Platformification: all together now
Hans Tesselaar, BIAN: fintechs and banks are better together
Platformification – what is it and why do banks need to know about it? Hans Tesselaar, executive director at Banking Industry Architecture Network (BIAN), explores the issue.
When alternative fintech players first established themselves in the financial services industry, they raised their profile by collectively bashing the banks – positioning themselves as a more transparent, simple alternative, at a time when distrust in high street banks was at its peak. In their defence, banks tried to dismiss fintech enterprises as inexperienced cowboys. However, over time both have come to realise they are better together, working collaboratively, than against one another.
Fintech companies have a distinct advantage when it comes to developing innovation that appeals to customers’ increasingly technology-focused expectations. Built on flexible platforms – often on cloud-based technology – these organisations are able to adapt and evolve quickly in line with the fast pace of the financial landscape.
In contrast, traditional banks rely on outdated IT systems that were developed in a pre-internet era. These systems have become a convoluted mess as banks have added on layers of technology in an effort to modernise.
Nonetheless, that same legacy and heritage is also the banks’ biggest asset. What the banks lack in speed to innovation, they make up for in experience, support from the regulators and connected networks – all of which fintechs are comparatively lacking.
It is understandable then, that after years of condemning one another, we are starting to see collaboration between the old and new players in finance. We’ve seen banks introducing heads of fintech, accelerators launched by high street banks to fund the future leaders in the industry and referral partnership deals.
The introduction of platformification
This year, however, it is predicted that these indirect collaborations and partnerships are set to go one step further – a move that has been coined “platformification”. This would see banks operating as the core financial platform, responsible for many of the core transactions – but they would be directly linked to fintech enterprises. The platform would essentially provide a one-stop shop for customers, from which they could access both the traditional bank’s services, alongside a host of innovative solutions, offered up by fintech alternatives.
Banks can benefit by providing innovative new services for their customers, and open the door to entirely new revenue streams, with relatively minimal infrastructure developments on their part. Meanwhile, fintech enterprises would have access to the vast financial network and customer base of the bank.
Better together
At BIAN we have been extolling the benefits of collaboration in financial technology for many years – not just new players working with old, but traditional players also joining forces with one another to address and solve their legacy technology issues.
Financial services providers across the globe need to collaborate to develop a new industry IT standard. By identifying the core IT business functions across the board and figuring out how these functions interact using a Service Oriented Architecture (SOA), will enable banks to identify which areas can be managed by third party technology providers.
This will allow financial services to ensure they are competing on the areas that matter to their bottom line, such as offering competitive loan or mortgage rates, rather than competing on the efficiency of their tech.
If banks can gain a full understanding of their business functions and how that fits into IT structures, they can also move part of their services into the cloud. This will enable then to embrace the full flexibility of technology that is facilitating fintech firms to innovate at such a rapid pace.
The future of core banking technology could look like an app store, whereby banks pick and choose the best cloud solutions to meet their business needs…
This is an excerpt. The full article is available in the April 2016 edition of Banking Technology. Click here to read the magazine online.
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