Today, the digital economy is on the rise to an extent where it is overtaking the traditional business models. There is hardly any industry that is left untouched by technology. When it comes to banking, trust is made of up two parts: reliability and regard. Reliability refers to a consumer’s belief that a provider looks after their money and data and won’t treat them unfairly Legacy banks score well in this area. Regard is about being held in high esteem, either through the products offered or values are shown. This is where fintech start-ups have the edge.

Up until now, banks mainly followed a pipeline business model that is they create and optimize services that add value and then offer them to their customers via traditional face-to-face interactions and secure service websites. In order to graduate to a platform model, one that is more in line with the expectations of today’s consumers, banks need to rethink how they create and offer their services.

Banks are leveraging this opportunity and looking at newer and smarter business models that can move them towards market leadership. Many banks have already started exploring collaboration opportunities with fintech companies, recognizing their advantage in offering high-quality customer experiences that allow them to collect precious data. Platformification is the logical next step in this process.

Platformification is not a new concept but is has never been applied to the banking industry before. In essence, a platform is a place where producers and consumers meet to conduct some form of exchange such as they did in the markets of yore. Platformification without digitally open platforms will not help. Open platforms help in the evolution of ecosystems, where business models are heading towards.

According to the Harvard Business Review, to be considered successful, a platform must meet three criteria:
1. It must be easy to plug into;
2. It must attract both producers and consumers; and
3. It must facilitate the exchange and creation of value.

Open Banking has created new avenues for innovation and growth in the digital banking world. A successful Open Bank would be one who creates a conducive ecosystem for various players to co-create solutions with the bank, thereby facilitating reaching out to a larger customer base.

According to the Harvard Business Review, in order to move from a pipeline to a platform model, businesses first have to shift their thinking from controlling resources to orchestrating them. Businesses also have to move from internal optimization to external interaction.

It’s not a partnership. But it is a symbiotic relationship, working together API-providers and banks can create something stronger than they could alone. Similarly to how cloud banking platforms are creating a foundation for banks, platforms create a foundation for APIs.

The security, movement, and performance aspects of banking have traditionally been performed by banks themselves. But banks can’t keep up, technology is moving too fast. That’s where platformification can fill in the gaps. Platformification can create a path for relationship-building with API providers and constructs a space for those providers to access a wider customer base.

9 comments

  1. Yes, banks have to come out of their traditional shell and adopt new fintech products for better customer experiences. Nowadays, people are used to platforms like Amazon, which seems to be a dream for banks now. 🙂

    Liked by 1 person

  2. I think it is a continuous process of evolution. Platforms of a kind have been there in the US for many decades with smaller banks, unable to create their own, have used. Indian IT companies also created banking platforms. Fintech companies are rewriting the rules once again.

    Liked by 1 person

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