Will banks avoid the mistake of DIY internet banking platforms and opt for shared mobile banking?

Everybody is looking at the cloud right now.  This might be a private cloud that sits within an organisation, the public cloud which harnesses software on the web or a community cloud where companies with similar needs share software that doesn’t give them any differentiation.

The third option is of particular interest to me because I recent interviewed a couple of senior executives at the Society for Worldwide Interbank Financial Telecommunication (Swift). This is a messaging service currently used by over 8000 finance organisations.

The not for profit cooperative began in 1973, with 239 banks on board from the start. It provides a network that sends an average of 17 million financial transaction messages every day across 209 countries.

I interviewed Swift’s head of innovation, Kosta Peric, last week. I will be writing some articles following my interview with Peric and an earlier one with its IT head. But I found his views on how banks will build mobile banking platforms interesting.

He told me a story of the retail banks in the 1990s. He said at the time the banks all knew that customers would want to bank from home. So they all decided to build their own internet banking platforms.

They invested lots in them in the belief that they could differentiate. But as it turns out they don’t offer differentiation. They are all basically the same but banks spent money separately to build standard features such as the all important security. “They spent an enormous amount of money but it does not add a lot of value,” says Peric. “They could have established a shared service.” He says banks in Belgium share an internet banking platform.

This all reminded me of a conversation I recently had with an executive at a major IT service provider. We were talking about how so many things that in the past were core differentiators are no longer. He was talking in the context of outsourcing and how less and less needs to be done in-house.

It is very important for businesses to be able to identify where they can actually differentiate through technology. Even new services which are business critical, might not offer the opportunity to differentiate.

Peric at Swift says an example of this is mobile banking. All banks want to offer mobile banking to consumers so they can reach every corner of the world. Smart computing devices will outnumber people at the current growth rate.
But should banks develop their own platforms or could they share one from a provider such as Swift? After all it is all just about sending a message securely across a mobile network.

Peric said he recently attended a meeting with banks that are members of the Swift community when mobile banking platforms were discussed. He said: “We are asking the banks if they are going to do it themselves again?”

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I agree that banks can benefit through seeking external support but I strongly believe that mobile banking requires investment, innovation and differentiation to make it a success and this is not possible on a shared platform.

In many markets, the business case for mobile banking may not be strong enough to only offer simple banking functionality - banks have to treat the mobile channel as a valuable revenue stream by offering features such as personalised marketing messages and location based offers. In my view, this requires the bank to either develop a comprehensive in-house mobile team or outsource the development and hosting of bespoke mobile services to a third party.

Thanks James

Good points well made.


Karl Flinders