Thanks to Open Banking, embedded banking and banks positioning their apps as super-apps, the financial sector becomes more and more an ecosystem of parties collaborating together to execute upon a customer’s journey and needs.
As a result, more and more banks and Fintechs sign partnerships with other financial players and players from other industries, in order to deliver value-added services wherever, whenever and however the customer desires.
- Banks (like KBC or Belfius in Belgium) offering third party services in their banking app, like buying mobility services (train, bus, metro, shared bikes, shared cars, parking…), buying cinema and amusement parc tickets, consulting social vouchers (like Monizze), recharging pre-paid phone cards…
- Banks and insurers offering financial products via third parties in context of a specific user product journey. E.g. offering mortgages and home insurances in a real estate search engine (e.g. in Belgium Belfius in ImmoVlan and KeyTrade in Immoweb), offering consumer credits and car insurances via car dealers (e.g. Alpha Credit for Renault, Nissan or Toyota), travel insurances on websites of hotel booking platforms or airline companies…
- Banks partnering with Bigtech to offer financial products, like Amazon partnering with Bank of America for Amazon Lending, the Apple credit card issued by Goldman Sachs or Google partnering with Citigroup and Stanford Federal Credit Union.
- Banks partnering with Fintechs to offer specific value-added services, e.g. Billshark with Radius Bank for renegotiating bills, Minna Technologies with Swedbank, Spare Bank or ING for subscription management, Bank of America with Zelle for peer-to-peer payments, Barclays with Flux for digital receipts…
While banks were traditionally very hesitant and skeptical towards these kind of partnerships (out of fear for reputation risk), this starts to become more and more common in recent years.
Multiple reasons can be identified for this trend:
- A high number of Fintechs or other tech firms have gained a reputation of being credible and secure
- The increased digitalization makes the creation of those partnerships easier, more profitable and more desired
- Customers expect more and more that financial services are part of their overall customer journey and not a separate process, which puts the main customer journey temporary on hold.
- The increased competition meaning that Time to Market has become critical. As such a partnership can considerably reduce the Time to Market and allow to stay ahead of competition.
- The scarcity in IT resources (or more general resources allowing to setup digital processes), forcing banks to be extremely picky to which projects they allocate their precious resources. However via partnerships, it becomes possible to increase this capacity and deliver more (digital) innovation in parallel.
Typically you can distinguish 2 types of partnerships:
- Partners helping with customer acquisition: these can be pure marketing platforms (such as advertising, couponing, cashbacks…), but also lead generators and even integrated sales channels.
As customer acquisition is extremely expensive (estimated between 40 and 60% of the cost linked to a customer) such partnerships can be very valuable. Obviously incumbent banks, which already have a large customer base and good user engagement, are typically helping other parties with their customer acquisition, but there are many other parties that have an extensive customer base that can be leveraged for the customer acquisition strategy of a financial player, such as Telco players, Social Secretariats, digital marketplaces, social voucher issuers, eCommerce players (like PSPs or CMS platforms)…
In the above examples, ImmoVlan helps Belfius with customer acquisition for mortgages, while Belfius helps to bring customers to Jaimy, which is a digital marketplace for finding a handyman (or in both directions Belfius and Proximus will help each other in customer acquisition.
- Partners helping with the execution (delivery) of a product or service. These are partners providing either specific technical components, full business outsourcing (e.g. taking care of your full customer support) or specific value-added satellite services.
For example, ING partnering with Minna Technologies to offer subscription management service or the challenger bank N26 using Mambu as a banking-as-a-service platform.
With banks closing more and more partnerships, the role of a "Partnership Manager" (or Partner Account Manager) becomes more and more important. This person should guide a partnership from its conceptualization all the way to its operational management.
The first step in a partnership is obviously selecting the right partner. Even though partnerships can increase the capacity of a bank to deliver innovation, these partnerships will still absorb a lot of the scarce capacity to setup, implement and follow-up the partnership. This scarcity forces banks to be very selective in the parties they partner with.
A typical incumbent bank having thousands of customers and a strong customer engagement is a very desirable partner for many third-parties. This means a typical bank will get hundreds of proposals for partnerships a year. It is key therefore to find the right partner, i.e. a party that
- can provide significant value to the customers (via an interesting product or service) and/or to the bank (e.g. access to new prospects)
- can address all the constraints of the bank, like security, compliance, risk, audit, tight governance…, but can also deal with the sometimes bureaucratic and political (decision-taking) processes.
- shares the same values, i.e. ensure a cultural fit: even if 2 partners are perfectly complementary from a product/service point of view, a partnership is still managed by people and the partnership also needs to be convincing (feel authentic) to the end-customer. As such a cultural fit and fit in values is essential. A typical example of a misfit might be a financial services company partnering with a "Green" company, trying to boost its "Sustainability" reputation, while the financial services company takes very little effort to be sustainable itself.
