Platform Banking 101: What is Platform Banking?

Consolidation, partnerships and continued collaborations between legacy banks and fintechs seem imminent. And consumers can probably expect to see the continued emergence of companies touting shiny, headline-worthy services, including the likes of blockchain, cryptocurrency, artificial intelligence and peer-to-peer transactions. A travel company offers customers an online loan to pay for package deals directly through its own website. It offers its own financing using BaaS rather than redirecting customers to a separate bank. At the same time, it sells more package deals and increases customer spend. NovoPayment, a provider in the area of Banking as a Service platforms across the Americas, enables digital financial and transactional services in support of varied use cases.

• The European Union first introduced open banking policies, and the United Kingdom has been hailed as the global leader of open banking.
• These various financial services are all related to dealing with money—accessing it, storing it, spending it, and moving it—so your systems need to be able to talk to each other and pass important customer information.
• The simplest option is to use one solution that offers both payments and BaaS services.
• Engaging with fintechs—many of which remain largely unregulated, particularly in the Wild West realm of cryptocurrencies and blockchain technologies—can lead to unwanted or unexpected threat exposure.

It’s an attempt by the Fed to boost confidence so people don’t panic. Greene emphasized that the Fed can both raise interest rates and open up a new facility at the same time. “I don’t think this will change the Fed’s rate path at all,” she said. Account banking-as-a-service options.You’ll have more account options than an online banking platform. You also may be able to apply for a loan or explore investment options. Online banking platforms are still safe to use if their accounts are federally insured by another bank.

Digital Banking Solutions Best Of Awards

This exhaustive onboarding process is critical as the bank should get enough comfort on the platform concerning trust, privacy, and client satisfaction. The BaaS company is then able to onboard its customers within a few weeks. The salon owners also need capital to invest in marketing and studio renovations.

It’s true that traditional banking business models are giving way to banking as a platform , a model that incumbents will need to navigate in order to remain competitive. But, it’s also giving community banks and credit unions a chance to leverage technology to better serve account holders and become leaders in a rapidly changing industry. Platform banking is not restricted to retail financial services—it does apply in the institutional context as well, whether for corporate customers or buy-side firms. FXall, an electronic, foreign exchange trading platform, offers access to over 180 liquidity providers.4 While FXall is a third-party platform, it illustrates the potential of platforms in the institutional markets as well. You’ll also prefer online banking if you are looking for a high interest rate on savings.

Why Your Company Should Start Looking at Banking APIs

For example, imagine a bank adding a chatbot into their app to enhance their investment services. The chatbot is developed by an outside fintech company yet offered directly through the bank. Finastra’s Fusion Digital Banking combines core banking functionality with digital experiences for customers, with a business edition supporting workflows for higher risk transactions. With both desktop and mobile access to your bank accounts available, digital banking means you’re not beholden to bank hours to manage your finances. Together, online and mobile banking create the digital banking umbrella, giving people access to banking wherever they may be—or, in some cases, wherever they’re graced with secure Wi-Fi and strong cell signal.

Banks win because they increase customer satisfaction, simultaneously saving money on development and support. Open banking is gaining momentum worldwide with PSD2 , CMA , UPI and many similar initiatives being undertaken elsewhere. These regulations seek to open the financial sector to competition, stimulate innovation, reduce costs, increase transparency and empower consumers.

ClearBank is notably the UK’s first new clearing bank in 250 years, and aims to transform the clearing bank experience and create a new level of open competition and transparency in the UK market. Its technology stack transforms the ability for financial institutions to provide current accounts to their customers, resulting in faster, more efficient payments, and financial inclusion. While the journey to platform banking is difficult, it provides banks with the capacity to build and penetrate new markets, as well as construct new business models to facilitate growth. Assuming a leadership or active position in the platform banking industry would not only generate new income streams, but will also improve client experience and operational efficiency.

Cons of using an online banking platform

She has worked as a personal finance editor, writer, and content strategist covering banking, credit cards, insurance and investing. As a small business owner and former financial advisor, Daphne has first-hand experience with the challenges individuals face in making smart financial choices. Fidor designs, tests, and builds its clients’ digital banking projects into its full-service proprietary digital banking platform fidorOS . Customers can also build a unique customer experience on top of Fidor’s APIs if they choose. The firm provides agency banking services including secure access to core banking solutions, payment schemes and systems, all operated within a liquidity-managed account.

