Ron Shevlin, Director of Research at Cornerstone Advisors, assessed the future of retail banking and what it means to the financial technology industry at the 2018 AFT Fall Summit at Hilton Head, S.C.
Shevlin, author of the Amazon best-selling book, “Smarter Bank,” focused on what he called the “platformification” of fintech, or the act of developing platforms. “It's not just happening in banking but happening in the fintech world.”
He told the AFT group, “You're used to thinking about your core or your digital banking platforms, your lending platforms, your whatever platforms, but I'm not using the term in a technology construct but as a new type of business model for banks.” He described the platform type as a plug and play business model that enables buyers and sellers to connect, integrate, create and exchange value.
Shevlin noted what distinguishes a platform business from other types of business models are three capabilities: it must be a magnet that attracts both buyers and sellers; it must be a matchmaker (and the banks actually matches consumers and prospects); and the hardest part, “You must have a toolkit to integrate the buyers and sellers. It's important here to distinguish between the platform business and a marketplace.”
He added large banks such as Citi and Wells Fargo are already moving toward this model. Others such as Capital One have a developer platform, and BBVA officially launched its banking-as-a-service platform in the U.S., using APIs to let firms offer their customers financial products. In the case of BBVA, companies plug into a core digital platform and then access APIs including Identity Verification, Account Origination, and Card Issuance services.
“The key thing here is while they're addressing the third capability, the tool kit, they've really done nothing to becoming a magnet to both providers and consumers, nor anything from a match perspective,” Shevlin maintained.
He added, technological developments through the internet and mobile have enabled banks to become platforms. But technological change is not the only reason. Consumer demand and economics have ushered in the transformation as banking’s traditional business model erodes.
Shevlin suggested the financial institutions need a different approach to the technology market. They need the platforms. “The platform becomes the new banking battlefield,” he said, and explained to the AFT crowd they are always going to have sales teams calling on financial institutions or developing partnerships with other people in the room.
However, “Financial institutions will start to look to the platform as the first step in their buying journey.” He recommended financial technology providers start working with banks and credit unions on how they can integrate these platforms and provide more information on how to make smarter decisions.
“Because the platform has to have the toolkit, it's really about transforming the relationship between financial institutions and fintech providers with the platforms. It's going to change the financial institution’s shopping and buying behaviors, and it's going to create new business models,” Shevlin said.