Will banks become startup-like companies?

Joins us on Wednesday 14 at Roca i Junyent HQ to learn and debate about one of the most hot topics in fintech : how banks are becoming digital platforms, they look less like a bank and more like a startup.

The integration and delivery of financial services is changing as new channels, products and partnerships are being explored. Banking as a Platform (BaaP) is one of the alternatives.

By platform strategy, we mean those that IBM, Cisco, Intel, Microsoft developed in the 80s and 90s. Equally, Amazon, Google, Apple and the firms previously mentioned have also employed more recently. 

The only exceptions in the banking sector may be found with Visa and MasterCard who, as networks, had to develop a platform strategy where issuers, acquirers, startups, various payments service providers and merchants are symbiotically linked. In that sense, most banks are part of Visa or MasterCard’s platform strategy, but do not have a platform strategy of their own. In insurance, developing a network of agents, brokers and master general agents does not really qualify as a platform as it is limited to a distribution channel.

 

Today, though, we live in a world where computers and algorithms are proving to be very adept at pricing credit and underwriting risk. And where in the past data that was not readily available, it is very abundant and available in real-time today.

Technological innovations, coupled with significant regulation changes, have lowered the barriers of entry into these markets to a staggeringly low level. Completely new organizations like Mondo Bank in the UK, Simple and Moven in the US, and some of the largest technology firms, like Apple and Google, now move freely into these markets at will.

As this occurs, banks and insurers run the risk of losing their dominant position as primary intermediaries for customer interaction and engagement.

The reality is that the industry needs more than just new products — it needs a new paradigm. We believe the concept of Banking as a Platform (BaaP) provides that new approach, presenting collaborative solutions and offering new value chains not only for banks and their partners, but also for related services such as payment processors, credit providers and mobile network operators (MNOs).

What is BaaP? In a nutshell, the concept refers to banks redefining their business to embrace innovation from outside the bank. Through modern applications, open interfaces, and collaborative business models they will open their doors to innovators that will build on the banks capabilities. This will change everything. I don’t think it’s an overstatement to say we will see a breakthrough similar to what we experienced when smartphone creators Apple and Google opened up their mobile platforms to application providers.

BaaP borrows from traditional financial services, morphing traditional solutions into innovative and vibrant communities. It is an opportunity to leverage communications technology advances to reconfigure today’s obsolete financial services system.

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