Abstract
Mutated market conditions, the advent of new players, and a significant regulatory push have changed the banking industry profoundly in the past fifteen years. Banking business models have shifted from a vertical integrated paradigm, where production and distribution mostly belong to the same entity, to a platform driven model in which a combination of modular solutions can take place and evolve consequently according to an ecosystem market approach. A higher level of openness toward third parties and an increasing number of modular services bundled together have rebooted the way financial service formats can be conceived, delivered, and consumed by individuals. Digital platforms are driving open innovation and different formats are evolving in the market, driven by multilateral relationships. In this regard, open banking is becoming increasingly popular in many jurisdictions, especially in regard to stages of development, approaches, and scope. This paper explores how, through an affiliative approach, banks are seeking to retain customer loyalty as they respond to the ways in which FinTechs and BigTechs have developed more innovative financial service formats. This is also boosted by new legal frameworks—such as open banking and open finance—where many new services will be developed thanks to the sharing of customer-permissioned data, by offering customers new, more efficient payments; improved online account services, and other set of new services. The first part of this chapter highlights which trends are impacting the next banking frameworks as well as the evolving relationships between banks and FinTechs. The second part outlines the main outcomes of the evolution of new financial services and their impacts on value chains. Finally, the last section presents conclusions and describes upcoming opportunities for all the players, and identifies the next big challenge as the ability of these services to make a difference so that differentiation in value propositions, features, etc., is needed to give the customer a reason to choose a particular service.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
ABI Lab. (2020, June). The new account aggregation frontier: A comparison between banks and fintechs.
ABI Lab. (2021a, July). Digital banking: A resilient center of gravity!
ABI Lab. (2021b, December). Digitalization and retail banking: The evolution of the bank-client relationship during the pandemic.
ABI Lab. (2021c, June). Next step: From open banking to open finance.
Accenture. (2018a). The brave new world of open banking (Report).
Accenture. (2018b). Competing in the new era (Report).
Accenture. (2019). Competing with banking ecosystems (Report). https://www.accenture.com/_acnmedia/pdf-102/accenture-banking-ecosystem.pdf
Accenture. (2020). Banking in 2020: New trends to watch (Report).
Accenture. (2021). The future of banking (Report).
Adner, R. (2017). Ecosystem as structure: An actionable construct for strategy. Journal of Management, 43(1), 39–58.
Adner, R., & Kapoor, R. (2010). Value creation in innovation ecosystems: How the structure of technological interdependence affects firm performance in new technology generations. Strategic Management Journal, 31(3), 306–333.
Alimamy, S., Deans, K. R., & Gnoth, J. (2018). The role of augmented reality in the interactivity of co-creation: A critical review. International Journal of Technology and Human Interaction (IJTHI), 14(3), 88–104.
Baldwin, C. Y. (2020). Design rules, Volume 2: Chapter 6—The value structure of technologies, part 1: Mapping functional components.
Ballantyne, D., & Varey, R. J. (2006). Creating value-in-use through marketing interaction: The exchange logic of relating, communicating and knowing. Marketing Theory, 6(3), 335–348.
Balling, M., Lierman, F., & Mullineux, A. (Eds.). (2002). Technology and finance: Challenges for financial markets, business strategies and policy makers. Routledge.
Bank for International Settlements (BIS). (2019). Report on open banking and application programming interfaces. https://www.bis.org/bcbs/publ/d486.pdf
Bareisis, Z. (2013). The rise of the new bank account? The quest for transactional account primacy (Report).
Bask, A., Lipponen, M., Rajahonka, M., & Tinnilä, M. (2011). Framework for modularity and customization: Service perspective. Journal of Business & Industrial Marketing, 26(5), 306–319.
BCG. (Authors: Desmangles, L., Dupas, M., Sachse, H., de T’Serclaes, J. W., Vasy, B., & Walsh, I.). (2018). Global retail banking 2018: The power of personalization. https://www.bcg.com/publications/2018/global-retail-banking-2018-power-personalization
BCG. (Authors: Brackert, T., Chen, C., Colado, J., Poddar, B., Dupas, M., Maguire, A., Sachse, H., Stewart, S., Uribe, J., & Wegner, M.). (2021). Global retail banking 2021: The front-to-back digital retail bank (Report). https://web-assets.bcg.com/89/ee/054f41d848869dd5e4bb86a82e3e/bcg-global-retail-banking-2021-the-front-to-back-digital-retail-bank-jan-2021.pdf
Brass, D. J., Galaskiewicz, J., Greve, H. R., & Tsai, W. (2004). Taking stock of networks and organizations: A multilevel perspective. Academy of Management Journal, 47(6), 795–817.
