Here’s how platformication will transform banking and FinTech

By Puja Sharma

Open APIs have enabled banks, customers, and tech companies to access banking data. Banks have plenty of data and customers’ trust, which can be combined with the innovation and agility offered by FinTechs to create a banking platform that allows players to collaborate on and profit from developing best-in-class financial products, according to the blog published by Nordicapis.

Platformication can thus be defined as a new business model based on API strategy. Banking as a platform represents the third wave of APIs that will transform conventional banking into a payment hub. Essentially, a pipeline business model, where the owner controls every aspect of the value chain, is displaced by a platform organizational structure, in which different players collaborate to solve customer problems.

The concept of platformication is not new. Several tech giants have adopted this business model, including Facebook, Amazon, Apple, Netflix, and Google. Platforms connect producers with consumers rather than just generating products or services, thereby driving the demand-supply cycle and creating additional value for all players. PSD2 has lowered the entry barrier for Big Techs, which have inherent innovation and agility. The global tech giants are targeting the sales part of the banking industry, bringing in 47% of the bank’s revenue, according to a report by McKinsey.

Apple, for instance, launched a credit card with 2% cashback. Furthermore, according to a Bain & Company survey, consumers trust Amazon and PayPal as much as their banks. You can either adapt and collaborate to this situation or you can remain on the sidelines. HSBC is an excellent example of an agile player on the market. HSBC execs analyzed the potential of platformication promptly and deployed a mobile-first banking platform.

The API-powered service lets small businesses manage direct debits, standing orders, future payments, and debit cards, and allows them to acquire funds through an in-app overdraft feature. With the conversion of its core banking products into APIs, HSBC has created a value network in place of its value chain. The Banking of Tomorrow is all about open collaboration in setting up a banking platform, banks can allow third-party FinTech developers to build products and services for customers, enabling a wide range of fintech applications for loans, payments, investing, wealth management, and other services, enabling financial institutions to deliver a unified banking experience.

Open collaboration

API services have proven to be a game-changing interface between rich data from banks and FinTech innovators. Technology has progressed to the point where open and collaborative ecosystems can arise, allowing banks, FinTechs, and other businesses to collaborate to supply useful and complicated financial products to savvy clients. Open banking not only gives customers access to easy and personalised services but also gives them control of their banking data, which is secured and protected by GDPR and PSD2 standards.

Banks might also provide free access to an ecosystem of solutions and value-added services to their clients. Banks might, for example, provide services to help SMEs better manage their cash flow, which could then be utilised by banks to create a more frictionless business loan application process, similar to how Google provides free services like Gmail to its end-users.

To sum it up, the financial industry’s current situation is a clear premise of platformication as the open and collaborative banking of the future. With Open Banking becoming the new normal, we can see the shift toward platform banking as the next strategic priority for banks that want to stay relevant today and tomorrow in the highly technological and saturated market.