«Ecosystem» is one of those buzzwords that tend to appear with varying intensity. This time – so our perception – it’s here to stay. Various developments strengthen this assumption. Among others the trends in Open Banking with API standards and DLT making cross-branch offerings possible and, according to the Digital Finance report issued by the Swiss Federal Council, even desirable.
As opposed to biological ecosystems, where an ecological balance is established and ensures the survival of the system, in an economic market context, ecosystems survive only if the management – the orchestration of participants, chains of offering and demand – is organized through an adequate distributed governance and also through adequate software, independently of the ecosystem model you might think of.
The current ecosystem landscape
When economic actors, in particular producers or contributors to value chains, speak about ecosystems, they often think of one of two different models. A player being attractive enough to establish trust and having the power to provide different and complementary services to his core offering, may consider orchestrating his own ecosystem. Alternatively, actors orientate themselves towards topics or «verticals» like home, health or pension planning and co-offer their (similar) services with other competitors on a third-party platform, looking for this additional business, while hoping to attract consumers on their own platform. These different models coexist and their number is growing, ultimately leading to an overlapping bubble-like structure of various ecosystems.
On the market for financial products and services, where the paradigm shift from a bank-centric structure to a truly customer-centric one is gaining speed with clients sourcing «their» banking products from various providers, this emerging bubble structure is serving customers quite well. They combine what best fits their current situation and plans and, by doing so, they manage their own ecosystem. In this view, selected banking services are just one ingredient among others.
How should financial services providers respond?
How can banks react? Or better, how should they act? Ultimately, the ecosystem of the strategic target customers is the one that really matters for the mid-/long-term positioning of the financial service providers’ offering.
The first of the two ecosystem models offers the higher positioning and distinction potential. From this perspective, the really valuable strategic asset for a financial actor is the ability to derive a competitive offering from his own core competences while simultaneously being able to make it attractive and relevant. This may be achieved, for example, by enriching it with complementary third-party services provided through his own platform, so that clients decide to source them into their ecosystem, which is part of and adds value to their own «value chain».
To do this, financial market financial service providers need software that best reflects their competences: the digital twin of their business model, i.e. tailor-made software. The software must be able to evolve with the adaptation of the business model and a changing world. In addition, it must be able to include partner services in a way that the customer values the platform aspect. Can your software do this? Not sure? Let’s talk.