Banking on the platform economy—India point of view

In many ways, banking has changed little over the past 1,000 years. Although computers have replaced abaci and parchment, underlying principles of banking have remained remarkably consistent. A money lender from medieval India would recognize the fundamentals of a modern bank branch’s operations today. But a millennium of constancy is now changing at warp speed in ways that would have been inconceivable even in the recent past.

And traditional industries are interacting in ways that were unthinkable even as recently as a decade ago. Financial services are being mixed in with services or products from other areas and industries—from healthcare and telephony, to mobility and media, retail and logistics, and numerous other areas. Banking is becoming embedded—sometimes almost invisibly—in non-bank business processes. New types of ecosystems are emerging, powered by dynamic new business models, often based around platforms and network economics.

Within this context of industry overlap and fusion, new business imperatives are emerging. Customers can be approached and engaged in innovative ways—and by different parties. Telephony businesses are becoming a channel through which customers can engage in health-care discussions. Retailers are orchestrating payments systems. And social media businesses are establishing new forms of currency. Organizations in virtually every sector seem to be contesting the relationship with customers, hoping to become not only the provider of their own products, but also an entry point for other businesses seeking access to their primary customers. Forward-thinking organizations look to become curators of experiences as well of specific products and services. And this cross pollination of customer access is based on insights gained from robust data.

Organizations seek to establish and maintain a primary relationship with their customers—and to avoid being disintermediated by insurgents from both their own and completely different industries. But the playing field for deep customer engagement is not a level one. Unlike aspirers from other industries—and perhaps counter intuitively—banks are uniquely positioned for success in becoming the prime entity for building and maintaining relationships with customers.

Banks possess a key advantage that most organizations don’t have. Our research suggests that people are willing to share their personal data with their banks, and banks are trusted to keep the data safe and use it ethically, even if they are mandated to do so by regulators. According to a recent IBM Institute for Business Value (IBV) survey conducted in collaboration with Survey Monkey, 80 percent of Indian survey respondents trust their bank or other financial institutions to protect their personal information and data to at least a moderate extent. Indeed, IBV research indicates that India’s citizens and consumers trust their bank more than any other organization or institution they interact with, including their employers—78 percent; their government—76 percent; and their healthcare providers—73 percent.

The new emerging environment’s impact on banks and banking, as well as the highly systemic position banks hold compared to other institutions in the economy, can perhaps be best illustrated by what the Bank of Baroda (BOB), India’s second largest public sector bank, is doing with farmers. While most farmers in India may have at least a basic relationship with a bank, BOB is working to transform what the future relationship between bank and farmer will be—a much deeper, interactive relationship.

Consider its launch of an agricultural digital platform ‘Baroda Kisan’ in September 2019.