Platforms have crushed into banking strategies

What banks are talking about recently? Artificial Intelligence, it is the obvious answer that comes to mind first. But there are some more themes extensively exploited in banking strategies recently. One of them is platformization. As ambiguous as newly coined, the label leads to confusion without additional explanation. Platformization, with its many different meaning (depending who is taking about it and who is interpreting the message),  is a term encompassing various ways banks are reinventing themselves these days. Its meaning spreads from bank as a platform, to invisible banking embedded into digital platforms. Somewhere on the way options for building, acquiring, and partner with digital platforms lie. A bit more confusion has been already added by software vendors who sell their financial technology suites and call them banking platforms. Nevertheless, any transformational strategy based on a platform as a key ingredient could fit into platformization category.

Become a platform or get on one?

One option is to turn a bank into a platform. It could be understand as platformizing a few different layers of business model:

·       Infrastructural level – platformization could be the name of the implementation of new, uniform software suite so called “banking platform” (including migration of core banking solution) . In this case it is a part of digital transformation, the trend of 2010s in banking technology

·       Internal connectivity level – another example of technological project which uses the name. Some banks after migrating into micro-service architecture and implementing universal enterprise data bus start calling technology layered or platform-oriented (meaning they got front-end, middleware, and back office platforms).

·       External connectivity – known as “bank as a platform” – it is more business driven process (still technology-dependent, though) of enabling third parties integrate to provide value added services to bank customers

Those examples belong to the process of a bank turning into a platform category. The other kind of platformization path is to build or create (optionally acquire) a platform to achieve strategic goals. The specific cases differs on execution and the characteristic of a platform to be built (or bought). Most commonly these four kind of platforms are considered in banking strategies:

·       Content horizontal outlets

·       E-commerce marketplaces

·       Social media networks including communicators/messangers

·       Primary financial platforms like payments systems, investment and insurance marketplaces, advisory services etc.

The strategic choice whether turn a bank into a platform or get one is not the only alternative. In fact, the most popular way of platformization is joining existing platforms, usually a few of them. In fact banks have been participating in various platforms for decades. Money transfers and payment systems are the great example. Banks literally cannot provide their services without support of some platforms and in that broader sense, banking is already digitally platformized.

Let’s go beyond banking – out of comfort zone

However, the specific meaning of the term, which has recently got hyped a lot, is limited to the strategies which put platforms in the heart of business transformation. Banks in need of reinventing themselves look for the effective way to change. One of the most popular ideas is expanding the scope of the offer. Banks introduce new kind of services which are demanded by their customers aiming for tightening business relationship with them. Those amendments, usually coming from non-financial world, are called value added services for they are “added” to the traditional scope of financial products. If a bank takes this direction seriously, value added services can lead the bank into new territories; we call it “going beyond banking”. And, because the digital businesses are typically more cooperative, more interconnected, more open than banking, this journey is not easy for banks. But there is no actual growth without leaving the comfort zone and platformization surely is an effective path to leave.

Platformization makes curently a featured subject on my blog