and transparent view of success and outcomes between your organisations.

Think of this new-style partnership or ecosystem as more like switching on an application programming interface (API) compared to partnerships of the past, which were as clunky as creating a bespoke integration between two organisations. Hardly commercially viable.

Which brings us to another common concern: Do you have the capability to maintain profitability? It’s one thing to establish a partnership for extending your product offering or getting to market faster, but are you able to remain profitable or even measure and track profitability?

Increasingly, the question of profitability comes down to technology. Many ecosystems are digital partnerships, and these partnerships need to be scalable to be profitable. This, in turn, requires underlying low cost-to-income technology, as well as APIs. Also, it’s about capability. Ask yourself: Do we have the right skill sets? Do we have effective relationship managers? Do we have people who understand how to structure contractual agreements profitably?

2) Value creation is king

Value creation is fundamental to a successful partnership or ecosystem, and it’s worth saying they should create value for both parties. Are you really clear on the value creation equation before going into the partnership or ecosystem?

Of course, (sticky) customer relationships are at the heart of financial services and so the measure of success for any partnership should be whether it adds to the customer experience. Ask yourself: Is this partnership creating incremental uplift in customer value? Does it add value to customers’ lives? 

If your net promoter score (gauging customer loyalty, satisfaction, and enthusiasm) isn’t seeing the benefit from your partnership, then you should probably pull the pin.

3) Don’t set-and-forget

Partnerships need to be approached strategically, with the same operational rigour as other business functions. Just as with a Deals team, or an M&A team, your organisation must invest time and commit resources to your partnerships capability. It’s not something you can set and forget.

Also, partnerships and ecosystems require a range of skills including influencing skills, consensus-building capabilities, and conflict-resolution skills. Don’t just assume that someone that runs BAU operations has these skills.

Consider: How will you successfully embed your partnerships? How will you make this process seamless? And, given the investment required, how can you ensure your partnerships remain economically viable?

4) Have a collaborative mindset

All too often we hear clients with concerns such as: ‘Can we really trust our partner with our data?’ Or: ‘Should we give our partner access to our customers?’ Here, a fundamental mindset shift is needed around the nature of partnerships.

Partnerships are built on mutual respect between equals, and so you need to trust your partners – including trusting them with your data. Partnerships and ecosystems also require collaborative leadership and joint business planning. It’s about making the most of the hive mind.Too many partnerships never deliver the promised value for both partners due to the wrong mindset of the people dealing with each other day to day at the coal face.

5) Be prepared to pivot or kill it

Finally, transformative agility and flexibility are a must, and you should structure flexibility into your contractual agreements, so it informs how you engage with your partners. 

You also need a test-and-learn approach to partnerships. Try, pivot, and learn to fail fast.

For instance, Starling Bank might have a rigid process around partnership contracts, but this doesn’t mean they can’t establish partnerships rapidly and incrementally. From Flux to Moneybox, Starling has a curated ecosystem of financial technology apps (the ‘Starling Marketplace’) where they pilot partnerships, experiment in the sandbox environment, and all in a very short space of time.

And if a partnership isn’t achieving value for all parties? Starling simply ends it and moves on. Of course, agility requires technology, and making sure you’re part of an API-led ecosystem is key for scalability and, ultimately, profitability.

Read more

Read our article that pinpoints five reasons Australia’s banks and financial services institutions must prioritise new partnerships and ecosystems now.