FinTech platform business – the future

Elena Lundaeva Articles, Research Leave a Comment

Originally published on LinkedIn: https://www.linkedin.com/pulse/fintech-platform-business-future-hannes-helenius/

Researchers have identified and categorised two types of platforms. The first category is known as innovation platforms which act as a technological foundation on which other applications are usually built, like Google’s Android, R3Corda, or Amazon Web Serivices and MS Azure. The second type of platforms identified are typically related to a transaction of sorts, for example an ad platform.

Within the Banking and Financial Market industry Bloomberg is a good example of a transaction platform. More specifically Bloomberg is a FinTech (financial technology) platform, which has a global user base, for counterparties to execute and make deals, but also share information – such as order books.

Businesses are forming around their platforms or to launch a new platform. This has become an accepted business model globally. However, the platform business is not an easy one, as the barriers to entry are difficult to overcome: how to acquire multiple stakeholder to your platform, engage multiple customers with matching needs in a multi-sided service. Moreover, from the stakeholder perspective the best platforms do not require high capital nor long-term commitments to participate.

There are also doubts about the “Platformania” occurring in multiple industries, some of which are highly competitive – for example, the hotel online booking platforms and services. One might believe that there is no room for growth anymore in certain platform segments. For example, Uber experienced a turbulent start with their IPO and disrupting local regulations in certain markets, but then again, everyone knows Uber and it’s not easy to be a forerunner.

In the FinTech industry “Platformania” is still in its infancy. There are three basic reasons for this. First, the old bank legacy systems are not even close to what they could be using today’s technology and banks are very slow to adopt new technologies. Secondly, regulation-specific platforms are expanding rapidly, mainly due to EU and US legislation and reporting needs there. Finally, banks are always searching for different ways to cut the costs and streamline, as banks move away from their old legacy systems – this will boost the next 20 years of FinTech platform industry growth, especially B-to-B services.

Here at FA Solutions we have realized that the platform and SaaS business model is the future ten years ago. Why are we not known globally like Uber then? We operate in B-to-B industry and many FinTech people know us well, and to become known worldwide takes years and years. We have not done an IPO, because we are growing organically at a high pace.

And this brings us back to the definition of the best platforms: generally, best platform companies employ half the number of people, grow twice the rate, and have better profit margins. I just can’t wait to see what the future holds for us – we just build it, every day.


 

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