Empty Train Platform

Why “Platformification” is the Biggest Banking Trend of 2017

Temenos – Company

In this blog, we highlight the key areas of this new trend and why Platformification is re-shaping the banking industry: it will give consumers more choice; cut down on the need to pay multiple providers; create new revenue streams for banks; and unleash opportunities for fintechs to achieve scale by reducing acquisition costs through platform participation.

What is Platformification in Banking?

At its core, platformification is simply a new type of business model for banks. Ron defines bank platformification as a plug-and-play business model that allows multiple participants (producers and consumers) to connect to it, interact with each other, and create and exchange value.” Rather than consumers having to interact individually with a host of vendors and companies, platformification will help synthesize this into one relationship.

Why Platformification is Needed

There are 3 main priorities for banks:

Security: Consumers need to know that, when they put their money in the bank on Monday, it will be there on Tuesday. And banks need to ensure that the money in their customers’ accounts is secure, and that bad actors can’t get access to the accounts.

Movement: Consumers also need to move money. When they swipe a debit or credit card, or when they write a check, they want the money to move from their account to whomever they’re transacting and interacting with.

Performance: Consumers and banks have a need to optimize the performance of their financial lives by maximizing returns and minimizing fees. Banks, on the other hand, have a need to earn sufficient profits to remain viable institutions.

Historically, banks have tried to address all of the various aspects of these needs by themselves. However, today there are hundreds of fintechs that are focused on providing one specific product or function within these 3 areas, and that means banks are being forced to not just compete with other banks, but each of these fintechs as well. For large, slow-moving institutions, this just isn’t possible.

 What’s Driving Platformification?

Two main things are driving platformification—consumer demand and economics. Younger generations are active in managing their financial lives, and they want a wide range of tools and features at their fingertips in order to accomplish this. Unfortunately, it’s nearly impossible for one bank to be able to develop, launch, support, and make profitable these many tools.

Ron predicts that platformification will be beneficial for consumers because it will give them more choice but save them the additional work of duplicate data entry, integration, and paying multiple providers; it will be beneficial for banks because it will create new revenue streams from third-party providers; and it will help fintechs reduce customer acquisition costs as they struggle to achieve scale in a crowded market.

For all of these reasons, platformification has the potential to be the most important trend in 2017 and beyond.