04 Jan

Is “Banking as a Platform” the model of the future?

Reporting from the 2018 Handelsblatt Annual Conference "Banking Technology”.

On 4-5 December 2018, the 24th Handelsblatt Annual Conference Banking Technology took place in Frankfurt. We as SDS had our exhibition booth to present our products GEOS, i:Reg, m:Cost and c:Conform as well as our company. The major topic of the event was “Banking as a Platform”.
Platform economy has already been an integral part of other industries for years. Amazon, as the best example, acts as central international digital market place. Flights are often booked via travel platforms and not directly with the airlines, like hotels, to name just a few well-known examples.
A similar development is well underway in the banking sector. According to the consulting firm Roland Berger, platforms already have a market share of more than 30% for products for new retail customers – with an upward tendency. A bold thesis was put forward: “In 5-10 years, banking services will be used in the background, i.e., the customer won’t care which bank offers the service”. The banking service will then become a commodity.

A common topic is the increasing challenge for banks to maintain their current operating models in times of technological transformation and changing customer expectations. Some market watchers expect that a considerable part of the banks’ revenues, especially in the retail business, is at risk within the next ten years. Others predict that the banks can either accept the new competitors or compete with them, while they will at the same time improve their own performance and efficiency.

The most important question regarding the future scenarios of the banking sector is which actor will manage the customer relationships and the interface and which actor will finally render the services and take the risk. The rise of Fintech innovations and the development of tech giants in the banking area has already resulted in a fight for customer relationships and customer data. The result of this struggle will be decisive for the future role of the banks. All experts emphasise that a single bank will not be able to cover all financial needs. Opening up the systems (keyword “open banking”) to third parties will be one of the key success factors here.

E.g. Deutsche Bank’s digitisation strategy, on the one hand focuses on the transformation of its core business and on the other hand on the development of new business models via digital ventures. According to Mr. Pertlwieser, Deutsche Bank already offers a multitude of platform-based options, e.g. the digital house bank, various financial marketplaces as well as “beyond banking” ecosystems (via the Deutsche Bank API). Deutsche Bank plans to become the platform for all questions relating to financial issues. Mobile banking is regarded as critical success factor for the digital platform. Even today, the share of mobile login is about 62% at Deutsche Bank.

In terms of data security – an important element of digitisation – banks still seem to be the winners in the tough competition with Fintechs and tech giants. According to a survey of Deutsche Bank in 2018, 46% trust in their house bank, a value way above those of the new competitors.

Meanwhile more and more market participants pursue a platform strategy. Since a platform primarily relies on economies of scale, a tough selection process is expected. Like in other industries, most of those involved assume that only a few banking platforms will dominate the market and expect this competition on a national level in the first step. BBVA in Spain, BNP Paribas in France and the Dutch ING are considered to be in a good position.

Deeper insights into digital transformation at Commerzbank as well as insights into the modern open banking solution of Hypothekarbank Lenzburg AG rounded off the agenda of the Handelsblatt conference.

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Christian Trnka
Product Manager