Unexpected and surprising. The announcement, on June 12, 2020, of a future partnership between two of the biggest belgian companies, Belfius and Proximus, caught many experts off-guard. It seems understandable, as one can legitimately wonder how a traditional bank, ranked 2nd in retail activities in Belgium, and a major telecom provider might cooperate. Both CEO’s, during the joint press conference, mentioned several times that this type of partnership was a world premiere.
Now that the surprise effect is over, comes the time for analysis. What are the synergies between these two companies to justify such a partnership? When you read between the lines, the main focal point stands in one word: digital. For Proximus, providing digital services (mobile phones, Internet, TV, landlines) is already the biggest part of their core business, and their expertise is well established. Regarding Belfius, if we look further than their traditional banking activities (retail, private banking, loans...), we observe that digital has been part of the recent strategy, with great success: 1.5 million people connect everyday to the mobile banking application (that has been awarded as the best in Belgium, and the second best in Europe), creation in 2018 of an independent venture (The Studio) purely focused on digital services etc.
Become Agile to face new challenges
If Belfius invested so much in digital in the past years, it can be directly linked to a recent and massive trend observed in banking industry, Agile transformation. And Belfius is not the first nor the only one: it is the case in Belgium (the traditional ones, ING, BNP Paribas, KBC/CBC, started their transition projects since 2016/2017), but also all across Europe and beyond. At first, transitioning from a regular organizational model to an Agile way of working was the answer banks gave to meet the new expectations of their customers: personalized offers and advice, reactivity, lower management fees, mobile / virtual services... Agile offers tools and a recognized methodology to transform massive and hierarchical structures into flexible and smaller decision units, enabling the delivery of tailor-made solutions to clients in a faster time frame. Agile is by essence a customer-centric approach, a concept that some traditional banks may have forgotten over the years.
In addition of internal challenges, the rise of a new competition pushed traditional banks to evolve. Neo-banks and online banks, heavily focused on digital services, know an undisputed success since the beginning of the 2000’s. The neo-bank Revolut for example, created in 2014, has today more than 10 million clients, has signed in February 2020 a 500$M fundraising deal and is valued at 5.5$B on stock exchange market. By capturing a new generation of customers (mostly young people, between 18 and 35 yrs old), these new actors forced traditional banks to adopt a whole new strategy to avoid losing market shares, first at an internal level, but also by partnering with third-party companies to create business synergies and eventually enlarge their customer portfolio.
Belfius / Proximus: a good MVP example
To come back to our duo Belfius / Proximus, they managed to illustrate during the press conference a key concept of Agile methodology: the MVP (Minimum Valuable Product). Instead of presenting a fully developed product to the potential clients, they only gave the headlines: creation of a neo-bank, designed by Belfius, within Proximus activity portfolio, and integration of Proximus services & offers on the digital platform of Belfius. No further details were given: prices, release date, functionalities, packages... Cherry on the cake, the creation of the neo-bank has not been validated yet by the FSMA (Financial Services and Markets Authority). Many observers pointed out the lack of details and several blind spots, implying the following question: was the partnership announcement too early?
Following the MVP principle, Belfius and Proximus are however not putting the cart before the horses. When you plan to launch a product that no one has done before (and the two companies are claiming that it is the case here), it might be relevant to test first the market / customer reaction by giving just the necessary information to visualize what the product is. It can trigger frustration or questions, and that’s the case with this partnership, but it creates two major advantages: if the market reaction isn’t promising, it is easier to stop the project at this early stage (the resources spent won’t be as important as if the product had been fully designed and developed) or fine tune it to better cope with the customer expectations, and it allows way more reactivity. As mentioned earlier, the project has been kept secret and thus the surprise effect has been total, allowing Belfius and Proximus to appear innovative, even disruptive, and to take some advance on the competition. Being able to quickly deliver operational products is a fundamental concept of Agile.
A smart timing
Beside, the timing of the announcement is not random, and is part of the communication strategy. At the end of the COVID-19 lockdown, while many economists and experts are predicting difficult times to come for private companies in the next months, even years, being able to present such an ambitious project is definitely a positive signal. It also shows that both companies cleverly understood the ongoing trends, and their acceleration during the health crisis: democratization of digital payments and virtual solutions, need for mobile services, bundled offers etc.
Belfius and Proximus gave us here a great demonstration of what is Agile applied to a company strategy level: reactivity, ability to quickly design a product (even if it’s still a draft), creation of mixed teams, focus in digitalization... The big Belgian banks are now almost done in their internal Agile transformation projects, and this type of partnership, between two (or more) companies working in different sectors, might become recurrent. Telenet and KBC, the Flemish leaders in telecom and banking (funny coincidence) markets, are being mentioned in the news to potentially create a joint offer. In any case, this is the proof that the traditional banking industry is increasingly embracing Agile philosophy, to find new growth drivers in a market shaken by new competitors and new customer expectations.
Associate at AION Consulting