My first blog in this platformification series explored new business models for banking. To succeed in this new landscape it’s essential that banks are clear on what will set them apart and differentiate their services going forward.  Let’s explore this a bit further.

Financial institutions with expertise in specific areas or market niches should look to scale and grow these areas of their business. They should consider how a platform-based approach, banking as a service (BaaS), or embedded finance business model can help them work with partners to reach new audiences. In many ways, it’s about hunting for the ‘secret sauce’ that makes particular service offerings successful and replicating those services efficiently at scale.

How you service the end customer is crucial, but just as important in a new interconnected financial services ecosystem, is how you collaborate and work with partners. This includes other financial institutions, fintechs, bigtechs and partners across other industries that are interested in embedding financial services directly in their offerings to end users.

A key driver of success will be how effectively a financial institution can offer their services in a unique and differentiated way at the point of digital interaction. Working with partners can bring something new – think Apple and Goldman Sachs, or Shopify, Stripe, Citi and Barclays. Although for the financial institutions involved it can mean offering largely commoditised banking services, the trade-off is that it can bring a level of scale and reach that financial institutions couldn’t achieve on their own.

Size doesn’t matter

All financial institutions, regardless of size, can benefit from a platform-based approach to innovation and development. While most large financial institutions are already moving in the direction of platformification and open finance, sometimes it’s the smaller financial institutions that can be more agile and nimble. I’ve seen first-hand how some community banks in North America are already actively using mortgage APIs for development.

Many large financial institutions have their own internal API platforms, and some with a ‘not invented here’ mindset hold back from working with other third-party platforms. But often such platforms can offer a speedy turnaround and ROI. For example think about the cost, complexity, and time required to add useful functionality on top of existing core systems. An openness to reaping the benefits of a platform-to-platform approach as part of a fully connected open ecosystem will allow financial institutions to tap into and offer the latest fintech developments to customers.

The biggest stumbling block most often tends to be getting started. Finding the right use cases to prioritize is essential. Sometimes a ‘design thinking’ workshop can help uncover banking pain points, whether for customers or employees, and this approach can help the financial institution explore ways of making those experiences much more seamless and efficient. Hackathons are yet another great way of involving financial institution development teams in thinking outside the box about how to resolve a specific pain point.

What’s more, for any financial institution that comes up with a great solution, there’s the option not only for them to implement and use that innovation themselves, but also the opportunity through a platform-based approach to sell that app or service to other players within the wider banking and fintech ecosystem.

One example of this could be where a bank allows a real estate agent to embed its mortgage services within their own offering. The agent could then offer mortgage services to a home buyer exactly when they need it, without the consumer needing to go away and negotiate the financing separately. This gives banks the potential to reach a wider audience and scale this area of their business.

Tips for success

To sum up, here are four key tips for financial institutions:

1. Focus on points of differentiation – find the right use cases and focus on delivering some quick wins. Think about what will differentiate your services in a BaaS world and invest accordingly
2. Demonstrate a change in mindset – empower your teams to try new things, experiment and explore new developments and different ways of working
3. Champion the use of platforms and open APIs – recognise that platform and open APIs can get you to the end game faster
4. Embrace collaboration and innovation – there’s no need to invent everything in-house, work with partners and other brands in the market to leverage innovation and find new routes to market

Above all, don’t put off getting started…carpe diem (seize the day).