Innovation and Tech Zoom In: Platform Economy
On episode 23 of Breaking Banks Europe, Matteo and Matthias are joined by Balazs Barna, Engineering Lead for TransferWise European Expansion Team, and Paolo Zaccardi, Co-Founder and CEO of Fabrick to discuss Platform Economy. Platform Economy sounds like an imperious buzzword, but simply put it’s an opportunity for non-financial players to build new services cross leveraging their distribution channels, their customer base and open banking.
But the idea is by no means, new. According to a 2014 MIT Sloan article titled ‘The ups and downs of dynamic pricing,’ “in 2013, 14 of the top 30 global brands by market capitalization were platform-oriented companies — companies that created and now dominate arenas in which buyers, sellers, and a variety of third parties are connected in real-time.” This has been and continues to be an upward trend. By 2018 seven of the 10 most valuable companies globally were based on a platform business model.
Despite the commonality of the platform economy, everybody has their own definition for it. Why don’t we take a look at how the hosts and guests define it.
Matteo: To me is the opportunity for an infrastructure to go way beyond the purpose for which the platform was built for and actually, through an open series of APIs, connect an ecosystem. If we look at a platform like Uber, Booking.com or Netflix, they were all born to do one thing but potentially their business could be extended way farther than the initial scope. That’s to me the opportunity given by the platform economy.
Balazs: It’s hard to add anything. I think, in general, these platforms don’t control the production, they control the means of connection. They are about connecting the supply and demand in a given market. As you said, the difference between a regular taxi company and Uber is that the regular taxi company is responsible for the production (buying the cars, employing the drivers, etc.) and Uber provides a platform that allows drivers to sign up and do the work while they subsidize their service for the users to reach the drivers.
Matthias: I like what you said about not controlling production but the connection. And, out of my perspective, this describes the major aim of a platform very well. In particular, once you talk about various stakeholders and ecosystems. However, pouring some water into the wine willingly, and provokingly, significantly changes the nature of what would define to be a bank as of today. Doesn’t it? Or maybe that’s pouring the wine into the water, actually.
Paolo: In general, we consider the platform model and open banking to be concretely the way to bring open innovation into banking. In the last decade, we have seen the rise of the platform economy in many industries and I think that now, more than before, the platform economy is essentially cross-industries. So if we combine non-banking and banking services we can really create a superior customer experience.
Everyone adds their own spice and their own idea of what a platform can achieve. And so do the platforms themselves. TransferWise and Fabrick are both financial services-oriented platforms. TransferWise is an international technology platform whose primary goal is to move money across borders in the most efficient and cost-effective way possible. Fabrick’s mission was to create an open banking ecosystem, so more than a platform. A combination of an ecosystem of FinTechs and a platform to connect fintechs with banks and incumbents in general. Matteo believes “Fabrick is where open banking, platform economy and the API world are really coming together.”