Harnessing the power of partnerships in a crowded payments ecosystem

From the Covid-19 pandemic to a highly volatile geopolitical environment, a number of external factors are accelerating the way in which consumers are adopting new forms of payment types. For example, Mercator Advisory Group has found consumers shopped in-store 22% less during the pandemic in comparison to before the pandemic. Similarly, consumers shifted more of their purchasing behaviour from in-store shopping to online shopping and curbside pick-up during the pandemic compared to pre-pandemic times. Mercator expects to see an 8% sustained increase in online ordering with delivery. 

This acceleration means financial institutions need to be smarter and faster about how they implement new technologies, resulting in many turning to strategic partnerships to expand their offerings to improve business outcomes and meet consumer demand. However, choosing the right partner is becoming increasingly difficult in a market that is saturated with fintech companies fighting to be part of the evolving consumer ecosystem. The companies that can identify and leverage the right partnerships will be equipped to provide a better consumer experience and distinguish themselves in a dynamic, highly competitive payments environment.

To set your financial institution up for success, there are a few critical questions you should ask yourself up front. At the forefront is “the why.” It may seem like a no-brainer but given the amount of human and business capital that goes into building a partnership, having a clear definition of what you’re looking to accomplish will not only ensure that you give your customers what they need, but also find the right partner to achieve that goal. An important part of this discovery process is an open and honest assessment of your capabilities, what can be done in-house, and where you really need the help. Once you have that knowledge, you can set out to find a partner that will complement your strengths and fill in any gaps you may have internally.  

• Alliance Partnerships: Alliances can take a number of forms. There are horizontal alliances, where two competitors join to strengthen their industry position; vertical alliances, in which companies share the same supply chain and merge to reduce potential risk and cost; and joint ventures, in which a new entity is formed by two or more established parties that share ownership. In each of these relationships the key thread is a strategic combination that serves to benefit both entities equally.
• Reseller Partnerships: With these types of partnerships, the liability falls on the reseller. These partners are generally able to buy your offering at wholesale prices, and as a result, your profit may potentially be less than it could have been otherwise. While there will be some inherent reputational risk with these partnerships, once the offering has been sold to your reseller, the financial risk falls to them, which can be very enticing for financially risk-averse organisations. 
• Referral Partnerships: Not all prospective partners are looking to take on the financial risk associated with being a reseller, so in a referral-based partnership, the liability stays with you. These relationships can be key to tapping loyal audiences that may not have exposure to your product, and while there is a financial incentive for your partner to drive sales, the onus is still with you to make that sale.
• Integration Partnerships: An increasingly popular option, as more and more fintechs fragment the payments ecosystem, is to integrate a company’s product or service into your product suite. This relationship enables you to quickly capture an audience base you didn’t have access to, while also reducing the risk and cost of trying to develop the service in-house.

Whether it’s full ownership over the strategy behind an offering, or simply a percentage of profits, knowing which of these partnership models is right for your organisation is critical in standing out in an industry inundated with fintechs that are exponentially increasing the amount of payments options available to today’s consumer. With strategic partnerships and modular architecture supporting these partnerships, companies can provide clients with an agnostic global payments platform that benefits from superior technology across the entire ecosystem, and most importantly, provides a consumer experience that reduces friction and can meet the rapidly growing demand for new payment solutions.

About Michael Engel

Michael Engel is Managing Director/Vice President Payments, located in Utrecht, The Netherlands. He is responsible for the global growth of DN’s Retail Banking Payments solutions. He is directly engaging with customers and partners in the efforts of transforming banks into more agile, IT driven organizations. He is a frequent speaker at industry events and seminars about banking transformation, payments, and cloud native solutions/open API driven banking environments. Michael has over 20 years financial services experience and has been with DN since 2002 and held various management positions prior to his current assignment.

About Diebold Nixdorf

Diebold Nixdorf automates, digitises, and transforms the way people bank and shop. As a partner to the majority of the world's top 100 financial institutions and top 25 global retailers, our integrated solutions connect digital and physical channels conveniently, securely, and efficiently for millions of consumers daily.