In Part I of our “What is eating bankers’ lunch?” series, we took a trip back in time. Where once there were brick-and-mortar branches and bank passbooks, now there are mobile banking apps and intelligent chatbots. Over the last two decades, banks have faced disruption time and time again – and for the most part have benefited.
But things are changing. The cost of adaptation is rising rapidly, alongside increasing regulatory pressures, intensifying competition and changing customer expectations. This new wave of disruption, driven by the Fourth Industrial Revolution – an era of transformative technologies like mobile supercomputing, AI, blockchain, and more – poses some of the toughest challenges yet. Are financial institutions ready to react?
More importantly, have you fully grasped how technology-enabled platforms—those that combine both demand and supply—are reshaping entire industry structures? Have you questioned the assumptions of your existing teams and re-examined the way you run your business?
Luckily, banks don’t have to do it alone. In this piece, I’m going to look at the factors banks need to consider to stay ahead of the game and future-proof their business, remain profitable and competitive despite a challenging financial environment.
RECAP: The Platform Economy and Banking
The Fourth Industrial Revolution has given rise to platform companies like Facebook, Amazon, Netflix, and Airbnb, which excel at facilitating interactions between individuals and businesses through scalable digital platforms. These platforms harness the power of network effects, enabling exponential growth and value creation.
By leveraging mobile technology, they deliver utility and value across global, borderless communities, transforming industries and reshaping how we connect, transact, and consume. With a focus on outcomes, these platforms prioritize user experience from every perspective, enabling seamless, dynamic interactions.
In stark contrast, traditional full-service banks operate within rigid, siloed business lines, each adhering to a linear business model. Products are created at the head office and distributed through various bank channels. While digital-first strategies have shifted some transactions online, the underlying model remains unchanged—products flow in a one-way direction from the bank to the customer.
This approach limits innovation and scalability, as digitization alone doesn’t address the deeper economic structure. Moreover, banks continue to operate from a product-centric mindset, rather than adopting a more client-centric approach.
To unlock sustainable growth, banks must shift from this traditional product-centric model to a client-centric outcome model. To scale exponentially, they need to embrace platform technologies that align with the non-linear, network-driven dynamics of the platform economy—where customer interactions are bidirectional, data is shared in real time, and innovation is continuous.
What Must Change for Banks to Succeed
Of all the materials I have read, Paolo Sironi’s “Banks and Fintech on Platform Economies” resonated the most with me. In this book, Sironi delves into the fundamentals of platform theory and the mindset shift necessary for innovation. He introduces a new framework to help banks move beyond traditional business models, encouraging them to rethink how they create value and interact with customers.
Digital Innovation in Financial Services: The Tension Between Information and Communication
Sironi believes the true catalyst for business transformation in the financial sector lies in the evolving role of information and communication.
- Information refers to the collection and processing of both financial and non-financial data, which is monitored and analyzed using advanced technologies like artificial intelligence (AI). This data provides the insights needed to personalize services, optimize operations, and predict customer needs.
- Communication, on the other hand, pertains to the importance of relationships in shaping how distribution channels work. In today’s world, communication is increasingly integrated with mobile technology, virtual assistants, AI Chatbots and machine-learning-models, and other digital tools, all of which enhance customer engagement and service delivery.
Historically, banking has centered on converting savings (via deposit products) into investments (via loan products). Banks excelled at managing information, pricing products, and mitigating risks. Communication, meanwhile, focused on building distribution channels and client relationships. However, with the rise of open banking, the landscape is rapidly changing. Information is becoming commoditized, and communication is playing an increasingly crucial role in delivering value.
The Banking Reinvention Quadrant (BRQ) and the Emergence of Platform strategies
To help banks reinvent themselves, Sironi introduced the Banking Reinvention Quadrant (BRQ) framework, where:
- Information Quotient (IQ) represents the trusted intensity in the use of information, the level of openness in the use of internal and external data.
- Communication Quotient (CQ) represents the trusted intensity in the use of AI, supporting digital relationships and decision-making with transparent algorithms.
In traditional banking models, products are manufactured in silos and pushed out to clients. With the rise of digital technologies, banks have begun digitizing information management and distribution. To create more business value, banks must focus on delivering outcomes via digital hybrid relationship enabled with AI insights. This means upgrading legacy core systems to cloud-based platforms that enable an open architecture, allowing information to flow freely between the bank, clients, and third parties. On the communication axis, banks must harness AI to enhance their channels with intelligent analytics.
