Platform Thinking
Last month’s Paris Fintech Forum was an impressive event with lots of keynotes, panels, interviews, workshops and startup pitches and showcases. However, I intend to introduce to you only one of this year’s prominent participants, a pioneer of platform thinking — Matthias Kröner, founder and CEO of Fidor Bank. The reason is threefold. Firstly, the topic of financial services as platforms dominated the second day of Paris Fintech Forum. Secondly, the timing is perfect since European payments regulation PSD2* went live in January. Thirdly, Fidor is the oldest fintech bank! — That’s what I call a memorable tagline! By the way, Fidor has got a few of them. Check the website! Here is another one I particularly like: #BankingWithFriends — it refers to a community they created around financial topics.
Community?
Unquestionably, that was a very smart move! Who better to ask for input and feedback when developing new products than the community of your customers? In fact, the first thing Fidor did back in 2009 was to create the community, even before having been granted a banking licence. Their first step was to set up a loyalty scheme, which was followed by P2P lending out of the loyalty money wallet.
Tech + Data = Smooth Customer Journey
Matthias’ original idea of creating a smoother customer journey facilitated by new technologies and data analytics — and more integrated with mobile and our new life style — has proved to be far-sighted. Fidor has already got 800,000 members in the community, 300,000 customers (of which 20,000 are SMEs), and three quarters of a billion Euros in assets and business volume. It operates in Germany and the UK, and is currently getting ready for the expansion in France.
Great UX + Low-cost High-speed Banking + Novel Products and Services = :-)
Fidor is a one hundred percent digital bank that adopted open banking principles more than 6 years ahead of PSD2. It has managed to provide great digital experience and low-cost high-speed banking while offering superior products and services to their customers. Just a few examples: loans and overdrafts are approved or denied in 60 seconds, 24/7 — since the customers are pre-scored; new customers can be integrated via the community module; the sign-up is easy with a quick video identification process and no credit check; the customers can earn cash bonuses for asking and answering questions or sharing money saving tips; they can also invest from as little as £100 in Savings Bonds in less than 60 seconds directly from their Fidor Bank Account — for free and without any management fee. There are many more innovative features such as TipMe button, Community Karma, etc. — Hope that the above has piqued your interest in Fidor’s unconventional approach to online banking!
fidorOS as a Platform
The technical backbone of Fidor bank is their operating system (fidorOS), a platform that enables them to easily integrate different services via APIs**. For instance, Fidor’s eWallet aggregates each user’s accounts, thereby the users can see all their account holdings from savings and investments to virtual currencies on a single page.
Marketplace
What’s more, fidorOS allows accounts to be a marketplace. That’s the foundation of another innovative solution by Fidor called FinanceBay. It is a marketplace of the best digital products by fintechs, insurtechs and tradetechs curated by Fidor. It is currently in beta mode. Fidor’s customers will be able to pick and choose from the offers. In other words, Fidor will not be pushing only their own products. And, the community will still be playing an important role since they will be rating the offers.
Matthias told me that he strongly believed such an ecosystem was the future of customer-centric banking and an effective way to meet every customer’s specific need. In Matthias’ opinion, by opening to collaboration, Fidor is creating greater value not just for their customers, but also their partners who are gaining an instant access to the marketplace.
The main reason for marketplace ideas emerging nowadays is the inability of a single company to respond to evolving customer needs with new digital solutions quickly enough. Besides, real competitive advantages of multi-sided platforms like FinanceBay are numerous: external innovation can be incorporated quickly, internal products and services can be delivered and tested rapidly, new services may create new consumption patterns or open new channels, customers can be offered highly personalised experience based on data, fresh insights might arise from that data, and so on — all that through the use of APIs!
Online Marketplaces perform significantly better financially!
McKinsey’s survey ‘New evidence for the power of digital platforms’ found out that companies setting up online marketplaces perform significantly better financially than the non-platform players, especially if they redefine value propositions for customers by enriching their products or services with information, social content, or connectivity. — The stated figure is about six to more than seven percentage points in earnings before interest and taxes (EBIT) and revenues! That’s why Fidor’s social community, in which the members can exchange ideas and rate offers, is such a powerful concept!
Platform Models
I am sure that different platform models will spring up in the future. In my opinion, a well-thought-out platform strategy is of crucial importance in building a new, competitive and sustainable business model. Of course, it is all about data and its utilisation. But, technology is an important enabler. Some players will buy off-the-shelf tech solutions to underpin their new operating models. For instance, Fidor has already made their open banking platform available through Fidor Solutions.
As far as banks are concerned, they will have to transform at a fast speed. Many have already realised that APIs present a great opportunity for the development of more customised, client-centric products and services based on data analysis and insight. And, since APIs wire wildly different services together, the possibilities are truly endless! The key will be to build a mixture of mandatory and discretionary APIs that will provide additional value to customers, and also generate additional revenues.
Quite simply, I think of platforms as infrastructures that enable creation of vast array of products, services and interactions. Therefore, they allow complete transformation of business models and creation of marketplaces on top of them. To build a successful ecosystem, it is essential to decide which specialist financial services can be done more efficiently and cost effectively by external producers rather than in-house, how to attract those partners, and to set the rules to govern the newly created interactions.
Lots can be learned from online platforms of large Internet companies. Nevertheless, by now everybody agrees that a modern financial services platform will be on the cloud, driven by data, and will have cognition*** and blockchain through it!
Use Design Thinking when ideating your Platform Model and Strategy!
Since all business innovation is about design, I suggest using Design Thinking when creating your platform model. Here is a useful resource called The Platform Design Canvas developed by Simone Cicero that can help you to visualise the whole architecture of the platform and craft your entire strategy.
Singapore again?
Forgot to mention that I actually met Matthias for the first time in Singapore and enjoyed talking to him so much that I decided then and there to feature Fidor in my blog. Matthias is a very witty guy, and incredibly smart and open. If you talk to him, I am sure that you will hear a joke or two!
Since Fidor Solutions’ APAC office is located in Singapore, they had a booth at Fintech Festival last November. Another noteworthy fact is that Fidor has launched an educational programme that will train more than 500 polytechnic students and lecturers of Singapore University to develop fintech applications on Fidor’s API sandbox and fidorOS digital banking platform. This is one of many forward-looking initiatives supported by the Monetary Authority of Singapore I talked about in Singapore’s strategy for becoming the world’s smartest financial hub. From my perspective, this is a very enlightened move indeed — they are seeding new jobs by training their talent!
*It requires all EU banks to open their APIs to third parties on request.
**APIs are interfaces for electronic data exchange.
***Machine learning, reasoning, natural language processing, speech and object recognition, and other technologies combined with the context and insights from data.
