Platform banking made easy - Comment & Profiles -

For many banks the burden of running a platform model is out of reach. Time to think of other ways of achieving the same goal.

Banks have been told that they need to be more like tech companies and run their activities on platforms that use the same format across different businesses and geographies. They have also been told that they need to focus on their core strengths and outsource the rest. But determining what those core strengths are may come back to how efficiently they operate a particular facet of their business and that, in turn, may depend on being able to run platforms successfully.

And how many banks are good at running platforms? Right now the answer is probably in single digits and for any but the top tier banks, the investment required to make a platform run efficiently and keep it up to date is almost certainly more than they can afford – especially in the current environment, with Covid-19 lockdowns hitting revenues. 

All of which makes outsourcing the platform function itself an attractive proposition once initial concerns are overcome. A first reaction by a bank CEO to this proposition is that surely this is too fundamental to operations to outsource? Surely the platform is part of the bank’s unique DNA and the main interface with the customer? It would be a bit like outsourcing the core banking system or the branches.

But then again in the new world of advanced technology, thinking the unthinkable has become the norm and what’s core and non-core has entered into an entirely new realm of calculation. Indeed, some of the platform services could be provided to banks by other banks in a relationship similar to the one that already exists with foreign exchange, transaction banking and other scale businesses.

As soon as a bank’s management has got to the first stage in this critical thinking ie that almost every bank activity could be differentiating or non-differentiating depending on how it is configured, then the way is open for a lot of blue sky thinking and outsourcing platforms to a service provider starts to make sense. 

Brian Caplen is the editor of The Banker. Follow him on Twitter @BrianCaplen

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