Evolving Business Models for Success
To succeed in platform economy, banks must evolve their business models and strike a balance between information and communication.
Some banks are developing Banking-as-a-Service (BaaS) platforms, which integrate with non-banking ecosystems to embed financial services into consumers’ everyday lives. This model, referred to as Contextual Banking, allows banks to deliver financial services where customers already live and work.
Other banks are embracing Conscious Banking, a Banking-as-a-Platform model, which transforms banks into trusted advisors and partners in achieving broader financial and life goals. By bundling services in unique ways, these banks move beyond traditional banking silos, fostering deeper relationships with clients and enhancing engagement.
The Role of Data in the Evolution of Banking
At its core, the Information Quotient (IQ) is about data. In traditional banking, product teams controlled the flow of information and decided how it was shared. To shift to a client-centric outcome model, banks must build an open ecosystem that allows clients to collaborate and co-create value. This means simplifying complex products into core capabilities and fostering open interactions between clients and bankers to support innovation and growth.
The Banking-as-a-Service (BaaS) ecosystem represents a key milestone in this transition. Corporate clients can collaborate with commercial banks to integrate financial services into their business models. As partnerships grow, so does the collective value of the ecosystem, enabling seamless, scalable solutions.
The Shift to a “Pull” Model in Banking Engagement
The Communication Quotient (CQ) emphasizes engagement, and in today’s mobile-first world, consumers expect to take the lead in their interactions. By leveraging AI, customers can request personalized recommendations based on real-time needs. This represents a “pull” model of engagement, where the customer drives the interaction. AI stands to be the operating system of the future, orchestrating and automating complex processes, and seamlessly enhancing personalization and customer experience.
This contrasts with the traditional “push” model, where banks send offers to customers through various channels. Although banks are improving their ability to personalize offers, customers rarely have the ability to proactively request tailored solutions. This gap highlights the urgent need for a distribution system that allows clients to “pull” the information they need when they need it.
Beyond the Push: Rethinking How Banks Engage
Striking the right balance between digital interfaces and human advisors is key—especially for complex transactions like mortgages. Clients often seek the guidance of mortgage agents because the personal touch builds trust. But true innovation lies in achieving the ultimate outcome—homeownership.
This raises an intriguing question: Could banks benefit from developing or acquiring real estate technology platforms that provide listings, market trends, and property insights? For example, Canadian banks might look to platforms like House Sigma, which offers these capabilities, as a way to extend their business model beyond traditional mortgages. Such an approach could unlock new income streams and position banks as holistic partners in the home-buying journey.
The Path Forward: Conscious and Contextual Banking
While Contextual Banking has a clear strategic path, monetizing it presents challenges. On the other hand, Conscious Banking, while harder to define, offers ample opportunity. Life transitions—such as launching a new business, planning for retirement, or managing education expenses—present key opportunities where banks can provide valuable guidance. By offering tailored solutions during these pivotal moments, banks can not only support their clients but also unlock new revenue streams.
Ride the next wave of banking innovation with Zafin
The platform economy is poised to disrupt banking just as Airbnb transformed the hotel industry and Netflix revolutionized TV. The real question is: how quickly will this change happen? While banking is highly regulated, the pace of transformation is accelerating. Those who act now will gain a competitive advantage—those who wait risk falling behind.
To thrive in this new landscape, banks must rethink their business models. The traditional, product-centric approach is no longer enough. It’s time to focus on delivering meaningful outcomes for clients—solutions that create lasting value. Embracing an open ecosystem is critical for enabling strategic partnerships, expanding service offerings, and facilitating seamless data exchange between banks, clients, and third parties. By leveraging the power of AI, banks can turn this data into actionable insights, engage clients in entirely new ways, and unlock untapped revenue streams.
The time to act is now. Forward-thinking banks are turning to Zafin to future-proof their business and stay ahead of the curve. Zafin’s platform empowers banks to not only deliver hyper-personalized, data-driven financial solutions, but also modernize their core infrastructure. By replacing legacy systems with agile, scalable solutions banks can improve operational efficiency, enhance customer experience and foster stronger relationships that drive sustainable growth. Don’t wait for change to pass you by—connect with us today and start shaping the future of banking.
