Making Banking as a Platform (BaaP) Happen
?? Jim Marous
Top 5 Retail Banking Influencer, Global Speaker, Podcast Host and Co-Publisher at The Financial Brand
Banking as a Platform (BaaP) is one of the alternatives available to organizations in the future. What will it take to move to a new model?
By David Brear, Chief Thinker at Think Different Group
and Pascal Bouvier, Venture Partner at Santander InnoVentures
Banking as a platform has never really taken off for various reasons. Traditional approaches and business models are easy as the banks had full control. Financial services industry incumbents created products, pushed them out and sold them to their customers. Value was produced upstream by the banks and consumed downstream by the customers.
Unlike traditional models, platforms do not just create and push products out. They allow users to create and consume value. At the technology layer, external developers can extend platform functionality using APIs. At the business layer, users (producers) can create value on the platform for others to consume.
This is a massive shift from any form of financial services business that we have ever known. A platform play within financial services is different from traditional business thinking. Creation of network effects is more important than simply bringing in users or charging all users to make money.
In this model, for financial services, software and technology are not the only end products. Instead, they simply serve as the underlying infrastructure that enables users to interact with each other. Most importantly, the business itself doesn’t create all of the value.
As we mentioned in our earlier article, “Exploring Bank as a Platform (BaaP) Model,†we believe that this is the future of financial services business models. So, how can banking make this happen?
7 Layers of Banking as a Platform (BaaP)
We recommend the book Platform Leadership by Annabelle Gawer and Michael A. Cusumanoto to those who want to explore further what platform strategies are. We borrowed from this book somewhat, especially from the authors’ four levers of platform leadership which we have expanded upon to create the “7 layers of BaaPâ€.
Below is a potential view of a financial services industry incumbent platform state. For the purposes of the analysis, we dissected the levers into 7 components (vs. the four in the Platform Leadership book).
What Would a Bank BaaP Look Like?
Across these platform layers, what could a bank BaaP be and how could it operate? We adjust our table to reflect a bank BaaP ...
To read the rest of the article on how Banking as a Platform (BaaP) can work, go to the complete article here ...
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9 å¹´The current banking system is highly dependent on the continuity of the idea of a centralized account. In a peer-to-peer-network direct relations are possible and indirect "centralized" relations are not needed anymore. I believe that the blockchain combined with a higher layer called "Smart Contracts" will disrupt the banking system because it will serve a longer, more integrated part, of the business-value-chain. The most interesting technology for Smart Contract is Deontic Logic.
Growth Enabler | Entrepreneur | Product Manager | Financial Services and FinTech
9 å¹´Thanks for post, Jim Marous! This very well articulated article by David Brear and Pascal Bouvier, CFA is quite timely for many Banking incumbents. Stuck between high cost structures (incl legal system costs) and competitive pressures from FinTech incumbent, I'm sure they are giving some serious though to a different workable business model. This post and the earlier post (Part 1) are a must read on the The Financial Brand blog. If these incumbents are looking for ways to the FinServ-FinTech "frenemy relation" work, these posts presents several 'food-for-thought' items.