While there would be many questions to address in developing platform capabilities, banks should not wait too long to explore this model. And, quite possibly, the world of platform banking may arrive sooner than many expect. Digital platforms are poised to dramatically alter business models, competitive structure, pricing, and customer behavior in banking, similar to what we have observed in other industries, such as retail. Lower fees.Online banking platforms often won’t charge monthly service fees, and some have gotten rid of overdraft fees. The bank has also implemented an open banking platform with APIs to improve their online security and improve the authentication process.

Pros and cons of online banking

For example, different banking-as-a-service providers offer different sets of services. 70 percent of the IT budget in European banks is aimed to keep bank operations running and only 30 percent to introduce new services or improve processes. It may look like a staggering amount of money but once you take into account historic circumstances and the complexity of banking software, it starts to make sense. Adopting an API-fueled, platform strategy brings with it many organizational and technical challenges. Organizationally, banks will need to create multidisciplinary teams, redesign customer experiences and reshape business architecture.

Digital banking, inclusive of online and mobile banking, gives people more ways than ever to access the functions they need to keep their finances in order. As the Covid-19 crisis has demonstrated, in-person services, in general, can’t be taken for granted, and banking services are no different. While it may be used in many different ways online and elsewhere, the term digital banking, essentially, combines online and mobile banking services under one umbrella. Based on the business model, product and service roadmap, and technological readiness, banks can begin their platform banking journey in stages with short-term and long-term objectives. Furthermore, platform banking necessitates safe data communication via APIs. Platform banking is based on the idea that banks can better service their consumers, build greater trust, and keep the customer connection.

Each of the aforementioned 3 platform strategies necessitates a different level of commitment and will have a different level of revolutionary impact. It has allowed us to streamline processes, beef up reporting, and truly customize our operations. Thefinancialbrand.com needs to review the security of your connection before proceeding. At Cognizant, we help our clients do what others can’t—operate with human insight, but at superhuman speed.

Information provided on Forbes Advisor is for educational purposes only. Your financial situation is unique and the products and services we review may not be right for your circumstances. We do not offer financial advice, advisory or brokerage services, nor do we recommend or advise individuals or to buy or sell particular stocks or securities.

Banking as a Platform: What You Should Know about This Digital Disruptor

Other factors, such as revenue-sharing models and allocation of risk ownership between the platform operator and the service provider, are also important. Platform-based models are defined by a ‘flat’ structure that facilitates the exchange of information between business units, customers and other third parties. Leveraging digital platforms enables banks to be more responsive to change by simplifying their processes without dumbing down capabilities. Some online banking platforms let you deposit cash at GreenDot locations for a fee. As financial services become more fine-tuned to reflect the needs of consumers, BaaS providers will attract new customers.

The rise of banking as a platform

It was one of the pioneers in using banking as a platform, and many local banks have followed their approach. Furthermore, this integration with Plaid has helped the bank to improve the customer experience tremendously and also made the banking easier for its customers. The rise of logistics services has eased the burden on businesses struggling with shipping, warehousing, and supply-chain challenges. Let’s explore each of the top shipping management software or services and examine them in more detail, including the core features that set them apart.

Most of the banks have opted to move most of their services to “Banking as a Platform. Our KYC module is one small step towards open banking and we plan to add more innovation and leverage the underlying government and regulatory stacks. And most importantly, we take care of both kinds of downtimes and outages in an automated and streamlined fashion – when a bank provider goes down intermittently or even permanently. According to areport by PwC, around 39% of clients are willing to share their data with third-party companies if that meant benefits and a better experience.

Fintech wins because they sell their product to an established business for a profit. Banking as a Platform means Banking as “a Platform for fintech and tech companies”. QuickLook is a weekly blog from the Deloitte Center for Financial Services about technology, innovation, growth, regulation, and other challenges facing the industry. The views expressed in this blog are those of the blogger and not official statements by Deloitte or any of its affiliates or member firms.

This licensed digital bank from Germany provides a BaaS platform that encompasses an array of modular banking APIs. Among other offers on its website, the company advertises a comprehensive solution for creating a fully-fledged neobank. It has over 60 corporate clients worldwide and has raised more than €160 million in funding.