Do Banks have a Chance in the Platform Battle?

Will Amazon take it all in Banking as well?

A discussion on LinkedIn around Open Banking which I have been part of, has encouraged me to write a few words about this topic once again.

I gave a first comment on this earlier in “Digital Transformation to Keep up Revenue”. There I already mentioned that the winner still will take it all because of the network economics.

This is exactly what people in that discussion pointed to. Existing platforms such as Amazon are for so many reasons in a far better position than banks in Germany in particular. And I absolutely agree with this. Banks need to open up their processes and services an integrate them into these existing platforms as one of the comments explains. Another questions which I am asking myself is what’s so new about this?

Back to the future …

I remember around 15 years ago there was already the call for banks to transform from a value chain to a value network. In Germany there have been a lot of papers under the name “Industrialization of Banking” about opening up product, sales and settlement of banking into three decoupled and separated main processes each of which can easily be recombined in value networks. In that concept one bank could develop products, the other one could offer them to the market and a third one could offer settlement of those products in a loosely coupled manner.  That was the time when first banking fabrics for payment or securities processing came up.

If one takes the concept of value networks seriously than there is only one small step to an open banking idea where a bank can integrate its services into an existing platform such as amazon.

Why hasn’t that happened yet then? Is there some unfinished homework to be done?

If you can’t beat them join them

Indeed it could be too late for banks to become a platform themselves but it is not too late to integrate with existing platforms. If you can’t beat them join them.

On the other hand, as we know, existing platforms are becoming more and more powerful and network economics tend to create monopolies by their nature. This is being observed by competition authorities too. I hope they will not stand still and make soon sure that competition is upheld in this field.