Payments, e-commerce, e-government, and value added service - those digital ecosystems are clearly ready for banks to participate in. But which of them can create actual business opportunities for financial institutions? Where banks can stand up and differentiate and where they must stay as invisible as possible?

Not only blik, other payment platforms are also bank friendly

Recently, I’ve written an article about Polish mobile payment system blik (here is the entry in  Wikipedia). blik   is an interesting example of a digital platform, the place of collaboration of banks rather than a battlefield. Arguably, such platforms are the most likely to succeed for many players are contributing to the platform performance and get a clear motivation to effectively support the platform development and growth. blik came to my mind naturally as it’s a quite recent business story, but there are a lot more of such stuff worldwide. When I realized that it is easy to spot more examples, with longer history and wider presence that blik. What do all those cases have in common? What is the necessary ingredient for successful digital platform to become bank friendly? I suggested (in the mentioned article “Blik – a platform built by banks”) that genuinely collaborative platforms are built on popular services, not products, and that they are not allowing the competitive acquisitions by one bank from another. Indeed, many examples for such platforms can be given, it is enough to look around and think about systems which cluster banks and facilitate delivery of some specific financial services. SWIFT is one of them. SWIFT is actually the collaborative platform designed for international transfer facilitation. All bank (and non-bank) members use it for servicing purposes and neither compete nor acquire customers on the platform. SWIFT – the solution from pre-Internet era – effectively implements the idea of a service platform that is friendly and beneficial to the banks that use it. SWIFT has been doing this for more than fifty years already, yet it is not the oldest platform of that kind. We should not forget card organizations. In fact Visa, MasterCard, and others, are also the transactional platforms design to benefit banks and their customers. The competitive opportunities are very limited within a single card scheme and competition between schemes also takes place within precisely defined limits. Interestingly, the way banks use to differentiate in the context of platforms, is based on user experience, front-end ergonomic, and pricing. Generally, transactions, money transfers, and payments have proved to be the natural environment for banking collaborative platforms to thrive. Explanation of that is quite clear. Payment is a service with volume and scale dependent value. The more users, the higher number of touchpoints, the wider presence (across customer segments, geographies, and use cases) the more impactful the payment platform is. To stimulate growth and scale every payment scheme must be bank friendly and, indeed, there is planty of such enterprises across the world.Cards and SWIFT are old, well-established examples, blik is one of many FinTech companies belonging to this category. A special attention should be paid to hardware-oriented payment platforms (Apple Pay, Android Pay, Garmin Pay etc.) which could be a future of collaboratuive platformization. They can exploit the growing popularity of personal digital wearables, including smart glasses.

Blik, the example of mobile payment platform created by banks in a collaborative way (Poland)

Platforms beyond payments and money transfers also make sense

There are more services eligible for building a bank friendly digital platform. The examples which go beyond payments include e-commerce marketplaces. It is a subtle, but significant difference between e-commerce and payment platforms. For ecommerce a payment function is one of many elements of successful customer journey through the retail verticals collected on a marketplace. For payment providers the function is a key foundation of the platform. Both kind of platforms reach various merchants, but they do it for different reasons. For a bank participation in e-commerce marketplace is a chance to promote more services and products. Banks can finance customer spending and help to manage merchant’s cash flow. Lending, the high margin financial service, is the major reason why banks looks for closer collaboration with on-line shopping platforms. Consumer financing creates also an opportunity for new customer acquisition which makes e-commerce platform less collaborative and more competitive environment for banks. Usually, the major on-line players tend to strategically collaborate with few banks only, and it is also the trend among banks to look for e-commerce places where they can get some exclusivity for customer acquisition and loan distribution. If e-commerce can encourage banks to some level of competition, e-government platforms are purely collaborative. For governmental and administrative ecosystem banks can provide several services, not only fee, fine, and tax payments. Banks can support citizen authentication and social benefits distribution. In many countries banks authorization tools are accepted by on-line governmental offices. This kind of platform enforces equal rights and duties for every participating bank and does not allow competition between them. Usually pricing is set by the government and much of user experience is defined by governmental front-end. Therefore, there is very little place and opportunity to differentiate. Still, banks eagerly participate in such platforms because they want to be perceived as a universal financial operators, who can deliver any digital service available on the market. Value added services platforms (like ticketing, leisure, hauling, and social media) gives a bit more chances to compete, but there is a catch here: customers interact with those platform to get their services in convenient, efficient, and affordable way. Banks are necessary (usually for payments) for those ecosystems, but they are like necessary evil. Everybody wants banking to be embedded, invisible, as smooth as possible commodity, not the active business player. Banks got two strategies. The first is to stay as much collaborative as possible, become an invisible bank, and built profits on service fees. It is a mainstream, efficient approach. Some banks, however, still try to differentiate, stay visible, protect their brand and customer relationship. For the bank which chose the latter strategy, platformization is a challenge of creating the real, unique value for the users.

Velomarket, the example of e-commerce platform designed and launched by banking group (VeloBank SA, Poland)