The “Bank as a platform” (BaaP) vision is the idea that banks distribute their own products as well as those of third parties through Open APIs and front-ends, so that customers can easily exchange information with multiple suppliers. We talked to Artur Serra, GFT Sales Executive Director Banking about possible doubts and definite benefits behind this concept and why the time is right for such an approach.
Artur, why should banks seriously consider the Bank as a Platform approach now?
Artur: Banks are currently facing a number of challenges, from low interest rates to new competitors and huge changes in customer demands. If they want to survive, they will need to rethink their value chain for optimal competitiveness: Focusing on their core strengths while at the same time adapting to the customer’s needs to keep them engaged. One way – and possibly the very best way – to do this is by taking the step to evolve their bank from a financial service provider to a full-blown financial services platform.
When you say “focusing on their core strength”, does this mean banks should not try to develop everything themselves?
Exactly. They need to analyse what their real strengths are and in which areas they lie – depending on the customer segment they want to target and activate touch points. The remaining areas can be covered through partnerships with other financial service providers, thus delivering a broad range of services that reflect the needs of each particular customer.
This “mix and match” vision of banks, which we also call modular banking, enables them to play different roles at different times and stages of the customer journey. The value chain of the financial services industry could therefore be divided into product, process and retailer, making banks either product manufacturers, transaction processors or retailers.
Relying on third parties might seem like a scary move for a traditional institution such as a bank?
When companies like Amazon started offering other, often competing companies’ capacities on its own servers, they mystified a lot of people at first. Today, Amazon Web Services is the company’s most profitable business and in this sense, they have paved the way for such a concept. Many companies have followed and this has therefore become the preferred platform for things like customer goods, transport services or property lets.
Now imagine if banks followed a similar model: They could open up core services like customer authentication, money transfers or transaction data history on a secure Bank as a Platform foundation. Not only would this benefit the companies accessing those services, but it would also open up entirely new revenue streams for the host banks as well.
What does it mean from an IT perspective?
The bank of the future will be open, modular and made to measure for every individual customer. This approach clearly requires an IT architecture that is also modular and open as well as capable of co-existing with traditional banking systems. As a first step this means: Banks must embrace the Cloud. The bottom line is that they would have to change the IT systems architecture so that they could not only work in the Cloud, but also support the level of changes and performance needed by the company in a network model, ensuring the seamless exchange of data between the bank and third parties.
Has this been done before?
Certainly. We have recently worked with a global banking group which had determined that their most advantageous route to remaining relevant in the world of digital-everything was to find a secure way to monetise their assets by using them to build a service for third parties, as well as for the bank’s own customers. What they needed was a secure environment in which such activities could take place and govern them from a global perspective. Our role was focused on the architecture aspect of the project. After nine months of dedicated work, the bank as a platform was ready to move into production. This will help the bank’s service expansion well into the future.
And what does this all mean for the customer?
For the customer this basically means one very important thing: a far more comfortable customer experience. If their bank decides to go with the Bank as a Platform vision, it means that there will be an entire digital banking ecosystem built around the core assets of the bank – with additional appropriate governance rules and secure APIs, third parties can also be brought into the process. The customers won’t know that all this is going on in the background, but they will notice that they can view and interact with their entire financial lives through one single interface. Simply put, as customers – people like you and me – we will be able to access the services we truly want, when we want them and in the form and language we want them. All through our mobile device in our pocket, enabled by our bank.
Thank you for the interview, Artur!
Find out more about the Bank as a Platform vision on our GFT website.