Is “platform” the new metaphor for outstanding business success?
The world’s top 15 public platform businesses account for $2.6 trillion in market capitalization. Playing catch-up are about 140 unicorn companies, currently valued at more than $500 billion.
In 2018, we see banks riding this trend to shift faster from a pipeline business to a platform model. This will play out as follows:
- Under the platform model, banks will no longer stick to manufacturing and distributing their own products and services through their own channels. Rather, they will expand their portfolio with complementary products sourced from partners, such as insurance companies; products co-created with fintech firms – the ICICI Bank-Paytm collaboration in lending is an example; non-financial products ranging from movie tickets to cars; and even competing (and superior) products from third parties.
- Next, with open banking becoming reality and bringing transparency to the market, banks will have no choice but to present the best product and service options, regardless of ownership, to their customers on their own platform. Some banks will also look to go beyond banking and play a larger role in the life of their customers. This means banks will go from being monolithic institutions selling products designed in-house and distributed through owned channels, to acting as aggregators selling a host of financial and non-financial offerings in a single marketplace. Here, it is worth citing the example of Emirates NBD, which in May 2017 launched an online retail platform called Skyshopper, which gathered together a variety of products – from fashion to grocery – from several other sites. Another great example is DBS Bank, which launched an online car marketplace – the first by a bank in Singapore – where people could sell and buy cars, and also secure a DBS loan to finance the purchase.
- Thirdly, banks will bring third party channels on par with their own. So in addition to distributing via their network of branches, mobile channels, agents, kiosks, wearables, smart virtual assistants etc., they will use APIs to sell through third party apps, fintech companies, other partners, and even other banks.
From the above, it is clear that banks will do more than simply borrow the platform model from another business such as transportation or hospitality. As the first point explained, they will design and develop some products, and for the rest, tap the resources of the ecosystem.
Even for the purpose of delivery and distribution to the last mile – whether it is through devices, kiosks, points of sale or channels yet to emerge – the platform banks of 2018 will leverage their connections in the ecosystem to distribute through the channels that their customers like the most.
The next expectation for 2018 is that having evolved a platform model, banks will hope to earn new revenues from it. Hence we believe they will not stop at exposing APIs, but will actually try to monetize them. German digital bank Fidor and communication service provider O2 are already doing this: Fidor offers full stack of banking services needed to run a digital bank. O2 has launched a mobile only bank built on Fidor’s platform. With O2 banking customers can quickly enroll and transact or get an instant loan. The communication service provider acts as an intermediary between the borrower and Fidor Bank, which gets to make the loan. Revenue sources for the bank include shared revenue from O2’s business growth, transaction related revenue and net interest.
In the New Year there will be many such partnerships.