| Alliance
for Profit
 By
Thomas P. Johnson Jr.
Bankers need to take
their alliances more seriously if they wish to maximize
the value of these arrangements.
Banking companies have struck a wide
array of alliances and partnerships with non-bank firms
to help them in asset management, product distribution,
and most importantly, e-commerce. Since not even the largest
bank has the resources to go it alone in all these areas,
such affiliations make sense. Indeed, Speer & Associates
estimates the top 100 banks alone are involved in several
thousand partnerships.
Whether these arrangements are reaching
their full potential is another matter. Recent research
by Accenture, across many different industries, shows
that 30% of all alliances fail outright, while another
49% substantially fail to meet expectations. Forrester
Research Inc., in its own survey, identified "ongoing
alignment" and "keeping momentum" as the
two biggest challenges that partners encounter.
This issue's cover story, which looks
at bank alliances specifically, questions whether institutions
are giving their alliances the strategic priority they
deserve. There's a risk that such ventures can fade into
irrelevance from lack of senior management attention.
Parochialism is another stumbling block. As described
by writer John R. Engen, executives are reluctant to cede
much discretion to their nonbank partners, who end up
functioning more as glorified outsourcers than as true
collaborators.
Some of this reticence is understandable.
Bankers are steeped in a risk management culture that
recoils from exposing the institution to potential dangers
or uncertainty. It is possible, however, to minimize the
risks in alliances. Protective actions include methodical
screening of vendors, detailed contracts and a governance
structure that provides for strong leadership and accountability.
The value of a good alliance can be
seen in our article about Internet payments, or person-to-person
payments, a new technology that allows individuals to
transmit funds to each other over the Internet. As writer
Lauri Giesen points out, one of the most promising bank
ventures in this field is an alliance between Wells Fargo
& Co. and P2P payments provider Billpoint Inc. Wells
Fargo owns 35% of Billpoint; the remainder is controlled
by online auctioneer eBay Inc.
The venture unites Wells Fargo's payments
expertise with Billpoint's Internet payments technology
and deploys that package on eBay's Web site, one of the
most popular venues for P2P payments. While it's too early
to judge Wells Fargo's ultimate success, the example does
suggest what can be accomplished with alliances.
In an interview last year, consultant
Richard Schroth said financial services executives need
to move beyond their old world of proprietary business
models into a new era of networks, where collaboration
is often the primary means of creating wealth. Judging
by what's going on in Internet payments, that networked
era is upon us.
Copyright © 2003 by Banking
Strategies, published by BAI.
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