Expanding the boundaries of cross-industry collaboration with open banking
Blog: Capgemini CTO Blog
The world of cross-industry collaboration has changed dramatically. Traditional definitions were about product distribution, or supply chain alliances—different players coming together to market a product, build a city, or fill up a marketplace. There was typically one dominant player in the middle of this collaboration.
In contrast, the real conversation these days is about creating new business models and orchestrating cross-industry customer journeys. To take a chapter from another industry, in “Amazon and Physical Retail – Beyond the Red Herring,” I outlined how the real battle in retail is not at all about being online, implementing AI, or being omni channel. Instead, when we look past this red herring, we find that the real battle in this sector is about being a customer destination where almost anything can be found, and about creating a loyalty program that knits together multiple product lines and businesses that feed into this endless marketplace. That vision must then drive the digital strategy.
To better illustrate the emerging concept of cross-industry collaboration, I’ll use the story of The Paradise, a Netflix show about Britain’s first department store (fictional). The story outlines how an enterprising young woman brings together a diverse collection of main street stores in an effort to work together against The Paradise. She orchestrates the creation of a common loyalty program, links their promotions together, provides mechanisms to recommend each other’s goods, and helps them engage in customer service as one entity so they can feed off each other’s relationships.
Fast forward a few decades from that setting. While the model is the same, the tables have turned dramatically— the aggressors of yesterday are actors of the main street marketplace while The Paradise has been replaced by new types of digital conglomerates such as Amazon.
How can banks address cross-industry customer journeys?
Consider that banking is actually closer to the customer than almost any other industry. Not only do customers have emotional connections of security with their banks (education, retirement, safety, etc.), but they also interact with their banks several times a day—to buy, pay, and deposit. It is only natural that banks move to preserve these customer relationships by extending that reach to customer journeys instead of an enabling, but necessary, utility.
The concept of digital conglomerates or endless marketplaces is very relevant to banking. Can this new main street, a.k.a banks and other partners, come together to create digital conglomerates, and give rise to new revenue models? There is hope and it is in the form of open banking. Contrary to popular cries of doomsday, innovators in financial services have been embarking on exciting initiatives. In recent years, entrepreneurs have created models that have the potential to be the backbone of tomorrow’s open economy. For example, Shoprunner, a program powered in part by card networks and banks, links together more than 100 businesses to provide discounts and free shipping. Based on a similar philosophy but tightly integrated is Plenti, a cross-industry loyalty program that has brought together gas stations, retailers, pharmacies, and restaurants among others. Closer to home, banks are rolling out external integrations with APIs (an example is real time financial information provided to accounting and tax platforms). We have also seen health insurers partner with fitness providers to create win-win propositions (an example is the HorizonbFit program).
Why are these programs important for banks? Because, on the other end of the spectrum are voice-activated innovations like Google Home and Amazon Alexa, which are integrating with banks, and whose ambition it is to own and orchestrate broad customer experiences. In addition, most Fintech innovations straddle boundaries between multiple industries in an effort to bridge the gaps left by traditional industry silos—combining retail payments with investment portfolios, for example.
All of these models span cross-industry collaboration boundaries. Some of them more advanced and more tightly integrated than the others. The reason these scenarios are gaining momentum is because cross-industry customer journeys are what will matter in the future. If you thought this level of collaboration was too difficult to achieve, think again. The examples I provided above are just the tip of the iceberg.
As these models mature, participants in these models will create a flourishing, inter-connected ecosystem:
- Further develop the tools for personalization and goals-based selling
- Drive experiential commerce and lifestyle choices
- Extend to include other industries such as healthcare, insurance, food, nutrition, travel, and hospitality, to name a few
- Consciously engage customers in this exchange of value.
Each of these enhancements will create new entry points for a business into their customer journeys. The trick is in looking from the outside-in: at our business versus from our business. It’s also a call for reflection and action for those who haven’t pushed the boundaries of this new kind of industry collaboration yet. These models should no longer be viewed as just a mechanism for increased distribution. Open banking provides the broad umbrella under which banks can unlock value for their customers. The PSD2 regulation has already initiated this journey in Europe and, together with trusted partners banks, can bring these cross-industry customer journeys to life. However, opening-up access to data is just one facet of open banking. The more important consequence is the creation of expanded customer journeys through well-designed partnerships.