Platform banking

As banking industry is moving towards an inflection point with the following constraints:

• Reducing fee income and interest income
• threats from Fintech and bigtechs
• increased customer expectations
• More stringent regulatory

These constraints force financial institutions to re-look their business model, which traditionally has been selling and servicing banking products. Platform banking is a model by which banks deal not only with non-banking financial products like life insurance, general insurance, and wealth management products but also lifestyle products in partnership with B2C commerce players in the market. These operate on a bi-model economy with profit sharing, footfall revenue, lead conversion income, etc.

Success factors

• Digital first — The platform design needs to consider the digital-first viewpoint regarding products and processes.
• Cloud first — Hybrid cloud becomes a natural choice for all-new capabilities and a progressive cloudification of existing capabilities.
• AI first — The existing capabilities are augmented through AI on-prem and fintech partners. Potential areas are risk, pricing, NBA, sales & marketing.
• Event driven — Event-driven fabric-based architecture, where components collaborate on events rather than the traditional way of interfaces
• Zero trust-based — Absolute zero trust architecture at all levels, including new generation capabilities such as homomorphic computing

Different models

Three models which are more predominant in the market are the following:

• Minimalist banking platform
• BEYOND banking platform
• Ecosystem banking platform

Minimalist banking platform

This model is targeted more toward business and operational efficiency. This is a good starting point for any financial institution that wants to put their first step in platform-based banking:

Minimalist platform banking

The key features of this model are the following:

• Oriented towards the operational efficiency of business
• Lesser time to market new products
• The business can wire and launch new user journeys
• Catalogs (stores) with options from multiple sources so that bank can decide on the components which need to be wired
• Augmented with necessary capabilities such as AI

These are the leading indicators:

• Investment — Minimal
• ROI — Faster
• Operational efficiency — a significant improvement
• User experience index — NA
• Revenue increase — NA
• Cost optimization — Significant improvement

BEYOND Banking platform:

This next model is suited for well-established broad universal banking with a diversified customer base. The critical KPI of this is model is revenue generation

BEYOND banking model

The key differentiating features are:

• Oriented towards the operational efficiency of business
• Lesser time to market new products
• The business can wire and launch new user journeys
• Catalogs (stores) with options from multiple sources so that businesses can decide on the components which need to be wired
• Augmented with necessary capabilities such as AI, automation, Cloud, containers, and DevSecops, which get provisioned as automation flows.

Leading indicators are the following:

• Investment — Marginally high
• ROI — Medium with recurring returns
• Operational efficiency — NA
• User experience index — Marginal
• Revenue increase — Significant
• Cost optimization — NA

Ecosystem banking platform

This is the most matured platform banking model where the financial institution extends beyond financial products into lifestyle products. This model needs effective governance in on-boarding, KYC, reconciliation, dispute, and settlement mechanisms.

Ecosystem banking

The key features are the following:

• Oriented towards the operational efficiency of business
• Lesser time to market new products
• Businesses can wire and launch new user journeys
• Catalogs (stores) with options from multiple sources so that businesses can decide on the components which need to be wired
• Augmented with necessary capabilities such as AI, automation, Cloud, containers, and DevSecops, which get provisioned as automation flows.

The leading indicators are:

• Investment — Significantly high
• ROI — Medium with recurring returns
• Operational efficiency — NA
• User experience index — Significant
• Revenue increase — Significant
• Cost optimization — NA

Conclusion:

This type of banking model can be achieved with specific standard capabilities which can be leveraged across business units:

Architecture tenets

• Event-driven architecture
• Low code
• Gamification
• In-stream analytics

Automation

• Vanilla RPA
• AI-infused RPA

Productivity

• Simple chatbots
• NLP based chatbots
• AR
• Blockchain
• KYC store and expose for partner products
• Smart contracts
• Underwriting efficiency

Process acceleration

• AI-based KYC, Fraud detection, AML, and Text recognition
• Analytics-based risk management
• Alternate credit score (family wealth, education, etc.)