Introducing ‘Platform Banking’ - The future for Financial Services?
‘Platform’ is a lovely, polysemous word – it projects lots of meanings.
Whilst the general public may think of flares and big shoes (or is it me?), IT and operations experts will think about hardware, while for developers it may conjure up programming environments, for media types perhaps games and viewing formats, and bankers are more likely to think about mobile device types or communities of users.
Some folk may interpret ‘platform’ as a foundation for being agile and flexible – it’s natural to think that a Swiss-army knife will be better than a butter knife – but this only captures a fraction of the true significance of “Platform Banking” in today’s economy.
‘Platform’ now has a much higher significance; economists and business analysts use it to describe fast-growing companies that create new business models, making it easier for buyers and sellers to come together.
The ease of connection in this Peer-to-Peer model is made possible through the use of modern IT systems (‘platforms’ again) that allow both buyers and sellers to register and to become known in the community.
These IT platforms typically have easy-to-understand application programming interfaces (APIs), making it simple for users to join the platform, and for the technically minded to experiment with and create new services based on the underlying IT. This secondary platform creates a network of enthusiastic users, further promoting the use of the primary platform.
One of the key features of these Platform Businesses has been an ability to go beyond a core value proposition and focus on services that are valued by customers. Some major new examples have started to thrive and dominate in different sectors of today’s economy: Uber, Airbnb, Amazon and Alibaba are all examples of leading Platform Businesses.
If we examine one of these businesses closer, Uber is not about driving taxis with passengers from A to B. Uber has focused on the things that traditional taxi companies didn’t really bother with, specifically
- (a) making it really easy to pay,
- (b) identity management to allow drivers and passengers to validate each other and
- (c) sensor/position technology so everyone knows where they are (literally).
Banking, it seems, is out of synchronization; logic indicates banking will not be permanently immune to the kind of disruption seen in other industries. And yet, so far, it is hard to find a poster child for the Platform Banking Economy. So where is the Uber of banking?
Today, many bankers will be forgiven for looking at calls for open banking (including PSD2) as a regulatory nuisance. However, compliance will be a necessity and IT platforms will have to be designed to accommodate new connections and APIs.
Smarter Platform Bankers however may wish to go beyond compliance, and use their IT platforms to “Uberise”, and to become dominant Platform Economy players.
You can learn more about the implications of a Platform Banking Economy at the upcoming session during Sibos. Click here for the scheduling information and to add it to your diary.
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