Article by: Kristen Lunman, programme director for the Kiwibank FinTech Accelerator
Platforms are ecosystems that deliver seamless and meaningful experiences for the digital generation. The economic and social activities facilitated by platforms offer the ultimate in convenience, and connect participants in two-sided markets. Take Apple for example: app developers on one side and app users on the other, both working together to generate value.
My iPhone wouldn’t be very useful if it only had an address book and calling capability. I’m attracted to it (as are millions of others) because I can work, socialise, book flights, rides, and even dates all from one interface. As the number of participants on each side of a platform grows, that value increases. This is a phenomenon called ‘network effects’, which is central to the platform strategy.
You don’t need to look far to see examples of successful platform businesses. Just look at Uber, Alibaba, and Airbnb, all of whose spectacular growth abruptly up-ended their respective industries. In fact, six of the ten most valuable companies in the world are platform companies.
In the next five years, the banking industry will be challenged to join the platform economy; co-creating personalised banking experiences with their customers. The end result will be a banking system that focuses on the customer and their personal financial ecosystem. Banks that are customised to each customer’s needs. Banks that aim to delight customers by collaborating with financial and FinTech partners; capatilising on network effect benefits.
Welcome to the best bank ever: The Bank as a Platform.
If banks aren’t thinking about what banking as a platform may look like, eventually someone else will, such as a savvy challenger bank, upstart FinTech or tech behemoth.
Incumbent banks are most likely to be attacked at the edges by these innovative newcomers, who can swiftly meet evolving consumer expectations. Rapidly emerging FinTech companies have already captured the attention and imagination of consumers (think Lemonade, TransferWise, SoFi). Not to mention other sector disruptors that have steamed ahead and set the customer experience bar high, like Netflix and Airbnb.
What do they all have in common?
They put customer experience at the heart of everything they do. They’ve joined the dots of user experience and their customers love it. They love it so much that now they expect it and demand it from all of their interactions.
What will the bank as a platform look like?
Core to the customer experience of a platform is convenience and a smart, personalised experience – which in banking terms would be a revolutionary way to deliver financial products.
Think of the bank 2.0 as a hub for customers’ financial lives. Using trusted intermediaries and partners, the bank as a platform could provide access to a range of financial services, without necessarily providing those services themselves. The bank as a platform will give us insights into our past spending and behaviours; help us figure out how to build our financial futures. We’ll be transformed from passive participants of our finances to being active players in full control.
The NZ opportunity
New Zealand banks have many things going for them. When it comes to customers’ decisions about where to place their money, research shows that Kiwi banks enjoy greater trust than our tech companies. And they have exclusive access – for now – to mountains of incredibly valuable customer data as well as the highly prized distribution channels.
As financial platforms emerge, will our banks beat’em or join’em?
To build the bank as a platform, our banks will require technology leadership, a progressive culture, and the ability (and people) to leverage an emerging digital tool set. It’s time to start having conversations about collaborations with local and global FinTechs, with technologists, AI academics and, yes, with each other – to start co-creating the bank of the future, the ultimate bank where banking focuses on delighting the customer.
Kiwis tend to have multiple accounts, investments, insurance providers, different credit cards and struggle to keep everything under control. The bank as a platform could put an end to this. Banking shouldn’t just be easy and straightforward; it should be delightful. We should be able to access and make sense of our financial lives at the push of a button or tap of a screen.
It’s exciting to imagine a future where a modern generation of Kiwis welcome a financial relationship between their trusted banks and the tech brands they know and love.