Ecosystems challenging traditional banks: McKinsey

New findings on the future of the finance industry released by management consulting firm McKinsey & Company are reverberating through the finance industry and business media. In an annual global banking review, McKinsey sends a clear warning to traditional banks: the digital tsunami is coming and you need to move faster if you hope to remain competitive.

McKinsey points to what it calls “platform” companies, who, “by creating a customer-centric, unified value proposition that extends beyond what users could previously obtain… are bridging the value chains of various industries to create ‘ecosystems’ that reduce customers’ costs, increase convenience, provide them with new experiences, and whet their appetites for more.”

The report goes on to explain that these platform companies “have exceptional data that they exploit with remarkable effectiveness but also, more worrisome for banks, they are often more central in the customer journeys that include big financial decisions.”

McKinsey then cites Rakuten as an example of a business executing an ecosystem strategy by prioritizing the customer relationship. The report notes that Rakuten:

• Is Japan’s single largest online retail marketplace.
• Provides loyalty points and e-money usable at hundreds of thousands of stores, virtual and real.
• Issues credit cards to tens of millions of members.
• Offers financial products and services that range from mortgages to securities brokerage.
• Runs one of Japan’s largest online travel portals.
• Runs instant-messaging app, Viber, which has some 800 million users worldwide.

As testimonial to those observations, it’s safe to say that Rakuten has been a global pioneer in the development of an ecosystem, being the first to launch a successful online marketplace in 1997 and being the first to launch a fintech business closely linked to a strong e-commerce membership base in 2005. Today, Rakuten Card not only has tens of millions of members, but an annual transaction volume of over 5 trillion yen (FY2016) and, according to Kinzai Institute for Financial Affairs, is poised to leapfrog traditional banks to become the largest credit card company in Japan by transaction volume.

The Rakuten ecosystem now encompasses over 70 businesses, extending to industries as diverse as insurance, energy, health & beauty, parking and professional sports, and our global membership base is over 1.1 billion. Fundamental to everything in the ecosystem is our relationship with our members and our ability to offer them exceptional, complementary services at every point along the customer life cycle.

Of course Rakuten is a much younger company than many of the traditional banks, but since Rakuten was founded 20 years ago, CEO Hiroshi “Mickey” Mikitani has consistently talked about the “ecosystem” strategy – and he made it central to company growth. McKinsey’s report is an intriguing warning flag to those traditional banks, but the success of our strategy is only made possible through our members. Engaging members with even more compelling new services and developing ecosystems in new geographies around the world are next on the agenda for Rakuten.