There are many forms of partnership, offering different benefits and solutions. If you have not so far considered working with a banking partner, writes Jim Carrabino, the chances are that your competitors have, and are already experiencing the benefits.
Partnership in banking is as old as banking itself. Without the concept of reciprocity that underpins correspondent banking, it would have proved difficult to move beyond mere domestic deposit-taking to the powerful, international banking market that exists today. Without partnerships between banks and technology partners, the likes of banking standards, credit cards and online FX portals would still be on the drawing board.
For an industry currently facing many operating challenges – including margin pressure, market volatility, increased risk management and regulatory costs as well as competition from new entrants and excess supply – partnership offers a significant line of defence. And, where new opportunities and markets present themselves, partnership may also be the best route to early rewards.
Strategic option
Whatever the challenge to be faced or opportunity to be grasped, we think bank boards should include partnership possibilities in their discussions. Partnering can help to increase product capabilities, secure otherwise uneconomic services, reduce operating costs (by buying into scale solutions) and avoid or defer investment costs. It can allow a financial institution to maintain a broad service platform, while concentrating effort on what it does best.
From the decision to take an equity partner or enter a joint venture to white-labelling of FX services or outsourcing of overseas branches, the articles in this supplement seek to explain the ‘why’ and provide preliminary steps to the ‘how’ of partnering.
From a geographic perspective,ABN AMRO has partnered successfully with banks from Western Europe (for example, our well-publicised trade outsourcing deal with Barclays) to Asia (we manage collateral for the Asian Development Bank) and from North America (we provide FX capabilities for AmSouth) to our joint venture in Brazil.
Sleeping with the enemy?
A common question is asked by outsiders looking into the world of financial institutions – How can you partner with your competition?
Financial institutions are part of the service industry where our role is to provide our customers with a market leading product in terms of quality and service at a fair price.
There is no financial institution in the world which can provide a “best of breed” product in every single jurisdiction. Even the largest banks in the world identify gaps in their product/service spectrum and tie-up with their competition (by white-labelling or partnerships) and provide their customers with those capabilities more efficiently and more cost-effective.
Giant steps are not necessary
Partnering does not always have to mean a drastic change of direction or mammoth leap of faith on behalf of the board. Rather, it could be the gradual extension of an existing relationship (such as a contingency provision), a tactical response to meeting a defined service need in a limited area – or a more strategic decision, arrived at through detailed discussions and market testing.
Whatever an institution’s profile, operational or strategic need, the chances are there is a partnership solution that would enhance that business and help to secure its presence in an existing market or its entrance to a new geography.
Just a handful of the options available are covered in this supplement; we hope the articles have provided food for thought.
Jim Carrabino, Global Head of Financial Institutions, ABN AMRO. jim.carrabino@uk.abnamro.com
