This article introduces Banking-as-a-Platform, a potentially disruptive concept, providing a universal technical interface allowing to connect banks' core banking systems and banking apps from a massive ecosystem of FinTech companies.

Technology is rapidly changing the way services and products are delivered. The resulting digital economy has not only permeated the service sector but even traditional industries like manufacturing (the Germans call is Industry 4.0).

Some estimates suggest that this digital economy now accounts for a third of the total output of advanced economies like the US, UK and Australia.

The banking and financial services sector has always been quick to embrace new technologies. This is evident in the payments sector where services are now largely delivered through various digital platforms. Finally, the focus is moving to more traditional core banking products both in the retail and corporate banking space. The Banking-as-a-Platform concept aims to jump start this transformation in the context of a modular Banking-as-a-Service-Stack.

What exactly is the Banking-as-a-Platform?

The Open Bank ProjectBanking-as-a-Platform provides a universal technical interface that can be plugged into a bank’s core banking systems and provide software developers the ability to create various service applications. The idea is to enable third party developers to create a vast array of useful and secure applications that provide users tangible benefits when compared to legacy online or mobile banking systems.

Currently, the value chain of financial service delivery consists of the core banking systems of banks over which their own proprietary systems are built which directly interface with the customer. The Banking-as-a-Platform layer will allow third party application to replace this interface in a variety of useful ways. The end result is a more user friendly interface for consumers, with many new ways to shop for and use banking products as compared to what a traditional online banking interface allows.

So, what can it do?

While almost all large banks have their own online banking platforms, these platforms are restricted in terms of the services they can offer. Banks can upgrade these platforms using their in house teams or external vendors, but there would always be just one platform. What the Banking-as-a-Platform concept allows is for third party developers to create applications that can exchange data with multiple bank’s core banking systems and offer services. Essentially, something similar to an app store is created where each application can provide some value to the user based on their individual requirements.     

For example, if you need an application that can add up all the balances from you different bank accounts – that would be possible. Do you need to use a Business Intelligence platform to automatically read your bank statements and provide insights? That’s doable too. Are you looking for a banking application that can gamify the process of saving pocket money for you children and teach them to manage their finances? There can be multiple apps for that as well.

These are just some of the applications that have been made possible by Banking-as-a-Platform providers. The possibilities are truly limitless and are only restricted by the imagination of the developers - once they get the right type of data from the banks.

In the second part of this series on Banking-as-a-Platform, we take a closer look at how banks will need to adapt in order to succeed in such an environment. Will it lead to commoditization of bank services? Or will the banks find ever new and innovative ways to differentiate themselves?

To get the full picture of Banking-as-a-Platform in the context of the Banking-as-a-Service stack, read our publication about Banking as a Service.

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Topics: FinTech