Why Traditional Financial Institutions Must Embrace a Platform Model

With the 2016 Money 20/20 conference in Las Vegas, it’s become more clear than ever that the Platform Transformation of banking is no longer just a prediction — it’s happening now.

As more and more mobile-first consumers demand control over their data, convenience, and “anytime, anywhere” accessibility, every traditional model of how people manage their finances has been turned completely upside down. New companies that provide digital solutions for payments, budgeting, saving, and investing are bursting on to the scene. Entrenched, legacy institutions are responding — albeit not always at Silicon Valley speed — by developing their own capabilities, or collaborating with innovative upstarts, or both.

Even though US banks possess great assets — for examples, strong brand and consumer-base — the reality is shifting to a platform business model in a traditionally slow and steady industry has its challenges. While banks are highly-regulated and have massive scale, they also have many structural and regulatory disadvantages to compete in this space. The result is that few large U.S. banks are in a position to lead the evolution of Platform Transformation.

Banks must disrupt themselves or prepare for slow decline.

At Capital One, we’ve made investing in building our technology platform capabilities a top priority. We are, down to our very fiber, a technology company, and we understand how core banking technology works. Our intention is to meet customers where they are — and to give them intuitive, easy, secure, and friction-free digital banking experiences.

Adopting the platform mindset begins internally, by enabling product and technology teams to produce, consume, reuse, and improve hundreds of well-designed APIs internally. On top of our APIs, we’ve created breakthrough digital experiences for our customers like our Mobile Servicing app and the first banking skill on the Amazon Alexa platform. We pride ourselves on having the vision, the resources, and the courage to make this change, and we’re constantly hiring the talent to help accomplish it.

But changing our mindset is not the end of our story at Capital One.

We believe that external developers, startups, and other innovators will be co-creators of the next generation of digital banking and fintech experiences. APIs, SDK’s, open source projects and new platform-powered tools are making it easier than ever for developers to build solutions for customers. And these dynamics have huge implications for financial institutions, consumers, aggregators, and developers alike. The most innovative banks and fintech players understand this — and are giving external developers and partners access to their APIs and toolkits.

With this in mind, we launched the first true open banking platform in the U.S. in March 2016. Dubbed Capital One DevExchange, this new external platform business puts powerful new capabilities into the hands of external developers and partners and provides a best-in-class experience — from our API documentation (and we’re opening up some of our API documentation tools) to our instant, self-service API test environments for our community members (we’ve clocked it at 120 seconds).

We intentionally started our open program in beta — inviting early integration partners, and any external developer, to help us make the platform and our first set of APIs as seamless and bug-free as possible. Launching with three products — Credit Offers, Rewards and SwiftID — we were able to initially support several partner integrations, including a rewards integration with Uber and a new credit offers experience with Creditcards.com. We’ve already started to see the real impact on their businesses and ours — and most importantly, the positive impact on the customer experience.

We have learned quite a bit during our beta and know from our experience what makes platform businesses successful: a compelling business model, a plug-and-play platform experience, and understanding that developers have unique motivations and goals — to learn, to easily engage, to build their business and to be part of something exciting. Our ultimate goal is to create mutually benefiting exchanges between all parties involved.

As we prepare to come out of beta next month, we’re looking forward to announcing some new and updated products, as well as collaborations with innovative integration partners and startups. The remainder of 2016 will be an exciting period for us and we can’t wait to share what we have in store!

According to a report by CB Insights, named Pulse of Fintech, global investment in private fintech companies totaled $5.7 billion in Q1 2016, with $4.9bn specifically invested in VC-backed fintech companies across 218 deals, a 96% jump compared with the same quarter a year ago.

DISCLOSURE: The opinions in this blog are the opinions of the authors/interviewees and not necessarily the opinions of Capital One. Unless noted otherwise in this post, Capital One is not affiliated with, nor is it endorsed by, any of the companies mentioned. All trademarks and other intellectual property used or displayed are the ownership of their respective owners. This blog post is © 2016 Capital One.