When banks evaluate service providers, they should evaluate their ecosystem partners, too

In our recent study, HFS Horizons: The Best Service Providers for Retail Banks, 2023, we asked leading service providers* of retail banks to list their key partners. We learned that as banks’ IT needs mature, they should consider the value their strategic IT and business service partners deliver via ecosystems to benefit from a large set of execution and innovation capabilities.

*N= 21 providers of services to retail banks (including global IT service providers, business process service providers and consulting firms).

Ecosystem development is becoming a must-have, and it should be on the list when enterprises evaluate their banking service providers. Partners play a huge role in getting the right capacity and skills to grow retail banks while mitigating risks. Service providers depend on vendors and fintech partnerships to bring the necessary innovation to optimize banking functions.

Service providers are vying to quickly provide the best and continuously evolving transformation solutions by acting as ecosystem orchestrators to retail banks. The importance of orchestrators has been growing, as we’ve observed in past Data Viewpoints: Service providers vie to become software ecosystem orchestrators to transform BFS and Service providers are the glue for ecosystem development in capital markets.

Additionally, in our study, service providers indicated that partners for retail banks include hyperscalers, industry-skinned ISVs, and industry-specific ISVs.

The following were the most frequently identified as critical to supporting retail banking clients.

• Hyperscalers offer critical storage and computing capabilities with some industry-specific capabilities, including AWS, Microsoft, and Google.
• General purpose tools are increasingly skinned for retail banking. Oracle, Salesforce, Adobe, and Pega have banking solutions.
• Industry-specific partners are typically leveraged for various solutions:
  • Finastra, created from the merger of Misys and D+H, offers a range of banking and payment solutions.
  • Temenos is an on-premises and cloud core-banking platform.
  • Thought Machine offers cloud-native headless core banking.
  • Mambu offers cloud-native headless core banking.
  • Backbase offers a digital engagement banking platform.
  • nCino is a cloud-based lending and core banking specialist.
  • FIS offers various financial products and services, often used for core banking and specialty finance products.
• Critical partners are moving from hyperscalers and enterprise applications to a growing roster of industry-specific partners. Including more industry-specific partners, especially those focusing on core banking, supports the priority our study highlighted regarding banking modernization.
• All the service providers evaluated in this study have multiple partnerships, with the universal presence of hyperscalers.

The Bottom Line: The role of banking service providers as ecosystem orchestrators has grown tremendously over the last few years.

Banks that will consider the broader ecosystem when evaluating service providers will benefit from selecting the ones with partners that are disrupting and bringing technological advances at a fast pace.

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