Five core forces — technology, regulation, markets, competition and client needs — are at play in today’s global economy, each exerting a profound influence on how businesses across all industries grow. The combination of these forces has created a vast economic environment in which even small, local companies are increasingly looking to do business on a global scale.
As companies face a multitude of changes while adapting to these forces, banks are also challenged by the convergence of these forces as they prepare for their own futures and provide the financial services required by their clients.
Questions arise in the banking industry around the ability to survive in this new environment. How will banks change and adapt to the increasing demands of the marketplace? While global banks have the scale and capital base to develop in line with the market, are they doing so quickly enough and reaching enough customers with their solutions?
Meeting the challenge
How will local and regional banks change and adapt to the increasing demands arising from regional and global regulation? How will they provide the global services their clients need and are asking of them? Will they be acquired in this age of consolidation? How will they compete by differentiating themselves?
Increasingly, banks of all sizes are turning to strategic partnerships as a way to ensure their offerings remain competitive and so they can provide the best-in-class solutions their clients require. There are many ways to achieve success through partnerships, including strategic acquisitions to enhance capabilities and penetration into targeted lines of business.
Joint ventures
In addition to acquisitions, three core areas of partnerships that have been particularly productive for Citi are those with technology companies, with clients and with other banks.
Technology is an area in which partnerships are being forged to create superior solutions that can be introduced to the market quickly. In partnerships between banks and technology companies, each partner manages its own core competency, lending credibility, efficiency and expertise to the offering.
As the result of a partnership between Citi and Microsoft, for example, TreasuryVision® was developed to offer clients multi-bank information aggregation, enterprise-wide visibility of global financial information and analytic capabilities.
The partnership approach works between banks and their corporate clients as well. One of the best ways to develop innovative solutions occurs when a client has a specific need the bank can help solve. This ensures that the bank is developing a capability or product that is completely client-needs focused, and it sometimes even opens up new lines of distribution for the bank.
Global transfers
In the mobile banking space, for example, Citi is partnering within the telecommunications sector to provide global remittances and other banking services via mobile phones. In this case, a co-branded offering works well for all participants.
The telecommunications company leverages the bank’s banking and payments infrastructure while the bank leverages the mobile phone capabilities of the telecommunications company. Both expand their core capabilities into new markets, providing a new service.
Partnerships between one financial institution and another — a concept I call “partnertition” because it blends the notions of partnership with competition — is a key strategic decision to expand the business of both partners. Banks can capitalise on the platforms and capabilities of their indirect competitors without having to invest heavily in infrastructure.
At Citi, we sell our platform and capabilities to other banks with which we do not directly compete for clients. This is often seen in markets where we do not have a local presence for middle market and small business and we “white label” our platform and network to another bank to deliver those kinds of capabilities to their customers.
This is a win-win for both banks and the end-customers – we leverage our network and capacity for the benefit of customers we would not be able to reach directly.
Banks constantly have to assess what the market wants and how they can deliver a superior capability in a time frame that is meaningful to their clients. More and more, as technology, regulation, markets, competition and client needs evolve, the best strategic decision is for banks to find partners that can help fulfil their clients’ increasing needs. Partnerships will be a powerful differentiator for the banks that choose to embrace this concept.
Paul Galant is chief executive officer of Global Transaction Services at Citi.
