Colin Swain, Global Head of Platform with Travelex

Traditional banks must adopt a platform-based approach to boost their digital transformation strategies, a payments expert has claimed.

Colin Swain, Global Head of Platform with FX and international payments player Travelex, said platforms are the best opportunity for incumbents looking to offset the challenge of digital upstarts.

“This year, market challengers are starting to set the pace,” he said. “So far, they have only been proving their viability and attracting only the most adventurous customers. But we’re now at the tipping point. Platforms are becoming mainstream and traditional banks that fail to innovate will noticeably lag behind, an effect that Natwest and RBS has already experienced.”

Swain said it is not just challenger banks that challengers benefit from so-called platformification: “The ability to hook directly into a bank’s infrastructure will make it possible for many to offer payment and credit services but, with unrivalled scale and owning swathes of consumer data, it’s the tech giants that stand to gain the most,” he said. “In recent years, a handful of challenger banks have successfully applied for banking licenses but PSD2 means that other providers can begin to offer a range of services to their customers without the need to create a whole new bank from scratch.”

Platformification, he said, is the bridge the industry has been waiting for, since it is about consolidating the legacy of the incumbents and the promise of the disruptors: “Existing and long-standing customer relationships mean banks already have a head start and, in fact, 40% of banks are using or actively investigating platforms,” he claimed. “Platformification gives incumbents the same opportunity that challengers are already grasping—to create marketplaces that can act as a point of differentiation from their rivals. But the speed at which big tech could undercut them means banks must decide if they build these platforms themselves, or integrate with an already established platform.”

by Guy Matthews