The use and growth of digital platforms worldwide will provide greater value to users, but also enable and require a variety of companies to provide their services at scale to solve specific user requirements, which necessitates partnerships and greater collaboration among value chain stakeholders.

The development of digital platforms worldwide is part of a cycle in which financial technology (fintech) innovations provide unbundled financial services, which are now being recombined with a range of ancillary and non-financial services on digital platforms, to provide greater convenience and lower costs for users and financial services firms, explains business digital transformation company Platformation Labs founder and author of Platform Revolution and Platform Scale Sangeet Paul Choudary.

There has been a shift in focus of the driver of primary demand, namely that consumer loyalty has moved from product owners to experience creators, adds financial services firm Standard Bank wealth management and fiduciary head Chris Browne.

Digitalisation, accelerated by the Covid-19 pandemic, sparked an adjustment in which the power moved away from corporations to clients and other stakeholders. This has accelerated the shift to new business models including platform and ecosystem participation.

Large corporations, including financial services providers and banks, have to adjust their business models and strategy to ensure they remain relevant and gain new markets through the exposure of their services and capabilities on platforms, he says.

"Large organisations can capitalise on this trend and provide convenience for consumers without adding to the cost base of providing services, but this requires a conscious shift to externalise their transactions to participate in the broader economy and find new revenue pools," says Standard Bank platform businesses head Jon Lamb.

Further, standardisation enables effective execution of an organisation's externalisation strategy in a cost effective manner and makes the integration of capabilities within corporate silos and verticals easier to achieve. This integrated approach also drives down redundancy and increases reuse of internal capabilities, which help to drive down the costs of transactions, he explains.

"It is important for organisations participating in the platform economy to recognise that collective actions and a strategic approach to key partners must be the core intention of their role on the platform."

Platforms are centred on a primary demand of customers, such as the need for housing or insurance, and typically have secondary associated financial services attached. All the players on the platform serve the primary demand and the platform mediates between customers and players to satisfy a need, says Browne.

The result is that financial services providers' relationships with customers are disintermediated and banks, therefore, have to focus on achieving competitiveness by focusing on the primary demand and investing in and reusing appropriate services, products and capabilities to fulfil the needs of users of the platform.

"Platform businesses are often incorrectly conflated with technology, but platform business models are core to the platform economy, while technology amplifies their effect by creating scale and a network," says Standard Bank wholesale clients digital channels head Kent Marais.

Traditional information technology systems used in the banking environment often prevented modular provision of services, but new technologies, including cloud, blockchain and artificial intelligence, are reshaping the financial services environment.

"Cloud-hosted data and modular services combined through the use of application programming interfaces (APIs) allows partners to communicate with each other and supports intra-firm coordination and innovation. For example, blockchain addresses many problems faced by the centralised banking model by enabling transactions and trust in a decentralised and cost-effective manner," says Marais.

Platforms are about partnerships and their success rests on partnerships. For example, by allowing other stakeholders to sell or distribute their solutions to Standard Bank's client base and for Standard Bank to distribute its solutions through the partner's business, both parties gain, explains Standard Bank client solutions CE Margaret Nienaber.

Platforms start with a client need and partners then look at the core capabilities and competitive advantages of each partner organisation. For example, fintech companies are agile, innovative and have greater risk appetite, while banks have lots of clients, assets and built-in processes that can provide fintech partners with access to scale and a large marketplace, says Marais.

"What fintechs do not have is access to scale. We have scale and massive amounts of data that fintechs can access through application programming interfaces to further improve their offerings to clients. We are there to solve a client's needs and improve the value proposition over time," concurs Browne.

"As we move forward, there is not a change in business dynamics, but more the idea that firms are more interconnected with each other and consumers and platforms and this will grow as time progresses. The prevailing global trends are pushing the market in this direction and with the expectation that it will grow further," says Choudary.

Legal regulation of digital platforms is required, with various early steps taken. Regulations will increase accountability and auditability and help to ensure that all parties on a platform are protected, as well as ensure that the platform provides broad benefits, while ensuring incentives for risk-taking by entrepreneurs and organisations are maintained, he says.

Banks have an opportunity to properly leverage fintechs by allowing them access to certain assets and capabilities in a controlled manner to use their agility to create innovative solutions, says Lamb.

"Financial service providers have to rethink how they compete in markets and ecosystems, as well as with interconnected players in the ecosystem.

If a financial services provider, like a bank, takes a progressive approach to using platform business thinking, it can start to create differentiated customer value propositions and answers to problems it identifies in the ecosystem by combining its own and partners', and even competitors', capabilities to address these problem and maintain its relevance and value in the ecosystem," he says.

Standard Bank has created its own financial services platform, One Hub, to focus on partnerships with its corporate clients and help them on their digitalisation journey. It has included various transaction support and risk-mitigation features, including a service to identify users that is provided by a fintech and that protects all users of the platform, highlights Lamb.