The idea of banks using a platform like the Apple App Store to plug in different fintech services as part of their own product suite to customers is where some believe the banking industry is headed.
Of course, others say the hand-wringing involved in getting banks to share data with fintech through application programming interfaces makes such dreams of open banking an unlikely reality anytime soon.
Several startups have emerged to try to tackle this concept over the last few years, but several established players in the past year or so have also launched such platforms, and how successful they are could portend the industry’s appetite for such a model that promises to offer an avenue to deliver products and services quickly and cheaply to consumers.
“Banks that are successful in the future will become platforms,” said Suresh Ramamurthi, chairman and chief technology officer of CBW Bank in Weir, Kan. “But it’s not just about plugging in new technology; it’s transforming your entire culture and processes.”
Last June, CBW published its application programming interfaces to offer a banking-as-a-platform service model. To accomplish this, CBW Bank developed and deployed more than 500 APIs, to provide opportunities for banks, application developers and software engineers to collaborate and deliver products and services. By deploying these APIs, the bank hopes provides connection points into its digital banking platform, giving users access to multiple payment networks and channels and ensuring interoperability between multiple financial institutions, programs, product combinations and accounts.
About 140 companies — mostly fintechs, but some banks — have signed on to become part of the platform, Ramamurthi said. While some banks Ramamurthi has talked with remain opposed to the concept, he said many are interested and see this model as the future, but are hampered by infrastructure that wouldn’t support such a play.
“It’s not as easy to do when you are constrained by legacy technology,” he said.
Ron Shevlin, director of research at Cornerstone Advisors, wrote in a white paper released Thursday about the IT hurdles for the “platformification” of banks.
“Few FIs have the resources to build a platform,” he wrote in the paper, which was commissioned by the fintech firm Avoka. “Twenty years ago, when banks and credit unions were told they would need websites and online banking platforms, they said, ‘We don’t have the resources to do that.’ They were right. The vendor community filled the gap. As it will with a ‘bank-as-a-platform’ capability.”
Indeed, some vendors are offering platform services so their bank customers can have access to such a paltform through technology they are already investing in. The…