“Banks need to benefit from the momentum”

PricewaterhouseCoopers (PwC) has recently published the fourth edition of its study “Outsourcing in the financial industry“, which examines current trends and challenges for banks, service providers and FinTechs. Our Board of Directors Vice President & Chief Strategy Officer, Dr. Richard Dratva, was interviewed in this study by PwC as an expert on current developments in strategic partnerships in the German and European banking market. He knows that banks got to want digital transformation.

“Strategic partnerships are key to the banking of the future”

In its study, PwC defines strategic partnerships as long-term, structured cooperation between the bank and the service provider in order to take advantage of market conditions or respond more effectively to clients’ needs. Strategic partnerships play a decisive role in the banking market: “They are the determining component for the banking of the future, not only for ‘fully digital’, but also for hybrid business models,” says Richard to PwC. This applies not only against the background of new regulatory requirements such as PSD2. “The market is simply mature: Apps are an excellent way to place partner offers with customers and digital tools enable banks to find the right recipient for a particular offer in real time. The conditions for efficient digital distribution have been created and it is up to the banks to take advantage of the moment.”

«Open banking is not a one-way street»

Richard observes that many institutions see the pressure for change created by PSD2 more as a compulsory exercise than as an opportunity: “Unfortunately, open banking has not yet reached the executive floors of all banks, as it is not a one-way street that only obliges them to pass on bank data to third parties. On the contrary, it opens up new potential for the traditional house bank in the aggregation of data and offers.” For a successful transition to open banking, a financial institution needs not only a suitable platform infrastructure to orchestrate its own overall digital offering, but above all the right partners: “If banks want to offer their customers a well-rounded and comprehensive financial ecosystem, they can’t help but look for cooperation partners because they can’t provide all the services themselves. The banks surveyed are aware of this. According to the results of the PwC study, 73 percent of service providers hope to gain access to specialized solutions through outsourcing. Through long-term strategic partnerships, they are building up their capabilities to offer modular services, achieve greater cost efficiency and focus on their own core competencies.

“Rethinking the entire business model”

Markus Schmermer, Senior Manager at PwC Germany, sees from the results of the study that the outsourcing market will change considerably in the coming years: “FinTechs will become service providers and service providers will become strategic partners. The range of services will be more flexible, more mature and in the future also contain more complex functions – this will result in new opportunities for banks”. The development from a classical credit institution to an orchestrator of services is above all a question of attitude, says Richard: “The bank must want change and be prepared to radically rethink. Basically, the entire business model needs to be put to the test. In terms of operational implementation, banks are primarily concerned with saying goodbye to the traditional notion of the big, predictable throw and instead pursuing an agile policy of small steps. However, the following applies: “Anyone who does nothing in the next two years loses touch and drastically restricts his own room for manoeuvre. The fact that the ‘late follower’ rolls up the field from behind is more common in Hollywood than in Frankfurt.”

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