- Standard Bank says banks should warm up more to the idea of sharing their customers with other companies.
- It says digitisation is driving the convergence of industries, and traditional financial services face a range of new competitors.
- But it thinks banks can work together with these new competitors instead of seeing them as a threat.
Standard Bank says it is open to partnering with fintechs, home service providers, retailers and even its direct competitors as the convergence of industries in the digital world is blurring lines and disrupting industries.
On Thursday, the bank published a report on "the power of the platform economy for financial services". The report delved into how this new business model is pushing traditional banking, investment, and insurance groups to participate in "ecosystems" in partnership with other industries.
"We would see partnerships extending beyond financial services," said Standard Bank's head of platform businesses, Jonathan Lamb.
"But I think we will also start to look at partnerships to offer non-financial services, products that the banks are never going to produce.
"Then we would look at strategic partnerships which is actually distributing the bank's products and services," added Lamb.
The platform economy report looked at the different scenarios facing banks as their traditional offering is becoming more commoditised. Standard Bank acknowledged that fintech players have disrupted the world of banking and said the industry is contending with a range of other new competitors.
Companies like Vodacom and MTN have entered the business of lending, payments and insurance, while Shoprite expanded its financial services in 2020 to offer a transactional account.
Standard Bank, however, sees the blurring of industry boundaries as an opportunity to meet a wider array of client needs.
The bank said the emergence of open banking, which enables consumers to share their banking data with whomever they choose, provides financial institutions with an opportunity to structure and distribute their products through third-party channels more flexibly.
"Our products are being commoditised, and that's true," said Lamb.
An opportunity, not a threat
But he said open banking has opened banks' eyes to how they can expose their offerings outside their organisations. It has become more of a source of excitement than anxiety. As opposed to worrying too much about the fintechs and other industries eating their lunch, Lamb believes that everyone has more to gain by adopting a collaborative attitude.
"Banks actually have an opportunity to properly leverage of fintechs by allowing them access to certain assets and certain capabilities that the banks have built up over time … We can almost get the best of both worlds; use their agility and their ability to create innovative solutions quickly," said Lamb.
Christopher Browne, global head of wealth and investment at Standard Bank, said one of the benefits of these big banks and big organisations is the scale that fintechs need. He thinks solid partnerships can be formed by looking at the competitive advantages that both players have.
Kent Marais, the head of digital channels at Standard Bank CIB, said the only balancing act will be ensuring that banks do not eliminate the importance of their role in the process.
"You need to think carefully about the business model that you're designing. You need to understand the capabilities that you can bring, the capabilities that the producers can bring, and you need to look for a win-win sort of business model," he said.
But banks have been here before, where they tried to be one-stop shops for their customers in the 1990s and early 2000s by bundling their traditional offering with insurance products, investments and prepaid voucher sales.
Still, Standard Bank's report said new behaviours point to consumer engagement shifting away from traditional banking channels towards new platform businesses.
So, how is this participation in ecosystems different?
"The opportunity that presents itself now, for any financial services company is that if they take a progressive approach to using platform business thinking and ecosystem thinking, you start to create customer value propositions, rather than just bundled products.
"Create answers to problems that sit in the ecosystems that you want to participate in," said Lamb.
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