BCG's analysis of top 100 financial institutions shows that high 🔺 #ecosystem engagement boosted shareholder return 2X, while driving other performance and valuation metrics.
🏆 In 27% of top banks that have significant ecosystem
Annualized total shareholder returns grew 2X faster than ecosystem abstainers over the past five years—8.2% versus 4.2%.
They have higher multiples (10.5 versus 10.0) and a higher price-to-book ratio (1.4 versus 1.2) vs banks that had little to no ecosystem engagement.
💡 Why only 27% of the world’s largest banks are investing in ecosystems meaningfully?
“The answer for many is 📍 uncertainty. Given the risks of moving away from existing business models, the fear of cannibalization, and the intricacies of partner-based initiatives, not even the largest and best-resourced institutions are certain which approaches can deliver the greatest risk-adjusted returns.”
Most banks are still in test-drive mode. 52% are in the experimental phase; they’re active in ecosystem initiatives, but not to the level of significance of core business activities.
🚩 But the stakes are VERY high
“This failure to leap into the ecosystem movement in a targeted way is leaving massive value creation at stake—and giving a significant leg up to peers that have embraced this shift.”
“The US banking revenue pool is worth over $900 billion. As of 2020, traditional banks claimed 80% of that amount. But that share is likely to drop precipitously. BCG projects that fintechs, non-traditional banks, and non-bank players will command more than 40% of total banking-related revenues in the US by 2027.”
🎯 4 ways to engage into an ecosystem
1. Build an ecosystem around the core and play as an orchestrator
2. Use ecosystems to go deep into specific verticals and markets
3. Use ecosystems to learn and experiment and potentially diversify
4. Play as a contributor (vs 1 - orchestrator) - de-risk the entry by partnering with those that have already mastered the concept.
💡 Delivering a successful ecosystem strategy is not just about good ideas, but good ideas delivered well.
Determine what strategy archetypes best align with your capabilities and market ambition.
Pursue multiple bets - the most successful examples in the study adopt 2-3 ecosystem archetypes and build, test, and refine them in parallel.
After choosing the most effective way for you (ROI, etc.) - execute with discipline. This is key
Source: Boston Consulting Group, graph edited.