Page 31 - Banking Finance May 2024

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suitable for banks that command strong share in a specific
market, or that wish to transform into an ecosystem player
outright.

Example: HSBC, for instance, launched an ecosystem called
Business Go to extend its core banking services and deepen
relationships in the SME market in Hong Kong.

2. Go deep into specific verticals and markets.
With this strategy, financial institutions build ecosystems in
specific industry sectors where they have strong existing
penetration and growth prospects, offering their core
products and services to these segments and tailoring or
introducing others to provide additional value. In this model
a bank would partner with one or more large players in each
industry to help reach scale quickly, enabling all participants
value. However, bigtechs and fintechs are likely to to benefit.
pursue that value for themselves. Horizontal players,
vertical specialists, and niche solution providers from Example: DBS has pursued vertical ecosystem plays. They
within and outside the traditional financial services established the DBS Marketplace, consisting of seven
sector are attacking the banking value chain from all
ecosystems each focused on a specific sector such as real
angles. Many are well-funded. And bigtechs that today estate, travel, and health.
focus mainly on the point of sale could use their
resources and sizeable market share to acquire
dominance in other parts of the financial services 3. Use ecosystems to learn and experiment.
industry. With this strategy, banks and financial services institutions
use digital ecosystems as a learning lab to enable
Strategic Plays Best Suited to Existing experimentation, diversification, and piloting to deal with
external opportunities and threats. Institutions can use
Banks these incubators to explore new products and business
Existing banks and financial services institutions have models, access new technologies, and gauge which concepts
different needs, ambitions, and starting points and are have the potential for substantial commercial upside. This
different from than the typical fintech or bigtech. They face archetype can be a safe and effective way for banks to
a tougher problem to compete in business ecosystems experiment before committing the core business.
without reducing their core business and capabilities that
have been built for decades. Example, ANZ, BNP Paribas, Citi, Deutsche Bank, HSBC, and
Standard Chartered founded Trade Information Network in
There are four ecosystems that an organization can give 2018 as a data registry to support the digitization of global
strong marketplace advantage. Three are creator trade through enabling the exchange of original trade
strategies and one contributor's strategy. information between the buyers, suppliers, and financiers
around the world.
1. Build an ecosystem around the core and play
as a creator. 4. Play as a contributor.
Under this model, organizations serve as the primary creator, There are several ways in which banks can capture value
building an ecosystem that is closely tied to their traditional on platforms managed by others. One is to be a generic
core business. They partner with businesses in different contributor and embed white-labelled products and services
domains to build the ecosystem, then bundle their financial such as payments or loans in non-proprietary ecosystems as
products with complementary offerings. This archetype is additional avenues to drive growth.

28 | 2024 | MAY | BANKING FINANCE