Banks must learn the art and science of forming stronger partnerships, according to a new report released by global management consultant firm Oliver Wyman.
The report highlights how in recent years partnerships have become core to banks’ strategies, with over 80% of surveyed bank executives saying that partnerships are critical to the success of their strategies. However, banks still fail to make partnerships work, leading to value destruction and bad partner experience. Only 6% of banks partnering with FinTechs have achieved their desired return on investment.
“Given the size of the opportunity, and the low starting point, the case for change is clear,banks must master the art and science of partnerships,” said Pierre Romagny, Financial Services Partner at Oliver Wyman.
“The majority of banking partnerships do not meet anyone’s expectations, be it the banks’ or their partners’. Banking industry partnerships have often been opportunistic or experimental, with banks lacking a clear framework of a two-way value creation.”
The report highlights how banks understand the need for partnerships and the need for the ability to distinguish between vendors and partners, putting this topic at the top of boardroom agendas. Vendors and partners can be distinguished based on the number of relationships, operating engagement, engagement model, relationship management and nature of the vision. Currently, many banking partnerships are not meeting expectations due to the lack of a clear framework to add value, says the report.
Oliver Wyman’s report shares five steps for banks to assist them in the best practices in maximizing their full potential in partnerships, including:
- Codifying the demand for partners: Banks must outline clearly what they want the outcome of the partnership to be and the key drivers of the partnership. This will create a bank-wide partner strategy.
- Formalizing the partner engagement models: Banks must outline a practical partner typology which is unique to each partnership, bearing in mind each partner brings a different value proposition.
- Adopting a partner-ready organizational structure: By adopting a partner-ready organizational structure, the partner competencies are already embedded within the organizational structure.
- Embracing continuous learning: Similar to how banks monitor customer experiences in order to enhance their efforts and meet expectations, the same must be done for partners.This allows banks to create accountability and strong incentive to improve their standards.
- Digitalizing the partner capabilities:This involves following other industries and creating digital partner portals. Digital partner portals can fix key substandard processes such as onboarding. The portals standardize processes which improves the partner experience.
Views from banks who were interviewed for the report stated the importance of banks’ strategies, with one mentioning that “growth via partnerships is a big agenda for us. It’s probably the single biggest agenda for both consumer and the wholesale business.”
Pierre continues: “Banks have recognized the need for partnerships but are finding that executing them at scale is not easy. Success in isolated cases is not enough when partnerships have become so central to deliver banks’ strategies.”
To download the report, please visit https://owy.mn/2ZHiqhJ