If you want to see a successful example of a collaborative business model check out Uber/Google. Transport service provider Uber has gone from tech start-up to global tech giant in less than 10 years thanks to being able to use Google Maps. Uber developed the killer app for people to call a ride; Google provided the data for drivers to take customers where they wanted to go.
The success of Uber’s business model is its simplicity. Its founders stuck to what they knew best – computer programming – and didn’t try to reinvent the wheel (or maps, in this instance). Instead, it worked with the specialist who had already invested to produce the definitive data.
There’s a lesson here for financial-service providers – a lesson that some are being slow to learn.
While collaboration is growing in the sector as more banks realise they can’t afford to build their own definitive core banking platform from scratch, many – particularly the big ones – have yet to realise that it demands a different way of working.
Rather than engage in a relatively small number of very large relationships with third-party suppliers, banks’ procurement departments should look to work with many, far smaller specialists. They need to realise that small doesn’t necessarily mean ineffective or risky. In fact, if done right, it can mean completely the opposite.
A nice example of a company promoting collaborative working is Temenos with its MarketPlace, a forum of more than 100 fintech solutions that have been assessed for relevance and pre-configured to work with the vendor’s own core banking software. Much of the banks’ due diligence has already been done – by Temenos.
But successful collaboration doesn’t just come down to signing up the right specialist third parties. It also demands that all parties are treated as equals. Everyone brings something to the table, and everyone takes something away. The banks get specialist technology faster, at a lower cost and with less risk than it would take them to develop in-house; the platform provider can offer broader, deeper, more function-rich solutions; the fintech gets the kind of market access it could only dream of if working alone.
What is more, when working together the solutions are honed more quickly, creating a sharper proposition for all concerned. Sure, large organisations can always copy what is already working in the market. But what they can’t do is recreate the drive to innovate found in these young, hungry third parties in a competitive (non-exclusive) market.
Collaborative working means sticking to what you do best and respecting the whole value chain – your traditional big suppliers, as well as the new kids on the block. When that happens the whole industry – financial service providers, vendors and fintechs – will take a giant leap forward in terms of competition and value creation.
Don Ginsel is CEO of Holland FinTech