Banking-as-a-Platform: Delivering a New Era of Customer Experience and Value

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By Nanda Kumar, Founder & CEO, SunTec

Only a year ago, few of us could have predicted the significant impact COVID-19 would have on the global economy and the disruption it would wreak on our daily lives. Now that there is light at the end of the tunnel, it’s important that we focus not solely on the pandemic’s negatives but rather examine the opportunities that it’s afforded banks to add new and real value for banking customers.

Every business needs a banking service. If banks can make those services as frictionless and “as a service” as possible, they can seamlessly meet a key customer need: the provision of hassle-free, easy banking. The pandemic may have forever altered the bank’s traditional relationship with its customers, but it has also opened doors to empathetic, value-based banking. It has forced banks and their customers to adapt quickly to newer ways of interacting with each other instead of depending purely on the traditional physical approach.

During such times of uncertainty, customers often rely heavily on their financial institutions to help them navigate the landscape and ensure their financial security. But if financial institutions aren’t sensitive to their customers’ needs during such times, they risk losing them to banks and other providers that are more in tune with the evolving needs of the end consumer. The opportunity is ripe for banks to pivot their range of services, earning their customers’ loyalties by providing tailored solutions that are easy to access, and to deliver a new level of experience and value.

That said, banks cannot build every single product and service required to solve customers’ broader challenges themselves. What they can do is streamline the process and end-user experience by partnering and collaborating with institutions within the financial-services industry and beyond. This forms the essence of platformification: a single platform that solves a specific problem for a customer by integrating services from banks, fintech (financial technology) companies and “non-banks”. Banks are uniquely positioned to map a customer’s end-to-end journey and effectively knit together an ecosystem of partners that will further enrich the customer journey.

Demystifying banking-as-a-platform

Technology has drastically changed customers’ expectations and how their needs are met. With banking-as-a platform, banks can focus on their core capabilities—designing and delivering banking products and services—while leveraging a software/technology partner’s expertise, functionality, infrastructure, platform and scale. This means less time and cost to develop those products and services and also offers relationship managers a 360-degree view of the bank’s customers. All of this can be achieved by simply installing a common platform across most products and services.

Honing the art of alliances

Advances in technology will always produce a corresponding evolution of customer preferences, and the pandemic has significantly changed customer behavior within online channels. We expect platformification to become more relevant this year, particularly as customers seek additional credit and flexible payment options and as brands promote financial wellness, given the macroeconomic circumstances.

A good example is the partnership between popular online furniture store Wayfair Inc. and Citigroup Inc. 1, which have launched co-branded and private-label credit cards to offer seamless financing options to their US customers. Another is the partnership between Chase Bank and American Express 2. With fewer people dining out during the pandemic, these companies collaborated to offer bonus rewards for food-delivery services. With the surge in e-commerce due to ongoing restrictions, private-label credit cards will continue to grow in number as the demand for online shopping and food delivery continues to soar throughout 2021.

Moving forward, financial institutions may separate their external presentation layer from their back-office data layer to create enhanced digital consumer experiences. This trend is already gathering steam with the collaboration between Google and several financial institutions. Slated to roll out this year, Google Pay recently launched its Plex bank accounts in partnership with 11 banks and credit unions 3 in the United States. The service will give users a chance to open digital bank accounts with traditional, trusted financial institutions.

Payments processor Stripe Inc. 4, which aims to be the internet economy’s financial supermarket, recently announced that it would team up with leading US banks, including Goldman Sachs Group Inc. and Citigroup Inc. Stripe will soon give its customers the option of offering insured, interest-bearing bank accounts, debit cards and other cash-management services to merchants and vendors that do business with Stripe’s customers. Stripe’s customer Spotify will begin offering the service to its merchants early this year.

Banks need to take the lead in embracing innovation and collaborate with other industry players to unlock the power of their respective ecosystems, deepen their existing relationships and design ways to serve a new generation of customers.

Taking the lead on delivering a value-add experience

Uber is an excellent example of how institutions should “ideally” interact with their consumers. When an individual books a car, his or her main purpose is to get from point A to point B. Historically, a customer would worry about the route and how to pay the driver at the end of the journey. Uber translated this challenge into an opportunity by ensuring that once a customer books a cab, he doesn’t have to worry about other aspects, such as navigation or payment—the Uber platform does all that.

Uber set its wheels in motion by bringing new specialist partners on board to help the company integrate each of these specific needs. By collaborating with such partners, delegating operations and creating a customized service for its consumers, Uber built a platform that instantly appealed to the public. And as its customer base grew, the company collected more and more data about their preferences and gathered insights into what additional services would benefit them. This eventually helped Uber venture into other areas and launch Uber Eats, Uber Business and Uber Health, among others. Without owning a single “asset”, Uber provided its customers with the easiest and simplest travel solutions while revolutionizing the transport industry. This “uberization” has allowed Uber to pivot the customer-experience model by not just collecting—but strategically using—consumer data. Uber developed the confidence to increase its customer offerings. All it took was the right platform.

Striking the correct balance

To create the most successful business model, banks must realize that the end customer is not their only important stakeholder. The ecosystem that provides these customized products and services to consumers and the multiple business partners included in it also do their part to ensure a flawless customer experience.

Banks now need to strike the right balance between their customers and their partners to drive additional value. Successfully curating an ecosystem of partners is critical to knitting together a seamless customer journey. As more and more banks and companies create their own ecosystems, we will soon reach the point at which one ecosystem collaborates with another to create a web of services that will add intrinsic value for the consumers within those ecosystems.

Banks can no longer afford to merely design products and services that meet today’s customer needs; they must radically innovate and transform for the future. Customers have become accustomed and are increasingly loyal to service providers that solve a broader spectrum of their needs. That means banks of today must embrace a cultural and mindset shift and transform to adopt a more platform-centric approach that allows them to solve broader lifecycle needs and deliver experiences that customers truly value. This choice will enable banks to evolve toward collaborating with a host of partners and create broader ecosystems. Banks that fail to shift gears soon enough will run the risk of being left behind—with little opportunity to catch up.

References

1 Citigroup Inc.: “Citi Retail Services and Wayfair Announce New Strategic Partnership With Launch of Private Label and Co-Brand Credit Cards“, September 11, 2020

2 CNN Underscored: “Chase and Amex add bonus rewards for ordering from food delivery services“, April 13, 2020, Julian Kheel

3 Google Pay: “Google Pay reimagined: pay, save, manage expenses and more“, November 18, 2020, Caesar Sengupta

4 Stripe Newsroom: “Stripe launches Stripe Treasury in major expansion of financial services offering for platform partners“, December 3, 2020

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