- has also sufficient gain of the partnership, i.e. the commercials should work in both directions (a Win-Win-Win situation, i.e. the bank, the partner and the customer). This is important for the long-term viability of the partnership, as a party which loses (or does not gain enough) from a partnership deal will not be very committed to the partnership in the long-term.
Once the right partner is found, the partnership can be negotiated and conceptualized. The key here is proper expectation management and a clear definition of roles and responsibilities, i.e.
- What is the business strategy behind the partnership? In this track you define together, what are the objectives, success factors and risks (and associated mitigation actions) linked to the partnership. Important here is to have already a discussion about what will happen if the partnership fails (e.g. how can the partnership be stopped, what is the exit strategy for example with regards to data transfer, is there exclusivity…), but also when it is very successful. A very successful partnership with a start-up can also be risky, as the dependency of the partner can become such a risk, you are forced to buy them at a very high valuation price.
Additionally the monetization or commercial model of the partnership needs to be agreed. Does one party pay a commission to the other party and in which case? Is there a sharing of revenue? How are costs split (e.g. costs for marketing the partnership, IT investments…)? Is a joint-venture setup? Will one party become a (minority) shareholder of the other company?
- Agree on a high-level roadmap. A partnership should be gradually rolled-out and extended, so that decisions can be fine-tuned, but also that there are checkpoints allowing parties to step out of the deal, when assumptions are not achieved, thus limiting the investment cost for both parties. Furthermore such a roadmap gives a view to the future and defines the common journey on which both parties embark.
- Marketing & communication: agree on a marketing and communication plan around the partnership. Important for the trust within the partnership, is that every party feels comfortable with each communication about the partnership that is sent out. Often start-ups have a more aggressive way of communicating, while large banks are very precise and more conservative in their communication. This difference can obviously lead to issues if not properly managed.
- Fix the contractual and legal part, i.e. contractually agree on the roles & responsibilities of each party and the agreed commercial model (including potential price increases for the future due to e.g. indexation), but don’t forget to also contractually define all agreements to mitigate certain risks, like what happens in case bankruptcy or acquisition of one of the both parties (e.g. access to source code via Escrow service or possibility to acquire at pre-defined price), what happens in case of security or data breaches, confidentiality and non-disclosure agreements, GDPR data protection agreements (DPA agreements need to be signed, if there is personal data sharing between both parties), the payment conditions, the termination conditions, penalties in case of failures…
- Agree on the implementation (integration) of the partnership: which changes need to be made, what are the timelines, what are the integration points… Obviously during the implementation, deployment and roll-out phase a correct reporting and transparent communication between both parties should exist.
- Agree on how the customer contact (typically via the Customer Support Desk) will occur, i.e. to which party will the end-customer call and how will this party involve the other party. Obviously for the end-customer the 2 parties should act as much as possible as 1 united party, but this is easier said than done.
Ideally the customer should call to the party where the user journey is occurring (also providing a single support system), but often the support desk of this party will not be aware of the specifics of the partner’s functionality. At that moment it is important to avoid having to transfer too many calls to each other and avoid blaming the other party. This can best be solved by sharing good FAQs between the partners (so that each party can also reply standard questions about the other party), by assigning a unique owner to each request/call who does the end-to-end follow-up for the customer, by good SLA management on response times (to questions and incidents) and by sharing easy dashboards where the end-to-end status of any customer request can easily be tracked.
- Finally agree also on how the partnership is followed-up and how it will evolve, i.e. define monitoring, reporting and SLA management, define which certifications should be maintained by each party, define how change management will work, define communication and escalation lines (like defining SPOCs)…
Again this comes down to defining clear roles and responsibilities of each party also after the go-live and to define a plan to keep the partnership alive, i.e. many partnerships start with a bang, i.e. with a big press release and marketing campaign, but after a few months there is nobody anymore looking after the partnership, resulting in a slow dead. To avoid this it is important to have a plan of repeating certain marketing campaigns, having quarterly partnership meetings to discuss results, potential improvements and next steps and putting the partnership objectives also in the KPIs of employees (at both sides), potentially even as part of their bonus plan.
Ultimate all these recommendations come down to Communication, Communication and Communication, in an open, transparent and respectful way, so that there is trust between both parties. Any issues need to be addressed as soon as possible in a constructive way, because once you start going legal, the partnership cannot be rescued anymore. It is the "Partnership Manager" to manage this communication and build out this trust. This should be done by both formal and informal communication channels, like formal communication plans, defining communication and escalation lines (like defining SPOCs), but also more informally by boosting personal connections between the people (at both sides) actively executing on the partnership (e.g. via joint team building events).
As such you will see more and more job offers in the financial sector for partnership managers and their importance within banking organizations will continue to grow in the coming years.