The vision behind the Banorte-IBM partnership
Banorte and IBM announced today in a press release a “10-year strategic agreement that will allow the Mexican finance institution to create a new customer-centric banking model.” For years we’ve been discussing best practices in bank transformation; but few have actually been implemented in more than piecemeal fashion. Three aspects of this US$1 billion alliance strike me as noteworthy:
- Banorte has decided that the time is right to undertake a radical restructuring of its relationship to, and view of, its customers. Now the number three bank in Mexico, with 20 million customers, Banorte realized that delivering value could more effectively come from existing customers, rather than expanded market share. They aim to create value from increased share of wallet, cost take-out, and improved risk management.
- The transaction is structured as a true partnership, with risk sharing baked into the pricing, and is structured to self-fund incrementally over time. IBM will realize upside potential if it over-delivers on a set of specific KPIs.
- Senior management was not only involved in the structuring and approval of the deal, but will be heavily enmeshed in the details on a week to week basis. Banorte and IBM recognize that this is much more than simply a technology play, but instead encompasses every phase and level of the bank, from platform, to organization, to process.
While this transaction, five months in the making, is clearly in its early days, Banorte and IBM are making all the right noises about how to execute on a well-structured vision. True partnership, risk sharing, and a professed commitment to true customer-centricity are necessary, if not sufficient, conditions to a potentially extraordinary deal. In the spirit of full disclosure, I worked at IBM from 2001 until 2009.