Uncorking the upsides: Why ecosystems are the future for financial services organisations

Mutually beneficial relationships can be found anywhere – even in hundred-year-old Portuguese cork oak trees. Currently, cork is making a comeback – as is its symbiotic relationship between ecosystem and industry – thanks to cork’s carbon storage capacity. (Cork oaks are carbon sinks because they don’t need to be felled to be harvested. In fact, a PwC report found 392g of carbon is sequestered by every cork bottle stopper.) Now, cork is being used in everything from electric cars to space rockets, while waste cork dust is being burned as an alternative to fossil fuels. It’s win-win all round.

In just the same way, financial services institutions can uncork all sorts of upsides via mutually beneficial partnerships and ecosystems.

Technology is creating opportunities for banks, insurers, and superannuation funds to improve customer experience, and to grow, scale, and operate more efficiently using ecosystems and partnerships. 

If financial services institutions get it right, then ecosystems and partnerships offer a way for them to innovate, respond to the next generation of customer expectations, address the skills gap, and meet new sustainability and ESG requirements.

And that’s worth uncorking a bottle for.

New-look ecosystems

Partnerships are evolving. Bi-directional partnerships are increasingly being replaced with ecosystems that nurture an entire network of partners. These ecosystems give banks and other financial services organisations access to a whole range of new market opportunities, capabilities, and digital assets.

What’s more, unlike some bi-directional partnerships (where ‘partner’ is simply another word for ‘supplier’), these new-look ecosystems are genuinely beneficial to all parties.

Still not convinced? Here’s five reasons why we believe financial services institutions need ecosystems more than ever:

1) Pandemic pressures: The pandemic accelerated expectations around digital offerings and customer experiences. At the same time, it forced businesses to find alternative ways to solve supply chain disruptions, address skills shortages, shift away from retail branches, and drive growth in a low-growth market. All these challenges can be better addressed using an ecosystem.

2) Imperative to innovate at scale: Next gen digital banking is here, and financial services organisations leave value on the table if they don’t leverage partnerships around digital banking. For instance, partnerships between major banks and neobanks offer big banks access to new technology, accelerated digital transformation, and a fresh customer base. While neobanks enjoy greater security and capital.

3) Tech talent drought: The skills gap is creating a capability gap in financial services, and it’s harder than ever for banks to attract top talent, especially in tech. Financial services institutions can boost their talent pool simply by tapping into their ecosystem to acquire capabilities and skills.

4) Maximising new market segments: Embedded finance has proved a headache for the big banks and insurers. However, if they partner with someone at a different place in the value chain, they can access a new customer base or distribution network simply by placing their product, such as a credit card or insurance policy, into an embedded finance product. Or, for those pursuing a financial service strategy aimed at owning the customer relationship, partnerships can help support this, too, by broadening the organisation’s customer offering.

5) New expectations and reporting requirements around ESG: Right now, we’re in the UN’s Decade of Action on challenges such as poverty, gender, and climate change. Yet, these are such complex, multifaceted problems they can only be tackled with cooperation at an industry, supply chain, and systems level.

But no financial services institution can do this on their own, and so we’re going to see the need for cooperation increase. Or, as we prefer to say, it’s time for the New Equation, where a Community of Solvers come together in unexpected ways.

Because now, more than ever before, it takes a collective. 

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Our next article reveals how the leading overseas banks, insurers and superannuation funds have established ecosystems, and what Australia’s financial services institutions can learn from this.