Last week I wrote that partnerships are becoming more important in banking. I see three main types of technology-oriented partnerships that have been emerging in banking lately:
- Distribution channel-oriented partnerships – providing products and services through a third party partner as a new deliver channel (example – China Construction Bank is partnered with Alibaba and Alipay to issue cards and cross sell loans)
- Value-added services-oriented partnerships: providing a unique product/service or combination of products/services that neither partner could provide alone (example – Barclaycard partnered with the London Transit Authority to issue the OnePulse card, which is contactless, EMV credit and debit and transit (Oyster, used for London Underground and bus transit))
- Rewards-oriented partnerships – encouraging customer behavior through rewards provided in various combinations with a third party partner (example – SmartyPig partnered with retailers, who add a certain percentage to the customer’s card when the customer reaches their savings goal and cashes out the account to the card).
Most banks have been hesitant to participate in partnerships for a number of reasons – loss of customer control, a tendency to view non-banks as competitors in many cases and a desire to promote traditional banking products (check accounts, savings accounts, mortgages, credit cards and others). This approach does not foster innovation or differentiation and will eventually lead to a loss of relevancy in the financial supply chain.