Banks and platform economics – (how) do they fit together??

Strategic challenges for banks and savings banks in 2022

alt="prof. Dr. Jurgen moormann" width="35" height="31" />//> from prof. Dr. Jurgen moormann 24. January 2022

More and more, our lives are played out on digital platforms. Physical facilities such as stores, but also car dealerships, bookstores and fashion boutiques, on the other hand, are losing importance. What are the consequences of the emergence of digital ecosystems for banks??

Strategic prospects and challenges in 2022.

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The spread of smartphones in particular has led to the enormous popularity of digital platforms such as amazon, booking, zalando, spotify, etc. Led. In addition, the platforms of search engines (google, baidu, etc.).) and social media operator (u.A. Meta/facebook, tencent/wechat) established. In part, these platforms have developed into digital ecosystems. The emergence of payment service providers in ecommerce (u.A. Klarna, paypal, stripe) has massively supported this development.

platforms are blurring traditional corporate and industry boundaries and are therefore highly relevant for the development of corporate strategies. What does this mean for interactions between customers and banks?? And what does the emergence of digital ecosystems mean for the strategic direction of banks??

Strategic questions about platform banking

First of all, the management of a bank must clarify, whether it wants to deal with platform issues or not. However, it is not clear how, given today’s expense and income structures, sticking to traditional business is supposed to ensure the survival of a bank. In addition, customer needs and interactions have changed fundamentally. As we know from our own behavior, in many areas of life the road leads us into the digital world (comparison platforms, search engines, etc.).). As part of our own "customer processes," we do not seek out branches or stores in the first step, but rather digital platforms. So the question of "if" is quickly answered.

So it is a matter of, like how a bench is best positioned in platform structures. In principle, the following rollers are suitable for this purpose:

  1. Initiator and operator of a platform: in this role, the bank orchestrates all activities and manages the participating partners. This requires know-how and a substantial investment – banks can easily overtake themselves here.
  2. participants on other platforms: for example, the bank then acts as a product supplier. The effort is less; however, there is a risk of losing the connection to the customer here.
  3. Infrastructure providers: here, too, the bank detaches itself from the end customer and offers loan processing, securities processing, payment transactions o.a. To. However, only a few institutions are required.
  4. combinations, additional roles and hybrid models (d.H. Traditional and platform) are possible.

With the focus on platforms, the business model of the respective bank inevitably changes. Whereas traditionally a company has "its" customers and keeps a strict watch to ensure that no competitor penetrates its own value chain, a more differentiated view is now developing. Especially in role models where the bank cooperates with other companies and consciously integrates itself into a digital ecosystem, it becomes part of a value network. This increases the complexity in terms of strategy, governance, communication, processes and IT in these structures.

Examples of platforms are available

The issue of platforms is relevant to all business areas. This is also shown by the examples that already exist in the german banking landscape: the aareal-bank operates a platform for housing companies with connections to tenants, insurance companies, landlords, etc. degussa-bank has several platforms in operation, u.A. MIVO (employee benefits.De), which is also offered to other companies outside the industry. VR-bank wurzburg operates a crowdfunding platform together with around twenty other banking partners. The "bauen + wohnen" platform is being developed by three PSD banks together with bausparkasse schwabisch hall and atruvia AG. apobank has founded the subsidiary naontek, which operates the platform univiva for healthcare professionals and institutions in the healthcare sector. volksbank mittelhessen, too, with its subsidiary mittelstand.Ai established its own company that serves corporate customers u.A. A platform for data analysis in the context of industry 4.0 offered. "Beyond banking" is also the credo at N26 and ING. The latter cooperates not only with scalable capital, but increasingly with amazon (dealer financing, cashback program).

these attempts are all well and good, but they are far too small-scale. We need to think much bigger, at least at the level of the respective banking group, but ideally at the european level. We don’t stand a chance against the world’s mega-platforms with our current approaches. Internationally, threats to our still folkloric banking world today are emerging in a completely different dimension, z.B. through companies like paypal and klarna. Their super-apps, which are currently being developed, aim to keep customer processes completely in their own universe and to degrade banks into suppliers.

Banks must become software developers

Turning to platforms is certainly not the solution to all problems. However, it is clear that fintechs and tech companies will take an ever larger share of the traditional banking business. Traditional institutes must therefore find ways to remain relevant. The integration of banks into the platform economy is one such way. From increased networking, data generation using new technologies, and new partnerships (e.g.B. With companies in the manufacturing industry), business models will emerge that are not even on the agenda of traditional banks today.

But this has enormous consequences. It must (finally) be understood that banks’ services are based on IT, i.e. that banks are information-processing companies. Even manufacturing companies have (belatedly) understood that the competitive advantage lies not in the sheet metal body, but in the car’s operating system, and have started a race to catch up (BMW, daimler, VW, bosch) to transform themselves into software developers. Erich sixt recently announced that sixt is a software development company with an attached car rental company.

And the banks? They produce interchangeable services. Your products are digital. you must all the more so put software development at the center of your activities. Therefore, they will have to radically change their course – with all the consequences. this includes in particular the change of the employee structure. Much more know-how is needed for digitalization. Artificial intelligence, data analytics, blockchain, cloud computing, platforms, decentralized finance, digital identities are just the first keywords. Who should deal with this if not the banks?? your business models, processes and IT will change drastically. The platform economy will not disappear, on the contrary – we are only at the beginning.

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About the author

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Jurgen moormann has been a professor of banking at the frankfurt school of finance since 1995& management. Teaching and research focus on strategy development, business engineering and process management in banks. 2005 foundation of the processlab – a research center of the frankfurt school focused on process management in the finance industry. Visiting professor at the university of colorado at colorado springs, the university of new south wales, queensland university of technology and the university of hong kong. Since 2014, he has held the concardis endowed professorship for banking and process management. He is a member of the supervisory board of karis AG, darmstadt, and a trusted lecturer at the friedrich naumann foundation, berlin. Vocational training at commerzbank AG in kiel (1977-1979). studies in business administration at the universities of kiel and zurich (1980-1985). From 1986 to 1989, research assistant at the chair of financial economics at christian albrecht university in kiel, germany. Promotion. Afterwards five years of working in management consulting. Lectureship at the european business school, oestrich-winkel (1992-1994).

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