This article was first published in the Summer 2014 issue of Finance on Windows
Competition in the financial services industry is becoming tense today. Financial institutions face double competition from direct and indirect competitors, as well as having to juggle pressure to regain customer loyalty and restore their status as a central institution for all financial services.
Due to changes in the market, the majority of competition is no longer limited to direct competitors. The number of players specialising in different financial services (such as payments or leasing) is increasing rapidly, and their activity is becoming more intensive. Retailers and telecommunications organisations are among the strongest indirect competitors today, and they attract customers for their flexibility and good customer service.
This is not a simple task for a bank, which manages a large portfolio of services. Furthermore, customer service in banking became fairly poor after some banks transferred to digital platforms, which is unfortunately the price they paid for providing 24/7 service accessibility. But, if a personal experience is lost and a customer is simply reduced to a nameless statistic, it would be naïve to expect loyalty from them.
So how can banks stay ahead of competition? Should they invest and compete individually, or go into partnerships? My preference would be to create a business ecosystem – a network of related businesses that share data with partners – that puts the client at the centre of its activity. The strength of this business ecosystem lies in the interrelation of its component parts. Related to each other, they behave for the sake of each other with each receiving profit and providing value for others.
When three stakeholders – a bank, a partner (such as a retailer) and a customer – join the ecosystem, they build interrelations based on the data-sharing partnership, comprehensive data analysis and its customer-centric approach.
By creating a partnership with a retailer, banks can turn competition into collaboration and encourage mutually beneficial teamwork. Both the bank and retailer manage large amounts of information about their customers, but there is also specific information that they mine independently of each other – the combination of this information allows both parties to complete the full profile of the customer. By knowing the customer better, banks can deliver them more relevant products and services.
Through this partnership, we could witness a great synergy, where retailers gain an additional channel to contact targeted customers and banks gain new opportunities to deliver personalised services to customers based on a rich client profile. Whereas the customers get rid of irrelevant information, save time in searching for what they need, and get what they are looking for through one provider. This makes them feel happy and ensures they remain loyal.
The most important thing is that in such a context, financial institutions remain leaders in the market, doing what they do best – keeping hold of clients’ money.
Ke¸stutis Gardžiulis is CEO and co-founder at Etronika
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