Why platform banking is the next evolution in digital banking
Few will have failed to witness the nature, speed, and scale of the digital fintech revolution that has transformed how consumers interact with their banks
Companies across industries are clamouring to get into the digital banking space, whether it be social media, e-commerce or fintech. Given the intense interest from external players, the time is ripe for banks to step up and be the glue that connects multiple capabilities and services to provide an integrated offering for the modern consumer.
Few will have failed to witness the nature, speed, and scale of the digital fintech revolution that has transformed how consumers interact with their banks. With open banking and third-party collaboration, the transformation is snowballing, changing what today’s bank stands for.
The context for this digital shift is the digital economy, a pre-Covid evolution that was expedited by the pandemic. Some global banks had already launched digital-only banking products, but as 2020 and its impact on how banks operate unfolded, many more of these digitally-focused financial products have been launched.
This is driven in part by consumer demand – the 2020 Mastercard New Payments Index conducted across 18 markets around the world, shows 93 percent of people will consider using at least one emerging payment method, such as cryptocurrency, biometrics, contactless, or QR code, in the next year.
With greater consumer demand for digitally-native products with expansive capabilities, we saw the rise of super apps, and they continue to play an important role in providing integrated services for consumers. However, to rise to the growing competitive challenge, financial services firms need to dig deeper and focus on building ‘super platforms’.
What is a super platform?
Having already optimised the banking sphere through digital-only accounts, fintechs have enriched the banking experience through open banking, enabling banks to plug in third-party banking solutions. These have helped banks to accelerate the provision of choice and simplicity, and in doing so, remain competitive. What comes next is platform banking.
Much like an operating system – Android or iOS for example – a super-platform operating system is built around a centralised warehouse which integrates services from across multiple industries. Thus, built on speaking to each other in one standardised way, this enables fintechs as well as others to aggregate services and launch new products and features. In return, this significantly lowers the cost of a new product or feature development and accelerates the rise of new and innovative services.
When owned by the bank, it can connect its users to multiple financial and non-financial services with the robustness and governance banks are known for. The aggregation of services on this platform will give rise to new apps, some created by the bank, some by other players but all integrated on one platform.
To not only survive, but thrive, organisations need to be good at two main things – change and adaption. To drive change effectively, we need to work and think differently, thus focusing on building super platforms to step into unchartered territories. To achieve this, here is what you need to look at:
1. Scalability
One of the main benefits of platform banking is its scalability. In the new digital era, businesses need to scale at an unprecedented pace to meet the needs of today’s connected consumer, which requires building and deploying new and unique products faster and cheaper than ever before.
To drive change effectively, we need to work with consumers and aggregate services, giving them a constant feed of new product innovations and services to improve their life.
Fintechs have enriched the banking experience through open banking.
Platforms allow banks to reach customers they previously couldn’t and to scale beyond banking by integrating into other platforms and creating a network with a lower customer acquisition and product distribution cost.
Banks can connect their platform APIs with others to consume and to provide one integrated platform. If we are to break it right down, customers no longer have to come to you, but you can embed yourself into other networks, totally changing the way a bank attracts and services its customers.
2. Data
Google’s vast ecosystem allows it to use data to create personalised product offerings to users of its products (like Instagram). Likewise, through a banking platform, banks have the potential to leverage data to understand customers’ needs and match them with relevant providers.
In addition, within the context of artificial intelligence and machine learning, vast quantities of unstructured data can also be leveraged. This is how banks can give smarter experiences to customers and stay competitive in an industry that is constantly evolving.
The natural extension of this is that banking will no longer be a siloed service or industry: It will dovetail into the entire customer journey. When this happens, the platform that offers the richest, most exciting and fulfilling platform will also be able to realise enormous scope for serving other non-banking customers.
3. Value
For the customer, platform banking reflects a seismic shift: From cookie cutter experiences and segments of framework to more niche – and highly relevant – services. All in one space.
Platform banking gives the customer an enormous choice of benefits, products and experiences through a library of services to meet their unique needs. The customer, having purchased a mortgage through the platform, might then be connected to related products – home furnishings, buildings insurance, or garden supplies, for example – delivering a fully intuitive product offering ecosystem.
Within the context of artificial intelligence and machine learning, vast quantities of unstructured data can also be leveraged.
4. People
To make the shift, banks must not only rethink their tech, but also their people. Your people are your biggest asset – but this could also be the biggest challenge. Bankers are smart individuals who have build amazingly successful businesses. The downside of the success is the resistance to change or accept that things can be done differently.
Even those willing to change might feel caged in with walls of processes, technologies and policy limitations; and if all that fails, then fear is the most effective tool to stop change.
But it is time for all of that to change, gone are those days where bankers can and should only be bankers, it is time to find people who think way beyond just banking.
5. Opportunity
As we enter the era of platform banking, the opportunity, as well as threat, for financial institutions has never been greater. Under immense competition, platform banking signals the evolution of the financial industry to connect with customers like never before and evolve the traditional banking business model beyond our greatest ambitions.
