4 charts on retail banks moving to platform-based business models in 2020
- Study finds banks with platform-based business models more likely to survive new digital demands from customers
- Retail banks struggle with shedding legacy systems

Banks are no strangers to the pressures of digitalization. But with Covid-19, retail banks now face the added challenge of adapting their services to a digital environment as quickly as possible, as customers continue to demand transaction support, account information, and reassurance.
To continue to provide customers with the services they want, banks need better handling of data to understand user behavior, as well as an easy-to-navigate interface for their customers.
According to Capgemini’s 2020 World Retail Banking Report, banks should consider adopting a platform-based business model in order to be more equipped to tackle these challenges.
A platform-based business enables third-party services to be added to core products and facilitates the exchange of information, goods, and services. For banks this would mean teaming up with fintech firms and subsequently becoming a platform for their financial services.
How the platform-based business model helps companies reach business priorities

In a 2019 study conducted by the Harvard Business Review, researchers analyzed 43 platform-based companies and found that businesses were more likely to reach their goals when operating on platform-based business models.
With platform-based business models, retail banks were twice as likely to increase business profitability and ten percent more likely to be able to upgrade their customers’ experience.
Banks are 1.8x more likely to offer personalized and differentiated products and services when they move to a platform model than they are in their current state, according to the Capgemini survey. That’s because a platform model enables banks to plug in third party services and products that their customers are looking for, without having to build them themselves.
The rise of COVID-19 has seen an accelerated shift in customers’ attitudes towards internet banking

2020 is seeing more customers switching to internet banking in light of Covid-19.
More than half the customers surveyed reported an increased preference for internet banking since the rise of Covid-19.
SPONSORED
With the pressure caused by the pandemic, even people who initially preferred visiting their retail banks over banking from home are now relying more on digital banking services (49% versus 57%). Now banks that offer open APIs are at an advantage with their customers compared to traditional banks. To stay afloat, traditional banks must first overcome the obstacles of closing their branches and finding ways to improve their services in the new digitalized environment.
Problems with data management

Many incumbent banks have lots of data at hand but lack the tools to leverage it.
One reason the platform-based business model has been such a useful tool for staying afloat during the pandemic crisis is its potential for data analysis. Platform-based businesses have the opportunity to analyze how users personalize their platform and therefore what services they are using most.
While retail banks may have the data necessary to evaluate customer experience, their business models could cause them to miss valuable information. Only 26% of the banks analyzed were able to extract data properly according to the study.
“Banks have several large data lakes in silos,” says one head of group strategy at a large bank in Israel. “The result is low interoperability that affects their ability to process the data to drive insights and use it to customize customer services”.
The road to platformification won’t be easy

Half the banking executives surveyed reported issues with putting together a strategic road map towards platformification.
Almost 80% of banking executives interviewed reported the use of legacy systems stopping them from achieving a successful platform-based model.
But even with big names like Wells Fargo and JPMorgan Chase having shown enthusiasm for platformification in the past, the transformation remains a controversial topic.
Many retail banks aren’t ready to completely let go of their legacy systems. Instead of working towards transforming their current systems, they are relying on workarounds and other less efficient tactics.
“A change in mindset and a change in technology are needed to move forward in platformification,” says Carlos Lopez-Moctezuma, global head of open banking for BBVA in Spain. “By collaborating with various ecosystem players, the learning curve can help banks to scale up toward becoming a platform.”
The report emphasizes the importance of building an API network that drives collaboration with ecosystem partners in enabling new products/services and building customer loyalty. More importantly, however, is to support a network of standardized APIs, which are interoperable, built on consensus, and work for all ecosystem participants. Adopting a standardized API for financial data sharing – such as the FDX API – won’t only keep development costs low and foster market choice and innovation, but ensure your firm needs to maintain just one API vs. sustain a costly maze of proprietary data sharing methods.
A platform-based or open API approach is vital to the success of retail banks. Regional and community banks, in particular, are struggling to compete due to outdated systems. Since replacing an entire legacy core banking system isn’t always realistic, a platform-based approach enables banks to improve one piece at a time. The banks that I have seen do this successfully set clear goals for their institutions, such as raising $100 million in deposits in 5 months, and then build their digital strategy and vendor selection process around these outcomes.
We are at the beginning stages of unbundling banking infrastructure. The next big wave in fintech disruption is sure to be felt by the legacy vendors that have grown complacent by the lack of competition. And this will hopefully lead to a shift in banks viewing technology purchases as investments and not solely as expenses.