Close to you – how white-label partnerships will continue to evolve
Over the past decade or so, white label partnerships have deepened and broadened, now covering many more services and capabilities than have been traditionally associated with the term. This evolution has been brought about as clients’ requirements have become more sophisticated, such as moving quickly into a new market segment, ensuring regulatory compliance or implementing a digital transformation strategy.
Even the very largest sell-side firms are reassessing the infrastructure and services they provide via in-house resources, showing greater openness to deploying third-party capabilities. A combination of higher customer expectations and fintech competition – against a background of low yields, squeezed margins and regulatory pressures – means that further business model change is inevitable.
While the partner bank sets the strategy, the white-label provider must focus on delivery. Firms who only offer one-dimensional “plug and play” solutions will find themselves overtaken by providers whose service range supports a closer level of partnership and integration.
Sustainable, scalable service
What should a white-label service look like – today and in the future? While it was always invisible to the end-user, there is now even more going on under the surface of a white-label partnership. Based on our experience, we list below some core elements of a sustainable, scalable service proposition.
Flexible infrastructure and platforms: While many white-label partnerships are likely to have started through the provision of liquidity/pricing in a non-core asset class or geographic market, e.g. emerging markets or FX, new needs soon emerge. Ideally delivered through a flexible infrastructure and multiple platforms, the white-label service provider has to cater for continuous service evolution to remain competitive and maintain client relationships.
Providing the front-office and trade execution capabilities quickly leads to the servicing of middle- and back-office needs, such as enhanced risk management or reporting capabilities, or settlement or safekeeping of securities. The depth of integration and breadth of functionality required to meet these needs can be substantial, but such investments in integration are typically rewarded by the growth and longevity of relationships with the partner bank.
Support across the value chain: In addition to providing a branded platform, to help a partner bank improve their own customer experience and maintain relationships, the white-label service provider should also supply a full range of services.
This should include on-boarding processes – enabling speedy adoption by the end-users – and front, middle and back office support in addition to the provision of training, education and even marketing resources. This approach not only encourages the use of existing services and products, but also binds together the partner bank and white-label service providers in their growing understanding of client needs – and boosts their joint efforts to meet these needs.
Service model: Service quality has always been critical to customer satisfaction, but the bar has been raised significantly in recent years, particularly by a new generation of online retail service providers. Not only do services have to be available 24/7, but support responses are also expected to be immediate and effective.
The IT and networking infrastructure underpinning white-label services must offer world-class levels of availability, redundancy and security, including robust back-up capabilities.
Service models will be guided by geographic distribution of client base, but a balance must be struck between the need for local support (providing market expertise, language skills, time-zone availability) versus technical and specialist support that can be provided on a global/remote basis from centres of excellence.
Customer experience: Competition to deliver a differentiated user experience has taken a quantum leap in recent years. Advances in other sectors have increased customer expectations for real-time responsiveness, customised functionality and seamless interchange between devices, platforms and channels.
Much of this digital innovation has been facilitated via open APIs, which make it much easier to combine a range of capabilities (often developed by different service providers) in a single service or customer interface. To support partner banks’ desire to assemble tailored customer experiences, white-label service providers must ensure their platforms can interact smoothly and seamlessly via open APIs. Over time, API-based communication and data exchange will be a pre-requisite for all service providers in the finance sector – including all middle- and back-office processes, not just at the client interface.
Anticipate need: Regulatory pressures on balance sheets, macro-economic pressures on yields and competitive pressures on market share are forcing a strategic shift in the banking sector.
A long-ingrained preference for proprietary solutions and resources is no longer sustainable. To respond to commercial opportunities and customer needs quickly and cost-effectively, banks are using industry utilities and third-party resources as a much more integral part of their business models.
For white-label service providers this represents an opportunity, but also a challenge: can you deliver a tailored service at scale and speed? Installing trading platforms on desks is one thing; handling corporate actions in a remote jurisdiction to support end-investors across time-zones quite another.
Our success is your success
Where will white-labelling be in five years’ time? The answer to this question depends on the future of banking itself. The willingness and need for a wider range of banks to partner with third-party providers to deliver customised, digitised services to end-users is only likely to grow.
Well-positioned white-label service providers will become a key part of a broad and fluid ecosystem in which the services, skills and capabilities of multiple parties are selected and integrated into new, diverse and exciting service propositions. This might be a far cry from the industry’s roots, and require the development of new skills (such as the ability to partner with a wider range of fellow-suppliers), but it is also the logical conclusion of its core purpose.
Whether you call it outsourcing, partnership or collaboration, best practice white-label service provision has always been about supporting a client’s ability to meet their end-customers’ needs. This has not changed in principle but will continue to do so in practice.
As needs inevitably evolve, the white-label service provider has to continually invest in innovative technology and capabilities, while working harder to understand and support individual client priorities. Providers that do not adjust will soon fall by the wayside, their demise hastened by the ease and speed with which banks can integrate new suppliers.
By Henrik Alsoe, head of white labelling, Saxo Bank