Impact of ecosystems on the business model of Swiss retail banks

Topic

Derived from biology and put into management science by Moore in 1993, the concept of ecosystems has received significant attention both from practical and scientific fields in recent years. Digitalization and the resulting platforms and interfaces can be seen as catalyzers for regaining attention to the topic, as they facilitate collaboration within ecosystems. However, it remains unclear what the impact of ecosystems on the business model of retail banks is. This paper analyzed retail banks' role in ecosystems, opportunities and challenges and what specific use cases exist.

Relevance

Today's customers of retail banks are looking for broader services and consultations specific to their daily lifes and state-of-the-art user experiences driven by FinTechs that provide new innovative solutions. Collaboration in ecosystems enables retail banks to expand their core offering, enhance customer experience, intensify customer relationships and maintain customer touchpoints. Nevertheless, research has focused more on FinTech ecosystems and less on what business ecosystems mean for retail banks' business models.

Results

Ecosystems change the business model by extending basic banking and financing services in collaboration with partners within or across industries. They further allow for alternative revenue, such as brokerage and transaction fees, revenue share and increased turnover. Besides "home" ecosystems, ecosystems towards mobility, health or retirement remain a white spot. Challenges for realizing an ecosystem strategy include achieving network effects and a profitable business case due to the vast financial and human resources needed to create and govern an ecosystem and the core banking system. A seamless integration of the offering and the capabilities to govern the ecosystem is crucial for an ecosystem.

Implication for Practitioners

• Retail banks should investigate in ecosystems to extend their services and increase customer relevance.
• Alignment with the hybrid strategy (online & branches) is necessary as it remains the value proposition.
• Open business, two-sided markets, cross-selling and leveraging customer data are important business model parts in an ecosystem approach.
• Most retail banks would complement complex ecosystems due to the above mentioned limitations and thus need to ask themselves which ecosystems to complement and with which partners. The capability to complement other ecosystems with modular services is vital.
• Smaller ecosystems and less integrated offerings allow retail banks to orchestrate and mediate third-party services, such as removal companies, that can create added value for customers.

Methods

The study used a qualitative research approach to explore the topic. The theoretical background has been set to answer the research question by looking at the relevant scientific literature and reports from consulting firms. Primary qualitative data has been collected regarding ecosystems' opportunities, challenges and limitations by conducting semi-structured interviews with 13 industry experts within the scope of financing and basic banking services. An iterative coding approach was used to analyze and categorize the data and gain results. Finally, the results have been mapped to the business model of retail banks, using the reference model from Gassmann, Frankenberger & Csik (2014).