Talking of partnering, many years ago, I was assigned the role of negotiating a contract with a partner for a large technology firm. The partner specialised in the insurance markets, my focus at that time, and we got into the game of contract wording. For quite a while, it was if you do this then we do that and if you do that then we do this. There was a sense of mistrust upfront and I wondered why we were doing this deal. For them, they felt it gave them access to a large swathe of insurance customers in the tech firm. Little did they know that most of those insurance customers saw us as hardware merchants and not solutions providers, which is what the software firm offered. For us, it was trying to do a deal with a solutions firm to move away from just being a provider of tin. Suffice to say, the partnership fizzled out rapidly and we never agreed a contract.
A while later, I was involved in the negotiations in another large technology firm to do a deal with a rising star solution firm in the CRM (Customer Relationship Management) space called Siebel. We had already signed a contract to be their partner, and were now working out how to get our sales teams to engaged with their product specialists and technicians. It was difficult, as our sales teams had little idea of what CRM was or how to sell it and their product specialists had little interest in our partnership as there were two or three bigger name partners who received all of their attention. Suffice to say, the partnership fizzled out slowly and we never sold anything.
I relate these two stories as we now talk a lot about bank and FinTech start-ups moving into partnerships, collaboration and co-creation. But do banks understand how these relationships work and will the FinTech upstarts really respect and trust the banks to do the right thing?
It’s really not an easy thing to do at all. Partnerships that is. I guess it’s why most people stay with their banks longer than their partners, as relationships are tough to start, hard to maintain and easy to break. The average US marriage lasts eight years, whilst the average American stays with the same bank twice that long. That’s because a marriage is a relationship whilst banking is just a utility.
Therefore, I wonder how banks will work as systems integrators of FinTech start-ups through ecosystems of partnerships. If another bank offers the partner more revenue and sales then your partnership loses its focus, as evidenced by my CRM example above. Similarly, if you are trying to partner but one side feels weaker than the other then the relationship flounders through mistrust, as shown by my insurance software-hardware tie-up above.
For a partnership to really work, it has to be a marriage of equals and with equal opportunity and benefits for both sides. If either side is on the back foot or treated as second fiddle, it isn’t going to work.
Now I know there are lots of management guru books about building successful partnership and lots of Harvard and similar papers and columns about such like, but you can scrap all the academia and theory. The reality is that even if the partnership is created as a marriage of allies, do the thousands of managers and staff who have to implement the marriage within the bank feel the same? Many times, partnerships are scuppered not because the intentions were honourable, but because the reality is that aligning two distinctly different organisations of thousands of people to work together in harmony just does not hold true.
Meantime, I’m thinking that within the IT industry, we have decades of experience of doing these ecosystem relationships and marriages, so it would do banks no harm to hire a bunch of system integrators from the technology world to become their leads in developing banks as value integrators in the financial world.
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...