Published: August 16, 2010
Events over the past two years have seen banks stepping back and re-evaluating their strategy and investment priorities. Some have divested assets and shrunk their balance sheets, and most face the dilemma of how to satisfy the growing demands of their clients in an environment of constrained expenditure. In this climate, we have seen a growing willingness amongst banks to collaborate with each other and with other market players, such as technology vendors and standards bodies. This relatively new commitment to collaboration has brought a variety of advantages for banks’ corporate clients. For example, SWIFT Corporate Access and the development of XML-based financial messaging standards would not have been feasible if banks had not been prepared to work together and put aside competitive concerns.
Another outcome of the growing recognition of the value of collaboration is an evolution in the way that banks work together to leverage each other’s products, services or geographic presence to benefit their clients. Bank partnerships are not new, and are a well-established means by which banks with complementary services or regional coverage can provide an enhanced service to their clients. For example, the strategic alliance between SEB and ING has continued to flourish over a number of years, with cash management clients of both banks benefiting from our combined geographic reach and product depth. However, as the banking environment continues to evolve, we are likely to see new models for bank collaboration in the future.
We have seen a growing willingness amongst banks to collaborate with each other and with other market players, such as technology vendors and standards bodies.
Although the partnership between banks is a familiar model, it can bring risks to clients. Over the past two years, we have witnessed a large number of announcements of new partnerships and alliances, but unless these have a clear commercial value for both organisations, and a demonstrable value proposition for clients, many of them are likely to be transitory or enjoy only short-term commitment from the relevant parties.
There are various key factors that contribute to the long-term success of a banking partnership. Firstly, it needs to be clear what the benefit of the partnership will be, and why the banks in question are best placed to deliver these benefits. This could involve complementary products, business cultures, skills and geographic coverage. Too much similarity means that the overlap, and therefore competitive stress, will be too great; too little, and the partnership will lack the closeness of fit that is required to deliver a cohesive service to clients. For example, in relation to SEB and ING, the two banks do not overlap geographically in providing cash management services, nor would either bank wish to replicate the services offered by the other. Instead, we can leverage the synergies between the organisations to deliver comprehensive services to clients. [[[PAGE]]]
Another potential issue in the partnership approach for clients is the risk that products and services are inconsistent. Clients selecting a regional banking partner expect a cohesive service across the region, irrespective of whether one or more than one bank is delivering the service. To be successful in achieving this, therefore, the relevant banks need a common approach in areas such as technology and integration, service levels, commercial terms, legal documentation and implementation. It requires considerable investment by both parties to align the sales and support organisations, including cross-company training and a close ongoing dialogue to ensure that the cultural and personal synergies, trust between the two organisations and momentum in developing the partnership are maintained. This should typically involve internal marketing, as opposed to being confined to a few individuals or one area of the bank, as clients expect the banks to act as one without necessarily recognising the boundaries of the relationship.
Some bank partnerships continue to prove highly successful, as the relationship between SEB and ING illustrates. For example, as illustrated in the interview with AkzoNobel in this edition of TMI, the partnership has enabled AkzoNobel to achieve a cohesive pan-European approach to payments and cash management. However, while some such alliances will continue to flourish based on proven benefits to clients, some banks will find it difficult to maintain the traditional partnership model in the future. Not only is the amount of effort required to maintain the necessary consistency and momentum considerable, but as banks have had to become more selective in the companies to whom they lend, they may only be in a position to offer overdraft facilities to core clients, as opposed to offering their balance sheets to partner banks’ clients.
SEB is a pioneer in developing successful, long-term partnerships that deliver demonstrable value to our clients.
However, there is still a recognised and growing need for banks to collaborate in order to satisfy the current and future ambitions of their clients. To achieve this, we anticipate that the partnership model will evolve in a variety of ways. One is a contractor and sub-contractor model, in which a bank will be appointed to deliver a service, but that bank may then sub-contract certain elements of the service to one or more other banks. Second is a wider, but looser alliance model, similar to the alliances we see amongst airlines, in which banks collaborate to invest in functionality that is important for their clients, such as infrastructure and messaging, but which does not offer competitive advantage. This is a logical and desirable evolution of the co-operative efforts that have resulted in SWIFT Corporate Access, SEPA and XML-based financial messaging, and such alliances are likely to be significant in promoting the banking innovations of the future.
SEB is a pioneer in developing successful, long-term partnerships that deliver demonstrable value to our clients. We will continue to be active in facilitating alliances and relationships with other banks and vendors that enable us to expand the products, services or geographic coverage that we offer to clients, without compromising on quality and robustness of solutions or the experience and client-focus on which we pride ourselves.
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