Jayesh Patel, fintech thought leader.
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By Jayesh Patel
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Why platform banking is the next evolution in digital banking
Few will have failed to witness the nature, speed, and scale of the digital fintech revolution that has transformed how consumers interact with their banks
Companies across industries are clamouring to get into the digital banking space, whether it be social media, e-commerce or fintech. Given the intense interest from external players, the time is ripe for banks to step up and be the glue that connects multiple capabilities and services to provide an integrated offering for the modern consumer.
Few will have failed to witness the nature, speed, and scale of the digital fintech revolution that has transformed how consumers interact with their banks. With open banking and third-party collaboration, the transformation is snowballing, changing what today’s bank stands for.
The context for this digital shift is the digital economy, a pre-Covid evolution that was expedited by the pandemic. Some global banks had already launched digital-only banking products, but as 2020 and its impact on how banks operate unfolded, many more of these digitally-focused financial products have been launched.
This is driven in part by consumer demand – the 2020 Mastercard New Payments Index conducted across 18 markets around the world, shows 93 percent of people will consider using at least one emerging payment method, such as cryptocurrency, biometrics, contactless, or QR code, in the next year.
With greater consumer demand for digitally-native products with expansive capabilities, we saw the rise of super apps, and they continue to play an important role in providing integrated services for consumers. However, to rise to the growing competitive challenge, financial services firms need to dig deeper and focus on building ‘super platforms’.
What is a super platform?
Having already optimised the banking sphere through digital-only accounts, fintechs have enriched the banking experience through open banking, enabling banks to plug in third-party banking solutions. These have helped banks to accelerate the provision of choice and simplicity, and in doing so, remain competitive. What comes next is platform banking.
Much like an operating system – Android or iOS for example – a super-platform operating system is built around a centralised warehouse which integrates services from across multiple industries. Thus, built on speaking to each other in one standardised way, this enables fintechs as well as others to aggregate services and launch new products and features. In return, this significantly lowers the cost of a new product or feature development and accelerates the rise of new and innovative services.
When owned by the bank, it can connect its users to multiple financial and non-financial services with the robustness and governance banks are known for. The aggregation of services on this platform will give rise to new apps, some created by the bank, some by other players but all integrated on one platform.
To not only survive, but thrive, organisations need to be good at two main things – change and adaption. To drive change effectively, we need to work and think differently, thus focusing on building super platforms to step into unchartered territories. To achieve this, here is what you need to look at:
1. Scalability
One of the main benefits of platform banking is its scalability. In the new digital era, businesses need to scale at an unprecedented pace to meet the needs of today’s connected consumer, which requires building and deploying new and unique products faster and cheaper than ever before.
To drive change effectively, we need to work with consumers and aggregate services, giving them a constant feed of new product innovations and services to improve their life.
Platforms allow banks to reach customers they previously couldn’t and to scale beyond banking by integrating into other platforms and creating a network with a lower customer acquisition and product distribution cost.
Banks can connect their platform APIs with others to consume and to provide one integrated platform. If we are to break it right down, customers no longer have to come to you, but you can embed yourself into other networks, totally changing the way a bank attracts and services its customers.
2. Data
Google’s vast ecosystem allows it to use data to create personalised product offerings to users of its products (like Instagram). Likewise, through a banking platform, banks have the potential to leverage data to understand customers’ needs and match them with relevant providers.
In addition, within the context of artificial intelligence and machine learning, vast quantities of unstructured data can also be leveraged. This is how banks can give smarter experiences to customers and stay competitive in an industry that is constantly evolving.
The natural extension of this is that banking will no longer be a siloed service or industry: It will dovetail into the entire customer journey. When this happens, the platform that offers the richest, most exciting and fulfilling platform will also be able to realise enormous scope for serving other non-banking customers.
3. Value
For the customer, platform banking reflects a seismic shift: From cookie cutter experiences and segments of framework to more niche – and highly relevant – services. All in one space.
Platform banking gives the customer an enormous choice of benefits, products and experiences through a library of services to meet their unique needs. The customer, having purchased a mortgage through the platform, might then be connected to related products – home furnishings, buildings insurance, or garden supplies, for example – delivering a fully intuitive product offering ecosystem.
4. People
To make the shift, banks must not only rethink their tech, but also their people. Your people are your biggest asset – but this could also be the biggest challenge. Bankers are smart individuals who have build amazingly successful businesses. The downside of the success is the resistance to change or accept that things can be done differently.
Even those willing to change might feel caged in with walls of processes, technologies and policy limitations; and if all that fails, then fear is the most effective tool to stop change.
But it is time for all of that to change, gone are those days where bankers can and should only be bankers, it is time to find people who think way beyond just banking.
5. Opportunity
As we enter the era of platform banking, the opportunity, as well as threat, for financial institutions has never been greater. Under immense competition, platform banking signals the evolution of the financial industry to connect with customers like never before and evolve the traditional banking business model beyond our greatest ambitions.
Jayesh Patel, fintech thought leader.
Follow us on
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