Banks are gatekeepers. As digital platforms they work only rarely, but that's still what they all want to be, Patrick Hunger writes in an essay for finews.first.
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At times, digitization has companies devise some awkward smokescreens. Banks try not to fall victim of the voracious tech giants by turning themselves into digital platforms – much like the mimic octopus, probably the most brilliant of actors in the animal world, using changes to structure and color to deter enemies.
A sober appreciation of the peculiarities of platform economics shows that the banks' copying efforts are primarily aimed at helping them survive, notwithstanding their occasional inventiveness. This is in keeping with the animal world. If banks wanted to emancipate themselves structurally, to dispose of their role as industry victims and to shape their future in an active and transforming way, it doesn't suffice to be an actor in somebody’s else role.
«Banks traditionally embody the antithesis of the platform economics»
Platforms such as Google, Facebook, Amazon, Uber and Airbnb are synonymous for economic dominance in the digital world. Platforms enable value-added interaction between users, building on their core activities. The preconditions for such value creation are mainly positive network effects on the basis of an efficient scaling of demand. If we take Uber as an example, more demand leads to more drivers, a better network and shorter waiting times.
Banks by contrast traditionally embody the antithesis of the platform economics. Based on their product pipeline business model, banks keep a tight hold over their clients, much like gatekeepers. They control value creation by way of supply-side scaling. Their focus is not an efficient value creation.
This gatekeeping business has been under pressure for considerable time. Fintechs have manifestly exposed the weaknesses of inefficient value chains and their vulnerability to competitors. They also have set new standards for content and speed of innovation as well as customer expectations. They have been less successful in measurably increasing bank customers’ readiness to switch or to build alternative infrastructure.
«The business model discussion seems about to be changing»
The disruption of the finance industry through fintech hasn’t happened, a fact exploited by banks to make good lost ground on digitization and to use fintech as an innovation and technology supermarket. But hardly anything has changed in respect to their one-dimensional relation to the outside world – with the customer remaining customer only. The banks retain their hold over product pipeline and value creation, in some cases together with network partners.
But the business model discussion seems about to be changing. GAFAMs (Google, Apple, Facebook, Amazon, Microsoft) and BATs (Baidu, Alipay, Tencent) are behind this shift. The tech giants as well as some successful platforms – including Ebay, Twitter and Snapchat – have mastered the underlying challenge of platform economics: users don’t visit platforms without some value gain and a platform has no added value without users.
«This dynamic in particular is a cause for alarm at the banks»
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