Standard Bank announced last week that they are attempting to transform from traditional to platform banking.
But what exactly is a platform bank and what are the implications of this decision?
Before asking Lungisa Fuzile, Standard Bank SA's CEO, to explain more, I thought it would be helpful to explain what a platform bank was anyway and consider the barriers Standard Bank will face pivoting from it's traditional model.
(You can listen to the recording by clicking here.)
First up, what is a platform business anyway?
If you are wondering what a platform bank is (or could be), your not alone, as it is still somewhat ethereal and may mean different things to different people.
I found it helpful to think about a few non-banking platform examples, to digest what Standard Banks is really saying.
Take Airbnb for instance.
Their "platform" allows homeowners to rent their properties out for short holiday-lets, to anyone in the world.
I use the platform regularly, and It has just been of phenomenal value, because it's removed some of the most significant entry barriers, such as marketing, distribution, cash collection, customer validation and security.
Kindle books is another great platform. If you want to author a book, Amazon will guide you through the whole process, so the only thing that you have to worry about is actually the writing.
And Salesforce is my third example. Less known perhaps than Kindle and Airbnb, but they are the market leader in customer relationship management software.
They were able to outperform Microsoft, SAP and Oracle, not because their 'product' was so much better, but because they partnered with third parties, who built additional solutions onto the Salesforce chassis.
Docusign, for example, was quick to add their e-signature solution to the Salesforce marketplace, which allowed customers to seamlessly move from pipeline management to contract sign-offs, without having to switch between different infrastructure.
Platform businesses are all similar in that they create a market place that allows other businesses to increase their distribution, reduce costs/friction and/or reduce business risks.
And the platform provider often benefits most of all.
By providing a 'generic' infrastructure, which others can use for their own purposes, they are able to create highly scaleable businesses, where marginal costs reduce significantly for each additional customer that is added to their platform.
Airbnb for example, now has a valuation that matches the whole hotel industry, which is remarkable when you consider they don't own a single hotel.
So it shouldn't be a surprise that many, perhaps even the majority of today's most valuable companies, are in fact platform businesses.
Alibaba, Facebook, Netflix, Amazon, Google, Salesforce, Airbnb....are just some of the names that spring to mind.
It therefore makes logical sense that Standard Bank is exploring platform banking.
In fact, it would be commercial suicide not to, because the entity that monopolises that space first, is going to become incredibly hard to dislodge.
What Could Platform Banking Look Like?
Well, in simple terms, I think it could be anything that shows some or all of the characteristics that Mckinsey have suggested define a platform business.
Airbnb is certainly software-based, it match-makes, it works across multiple jurisdictions, its marginal cost absolutely tends towards zero and the network effect is what generates it's growth.
As for combinatorial innovation (I had to look up what that meant), you can associate that with the augmentation of several scaling trends or technologies. Airbnb would not be Airbnb without digital cameras, mobile devices, cloud, machine learning and a host of big-data management tools.
For platform banking services, I could therefore imagine the following are on the Standard Bank ideas board...
1. Standard Bank lets businesses build or offer a wide range of products and services within their own ecosystem.
Imagine for example, you want to buy a house. How would the journey improve if you could do everything you need to do in terms of researching, pricing, surveying, insuring, moving, borrowing and legalising with one bank hosted platform.
Initially, this might still be disjointed, with a variety of bank approved providers being offered up, perhaps with significant discounts if you decide to use Standard Bank for your mortgage.
Over time this would be improved with all of the different actors, being able to access common data sets, reducing the overall amount of form filling and reducing the risk of fraud for all parties.
Eventually, you could imagine a savvy FinTech, working in partnership with Standard Bank, building a standalone software-as-a-service offering that automates the majority of the house buying steps, and ultimately aims to offer the fastest and cheapest all-in conveyancing package on the market.
(If you want a great example of a housing-related platform business, then check out the US firm Zillow to see how by starting with a pricing took, they have created a rich marketplace for buyers, sellers and related service providers.)
2. Standard Bank opens up a wide variety of plug-and-play services for partner businesses to use as they wish.
Here you could imagine you are a standard bank customer but you decide to take out insurance with a competitor.
Wouldn't it be nice if that competitor could pull your KYC data from St