Ecosystems: Blurring inter-sectoral lines to capture value | December 2023

The creation of long-term value and synergies are the core drivers for any organisation to engage in an ecosystem. However, a hurdle most institutions and organisations must confront is the siloed infrastructure present across the ecosystem.

FIs are in a unique position to integrate these siloed infrastructures by creating a proposition that can help lead the way for better integration within the ecosystem, thereby amplifying both value creation and overall profitability

While typical FI products such as lending and wealth management are common areas of interest for most communities, payments and collections help integrate all FS needs seamlessly. Since ecosystems are contractual arrangements, an effective payments and collections orchestration helps all the participants to maintain modularity and coordination. Moreover, delivering the right payments experience to every stakeholder helps innovate newer business models.

For example, the mobility sector has benefited greatly through the enablement of payments in its platform-based ecosystem.

There has been an increased focus on platform-based solutions for communities and ecosystems. Therefore, it is expected that the next decade would decide the fate of many FIs, as they embody this new era of value creation. 

A platform-based ecosystem integrates stakeholders of communities – enabling them to collaborate, create and add value. Direct network effects further add to value creation, as more participants join the platform. Additionally, data plays an important role here to customise, personalise and enhance platform services.

Scalability is also positively reinforced in platform-based ecosystems through lesser physical constraints, which communities and stakeholders would otherwise face.

The complexity of business ecosystems can often create challenges for FIs to decide on the right ecosystem strategy. Considering the nature, business and role played within ecosystems, FIs can essentially think of acting as one of the following: 

• Playing the facilitator: FIs can act as the facilitators of the ecosystem by leveraging core business activities. This would entail:
  • creating and maintaining multiple partnerships across various ecosystem legs to offer embedded banking products
  • getting as many players as possible onboarded, while increasing interaction on terms laid down by the FI (facilitator)
  • being mindful towards proper governance while playing the role of a facilitator.

• Leveraging adjacencies: This model entails deep-diving into a specific focused sector and identifying the adjacencies which can be leveraged in order to offer bundled solutions
  • FIs can leverage the access to diversified customers (existing and new) and create value through customised and new offerings.

• Supporting as a partner: FIs can help capture value in ecosystems in several ways even when they are not managed by them.
  • This model is especially helpful when FIs want to explore ecosystems with reduced risks and challenges. Here, FIs can leverage their position as partners offering financial capital and services to access newer markets or customers and grow their business.

FIs could leverage an ecosystem platform approach to capitalise on aggregating large and varied customer bases of ecosystem digitisers. By doing so, they can identify new revenue opportunities through embedded FS offerings, contextual product injection and service provider partnerships.

However, FIs must be mindful of embedding themselves in an ecosystem strategy that would benefit all stakeholders. This is difficult when established partnership models have a ‘gravity’ of their own, and FIs have inherited routines that served them well in a previous era.