Insights 10 October 2019

Borderless Competition Through Digital Ecosystem

How the businesses create competitive advantages. One strategy that many businesses have done is to integrate themselves as part of the “Digital Ecosystem”.

Traditional competition has been all about product features and costs with stiff competition. The playing field has become more difficult for players to beat their opponents. Also, a growing number of startups with high technology solutions have entered the playing field and posed challenges for the existing players. Therefore, the competition game in the digital world is no longer reliant upon old-school straightforward strategies. Instead, businesses must understand what rules are available in the digital era. How the businesses can create competitive advantages based on such rules. One strategy that many businesses have started implementing is to integrate themselves as part of the “Digital Ecosystem”. It draws benefits from the alliances in such an ecosystem.

What is “Digital Ecosystem”?

First, we must understand consumers nowadays. They want to transact all kinds of business via online channels and use multiple services at the same time; as such, convenience and speed are what they need. Thus, to achieve a business success, a “Digital Ecosystem” must ensure the most comprehensive range and widest connectivity of services.

Put simply, Digital Ecosystem is a bridge between businesses and costumers by sharing digital properties for a mutually beneficial purpose, such as commercial gain, innovation or common interest. For example, “Lazada”, the well-known e-commerce platform, has be alliance with many businesses such as; banks – to offer additional payment options, logistics service providers – to provide speedy delivery services, or even retailers – to present a wide variety of products to its customers.

Many companies that have large customer bases, have acted as Digital Ecosystem centre such as “Line”, “Grab” and “WeChat”. They offer cross-border services with alliance to customers by using competitive advantages in terms of customer bases and technology strengths. Those companies have propelled themselves into becoming ecosystem hubs. One observation is that all these tech giants are international companies. However, banks in Thailand have driven “Digital Ecosystem” and have gained big benefits from it.

The embarkment of the Digital Ecosystem: When banks are increasingly keen on the provision of “Lifestyle Banking” services.

Over a few recent years, all industries have experienced the so called “Digital Disruption” phenomenon. It can be said that the most impacted industry is the financial business community. In the old days, banks were only places to deposit, withdraw or transfer funds. Nowadays, that is no longer the case. New forms of banking services have emerged, especially from rivals like “Fintech” firms. Currently, banking operators are trying to adjust themselves to provide more of “Lifestyle” services. This is the first step of preparing banks to play a major role in the creation of “Digital Ecosystem”. All businesses will have to approach banks in order to connect themselves with customers as the banks are considered the most accessible channel to the customers.

We can see that establishing a “Digital Ecosystem” requires a great degree of collaboration among different business sectors so as to provide wide-ranging services though a fully-integrated one-stop system. It is beyond question that almost all businesses have to engage with payment services. Hence, banking is considered a key piece of jigsaw in the Digital Ecosystem.

Why does banking become a key element in the Thai Digital Ecosystem?

Mr. Chalakorn Panyachom, Chief Digital TV Business Officer of Workpoint, stated interestingly that among the Top 5 applications on Appstore or Playstore in Thailand, the only Thai company apps are mobile banking apps. Also, mobile banking apps are those with highest downloads in the country for 10 consecutive years. This means that Thailand has a huge pool of digital banking customers, leading to a large customer database. In addition, the banking sector has seen operating profits at higher levels than other sectors; thus it is in a far better position to be pushed forward to build the Digital Ecosystem with its available funding resources for system development and sufficient database for analysis and development of new forms of products to satisfy customer needs.

Digital Ecosystem example

Collaboration with alliances is key to the usage of the Digital Ecosystem.

It is widely known that banks are supervised by the Bank of Thailand and must strictly comply with specific rules. Sometimes, those rules pose restraints on the expanding role of the banks in the provision of new types of services because under such rules the banks’ ability to independently change their role and business model like other types of business is limited.

Hence, banks need to rely on the collaboration among different types of business in order to ensure diversified services and better satisfy customers. There are numerous examples reflecting the collaboration between the banking sector and other sectors in order to gain benefits from the Digital Ecosystem.

One example is the provision of non-banking services to customers through a mobile banking app, for instance; ticket booking, point accumulation under loyalty program, shopping through e-commerce platform, and etc. This collaborative effort benefits everyone. Consumers enjoy the convenience of using a one-stop service application. Businesses acquire additional customers from a large group of mobile banking app users at lower marketing costs by partnering with the banks instead of seeking new customers by themselves.

Another example is the provision of banking services through other businesses. For instance, banks partner with peers and convenience stores like 7-Eleven to provide money deposit and withdrawal services around the clock through the use of a mobile banking app at a convenience store. This is a big stepping stone for banks as they can increase more than 11,100 touch points nationwide without the need to invest in the construction of new branches. This is a true synergy that creates enormous benefits for the banks.

An additional interesting example is “Kasikorn Bank”, a major banking group and “Line”, a social media platform that using by more than 44 million people in Thailand. They form a new company namely Kasikorn Line Co., Ltd.  The company aimed to provide financial services that are simple and convenient. Examples of services include “digital lending” through the Line platform. This is going to be a new chapter in the history of bank loans. As a partnership, Kbank can access to a large pool of customer information and utilise such information to further personalise products and services to cater to customer needs.

“Bluebik” points out the trend of the banks unlocking their role to create the “Digital Platform.”

“Customers” are the most important asset in banking. To gain competitive advantages over competitors, each bank must establish its customer base to the greatest extent possible. At present, the strategy for contracting customers is not all about issuing financial products or promotion programs at lowest prices. In order to survive the competition, banks must develop platforms in order to provide customers with a full range of services.

As Bluebik working experience with several leading banks, banks rapidly adjust ther in order to keep up with customer needs in the digital age. Almost all banks in Thailand have tremendous amounts of digital investment. They focus on seeking new alliances in other business sectors to drive the efficient implementation and using of the Digital Ecosystem.

so as to provide customers with a full range of services to satisfy their needs.

Not only does the banking sector need to adjust themselves, other business sectors should also consider this opportunity. How to integrate products and services with “Digital Platform.”? Today, it is more and more challenging to compete against each other with the same old practices. Therefore, synergistic collaboration between businesses to create new added value would be a more sustainable solution.

References :
1. KBank & LINE Join Forces to Establish “KASIKORN LINE Co.,Ltd.”: https://kasikornbank.com/th/News/Pages/KASIKORN-LINE-Company-Limited.aspx