#Online #lenders may own more than half of the personal lending market, but they face serious headwinds. For one thing, rising interest rates will increase their cost of funds, and perhaps make their offerings less attractive, and for another, regulations may arrive that make operating their businesses more expensive. In New #York #State, perhaps anticipating a […]
Bank Innovation
#JPMorgan Chase & Co. reported a double-digit percentage rise in #active digital #users and active #mobile users this quarter, according to the 2Q’18 earnings call today. The bank’s digital to mobile penetration rate, however, is not as impressive. For instance, take a look at the bank&8217;s active digital users, which at 47,952 this quarter showed […]
Bank Innovation
#Most #fintech #startups don’t survive. The landscape of payments, lending, artificial intelligence might seem bustling thanks to all the industry hoopla around it, but the success rate for a startup to make it in these fields — or for that matter any of 15-plus fintech segments &8212; is slim. How slim? Well, according to a […]
Bank Innovation
#Banks have been working for years to achieve straight-through-processing (STP) but now #Citi has partnered with #HighRadius to bring artificial intelligence to the task.
Financial Technology
PayPal-owned #Venmo today announced it inked a partnership with #Uber that lets its users pay the ride share company through their Venmo accounts. #Apple Pay has had this feature with Uber for over a year. The Venmo feature is not available yet. It will be rolled out to Uber and Uber Eats customers over the […]
Bank Innovation
#Consumers want to engage with #banks on an omnichannel level, and right now, the mobile channel seems to be the #most popular. The percentage of “mobile-dominate” customers, who prefer to bank from their smartphones, has increased from 10% to 15% of consumers YoY, according to a June 2018 report published by Price Waters Cooper. Mobile […]
Bank Innovation
#Citizens #Financial #Group joins the latest band of established FIs in launching its version of a digital-first bank called Citizens #Access. Unlike others, such as JPMorgan Chase’s Finn, which was rolled out nationwide earlier this month, this digital bank is not catering to the general ‘millennial’ audience as is evident by its $ 5,000 deposit minimum. […]
Bank Innovation
French essayist and critic Charles Du Bos summed up the ability of humans to change when he wrote, “The important thing is this: to be able at any moment to sacrifice what we are for what we could become.”
For a long time, most #banks have been one thing: vertically integrated product manufacturers and distributors, shops that sell only their own brand products. But with the move towards regulatory-driven Open Banking in competitive-friendly markets like the U.K., Hong Kong and Australia, new business models are emerging—including #Open #Platform Player, one of four bank business models we identified as winners in the digital economy.
Is the open platform bank an intermediate point on the journey towards lifestyle platforms, on which financial services are just one of many offerings?
Unlike a traditional bank, a banking open platform is like a department store that carries all your favourite brands and also helps you coordinate outfits and do your interior decorating. Open platforms create a market where producers (supply side) and consumers (demand side) connect and interact in efficient exchanges of value. The result is a bank-branded app store where consumers shop to assemble the products and services they need to satisfy their everyday financial needs, building their own bank from components they know will work easily together. In this business model, the platform owner has the opportunity to maintain management of the customer experience and vet the third-party products and services being offered in that experience. In turn, aggregation of demand allows them to extract economic rents from suppliers.
This business model is attractive to new entrants because it allows them to aggregate #fintech product innovations while focusing on customer navigation and advice. A good example is Belgium-based fintech banqUP. It offers a current business account, credit and debit cards, and business apps in a unified small- business banking platform. Another is the UK challenger bank Starling, which has moved to offer a wide array of third-party products and services anchored on a core current account.
For incumbent banks, the economic equation of becoming an Open Platform Player can be more challenging. While an open model offering best-in-breed products can be enticing for customers, replacing balance-sheet income with fees isn’t always an attractive trade-off. A $ 100,000 mortgage with a three-percent net interest margin is equivalent to a lot of traffic on a toll road. So rather than pivot completely to an open platform model, we are beginning to see established #players—like HSBC and RBS in the UK—experimenting with the introduction of third-party products that they either can’t produce as well as other providers, or which, for risk appetite reasons, they may not want to provide. In the US, for example, eight of the top 10 banks now have some sort of alternative credit provider for small-business lending that falls outside their risk appetite, creating an emerging platform model in that segment.
Of course, in an open platform model, there must also be suppliers. While fintechs like Transferwise are most prominent, there is also scope for traditional banks to componentise their product offerings and create APIs that allow easy plug-and-play with open platforms. This export model, where the customer interaction is ceded to a platform owner, requires changes in how a bank deploys its resources, people and #technology. For example, the focus of relationship managers and banking sales representatives would need to evolve to emphasize B2B customers, developers and community builders, rather than B2C interactions. It also means excelling at broader skills, such as ecosystem analytics, API security and identity management.
While becoming an Open Platform Player may look attractive to both new entrants and incumbents, it is interesting to ask the question of if the open platform bank is just an intermediate point on the journey towards lifestyle platforms, on which financial services are just one of many offerings.
Speculation is rife that Amazon will begin to offer a wider array of retail financial services products—including a checking account—which may pay no interest but instead offer discounts on other Amazon products and services as compensation for holding your balances in that account (balances which could be insured by them being held on a regulated bank balance sheet). In China, the WeChat messaging app has already become a true lifestyle platform where consumers are able to conduct a huge array of financial and non-financial transactions without leaving the app. In this world, the “Alibabas” and “Amazons” may truly become the “everything” stores through which we run our lives.
In an era of increasing fragmentation, banks could choose to establish Open Banking platforms that focus on financial services aggregation. However, we suspect that many banks will accept that competing against the likes of WeChat, Amazon and other bigtechs of the world is a losing proposition, and decide to focus on being a product supplier instead of trying to hold onto managing the customer relationship.
I invite you to read more about open platform banking in A New Era: Open platform banking
The post Banks as open platform players appeared first on Accenture Banking Blog.
If there is one way to describe Umpqua Bank’s innovation plans it would be “#digital human,” according to the bank’s new CEO, Cort O’Haver. Digital human, as O’Haver explained, is the marriage of digital innovation with the physical retail banking experience. (Coincidentally, it’s also the title of a Chris Skinner book.) O’Haver is not talking […]
Bank Innovation
#Google Pay took another step closer to P2P rivals #Venmo, #Zelle, and Square Cash by introducing a bill-sharing and splitting service today. The new feature, one among several, arrived as Google combined its P2P app (Google Pay Send, which is no more) with Google Pay, its general payments app. Google has shuffled its payments apps several […]
Bank Innovation
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