As digital disruption shakes up the payments status quo with new opportunities and challenges, banks are working to maintain and broaden their traditional role within a dynamic and increasingly collaborative financial services ecosystem. Consumers have always looked to their bank as a payments services provider. But these days, customers are considering numerous options in search of real-time, frictionless, secure, and personalized payment solutions to match options they’ve become accustomed to from e-commerce and electronics firms.
FinTech firms, armed with emerging technologies, such as blockchain and digital payments, are challenging traditional business models and establishing themselves as a suitable alternative to banks.
What’s more, unpredictable macroeconomic conditions and regulatory mandates such as the EU’s Revised Payment Service Directive (PSD2) – which went into effect in January 2018 – are pushing banks to open their systems and share customer data with third-party players.
The next big thing
With new convenient, omnichannel payment methods gaining ground, it’s no wonder incumbents are concerned about losing market share unless they transform their existing business models and forge meaningful relationships with other industry stakeholders (FinTechs, card networks, processors, TPPs) to develop innovative solutions.
In the new payments ecosystem, banks must leverage technology to shed their conventional product-factory role and adapt a value-creator function that expedites exchanges between customers (service consumers) and third-party service providers.
Based on their client-account relationships, banks own the platform while FinTechs (and other third-party payment providers) produce platform services, and merchants, corporations, and end-users consume the services. Platform development and ownership ensures that banks retain the customer relationship while they simultaneously leverage the innovative capabilities of FinTechs and third-party developers through collaboration. Owning the platform bolsters the bank’s central role within the payments ecosystem and enables meaningful partnerships with industry participants.
Collaboration lays the path to digital transformation as banks adopt technologies such as open Application Programming Interfaces (APIs), instant payments, blockchain, and mobile wallets.
Overall, roles as both platform-developer and owner can become more significant for banks in the future as network effects (the feedback loops between consumers and producers) become more central to collaborative platform model success.
Collaborative Payments Platform
Source: Capgemini Financial Services Analysis, 2017
While banks’ infrastructure maturity levels vary, some firms are making significant platform ownership progress. Multinational Spanish banking group BBVA launched eight APIs in customers, accounts, cards, payments, PayStats, loans, notifications, and business accounts to help third parties build innovative, customer-experience enhancing products. German online bank Fidor developed the fidorOS platform to securely open its systems to the external world leveraging open APIs. International banks Standard Chartered and Citigroup rolled out open API developer portals to enable third-party developers to create value-added services that can be integrated with bank offerings, including payments.
Playing the long game
While contemplating the future of the payments industry, some bank executives are considering developer portals and marketplaces. A portal can act as a single platform where third-party developers who have partnered with the bank come together to explore value-added concepts. Marketplaces offer a one-stop repository in which all services developed within the bank’s network and from the third parties are featured for monetization. However, such platforms may face new cyber security and trust challenges. Banks can play an important role in resolving such challenges as they hold unique trust position by claiming central role in this ecosystem.
In the new payments ecosystem, the platform model is a mutually beneficial proposition for banks and other stakeholders. The collaborative model helps to meaningfully monetize customer data and boost growth of new revenue streams. Moreover, as customers enjoy more choices over products and services based on their needs, payments players will build a reputation for customer centricity. The long game for banks is to maintain and increase their existing stature in the payments industry, and at the same time, help FinTechs achieve scale by accessing the ecosystem’s broad customer base.
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 BBVA Compas web site, “APIs, BBVA’s commitment to the new banking ecosystem,” May 31, 2017, https://www.bbva.com/en/apis-bbvas-commitment-new-banking-ecosystem/, accessed August 2018.
 “What is the fidorOS platform,” accessed January 2018 at https://www.fidor.com/platform
 PYMNTS.com, “Standard Chartered Launches Banking API Portal,” February 13, 2017, at https://tinyurl.com/ybkhrum8, accessed August 2018.