Shifting paradigms in banking: how new service concepts and formats enhance the value of financial services

Mutated market conditions, the advent of new players, and a significant regulatory push are all factors profoundly changing the banking industry. Banking business models seem to shift significantly from a pipeline, vertical paradigm where interests margin and traditional fees have been dominating the scene for a long time, to a platform-driven model where modular solutions bundled together can take place and evolve consequently according to an ecosystem market approach with new revenue streams. Those opportunities are exploited through new banking paradigms that entail higher levels of openness towards third parties and a crescent number of modular services bundled together, rebooting the way financial services formats can be conceived, delivered to and consumed by individuals. These models can go from mere compliance with the prescriptions of openness of PSD2 or similar regulations to the inclusion of new services, the opening of the banking core and data, and the aggregation of those within a platform experience according to a more strategic mainstream. Digital platforms are driving open innovation and instantly funnel innovative value-generating units throughout different formats. As mentioned above, value is created in platforms through economies of scope in production and innovation, and platforms evolve gradually from an internal to an external and open approach, driven by multilateral relationships. In this regard, open banking is becoming an evolving trend in many jurisdictions in terms of the stage of development, approaches and scope. The paper intends to explore how through an affiliation approach, banks are reacting to FinTech and Techfin entrance and developing more innovative financial services formats also looking for improving customer loyalty. Old and new attributes are driving the way services are undertaking new structures as well as new pricing strategies are emerging. This sharing of customer-permission data by banks with third parties is leveraged to build applications and services that provide faster and easier payments, greater financial transparency options for account holders, new and improved account services, and marketing and cross-selling opportunities. The first part of the paper provides some highlights about banks and FinTechs on platform economies. The second part of the paper presents the main pillars needed to reinvent financial services on outcome-oriented platform economies. This requires focusing on understanding the essence of some of the most recent trends such as the enablement of client journeys, the contextualization of banking, and responsible banking. They all are the ingredients to drive new formats putting a customer-centric focus on personalization that banking and financial services providers can offer based on historical data and intelligent machine-learning algorithms. In this regard, some business cases will be analyzed in order to outline the most important dimensions (interface, content, etc.) of personalization developed in order to increase customer satisfaction and loyalty.