Breidbach, C. F., Brodie, R., & Hollebeek, L. (2014). Beyond virtuality: From engagement platforms to engagement ecosystems. Managing Service Quality, 24(6), 592–611.
Capgemini. (2019). World retail banking report 2019. Capgemini. https://www.capgemini.com/news/world-retail-banking-report-2019/
Capgemini. (2020). World FinTech report. https://www.capgemini.com/news/world-fintech-report-2020/
Capgemini. (2021). World retail banking report 2021. https://www.capgemini.com/news/press-releases/world-retail-banking-report-2021-to-create-new-value-banks-can-adopt-banking-as-a-service-to-embed-finance-in-consumer-lifestyles/
Chesbrough, H. (2003). Open innovation: The new imperative for creating and profiting from technology. Harvard Business Press.
Chesbrough, H. W. (2006). Open business models: How to thrive in the new innovation landscape. Harvard Business Press.
Chesbrough, H. (2011). Open services innovation: Rethinking your business to grow and compete in a new era. Wiley.
Chesbrough, H., Vanhaverbeke, W., & West, J. (Eds.). (2014). New frontiers in open innovation. Oxford University Press.
Cortet, M., Rijks, T., & Nijland, S. (2016). PSD2: The digital transformation accelerator for banks. Journal of Payments Strategy & Systems, 10(1), 13–27.
De Blok, C., Meijboom, B., Luijkx, K., Schols, J., & Schroeder, R. (2014). Interfaces in service modularity: A typology developed in modular health care provision. Journal of Operations Management, 32(4), 175–189. https://doi.org/10.1016/j.jom.2014.03.001
Deloitte. (2017). Open banking: How to flourish in an uncertain future (Report).
Deloitte. (2020a). Banking and capital markets outlook: Fortifying the core for the next wave of disruption (Report).
Deloitte. (2020b). Banking on the future: Vision 2020 (Report).
Deloitte. (2020c). Open banking around the world: Towards a cross-industry data sharing ecosystem (Report).
Deutsche Bank. (2017). Platform replaces pipeline (Report). https://www.db.com/newsroom_news/2017/ghp/platform-replaces-pipeline-en-11520.htm
Dratva, R. (2020). Is open banking driving the financial industry towards a true electronic market? Electronic Markets, 30(1), 65–67.
Enkel, E., Gassmann, O., & Chesbrough, H. (2009). Open R&D and open innovation: Exploring the phenomenon. R&D Management, 39(4), 311–316.
European Banking Authority (EBA). (2017, April 25). (Authors: Zetzsche, D. A., Buckley, R. P., Arner, D. W., & Barberis, J. N.).From FinTech to TechFin—The regulatory challenges of data-driven finance 2017 (Working Paper Series, No. 6).
European Central Bank (ECB). (1999). The effects of technology on the EU banking systems. European Central Bank. https://www.ecb.europa.eu/pub/pdf/other/techbnken.pdf
EY. (2017). Fintech adoption index 2017. http://www.ey.com/Publication/vwLUAssets/ey-fintech-adoption-index-2017/$FILE/ey-fintech-adoption-index-2017.pdf
Fink, L. (2018). The sense of purpose. https://corpgov.law.harvard.edu/2018/01/17/a-sense-of-purpose/
Gawer, A. (2009). Platform dynamics and strategies: From products to services. Platforms, Markets and Innovation, 45, 57.
Gawer, A., & Cusumano, M. A. (2014). Industry platforms and ecosystem innovation. Journal of Product Innovation Management, 31(3), 417–433.
Iansiti, M., & Levien, R. (2004). Strategy as ecology. Harvard Business Review, 82(3), 68–78.
International Monetary Fund (IMF), and World Bank. (2019). Fintech: The experience so far (IMF Policy Paper, No.19/024). https://www.imf.org/en/Publications/Policy-Papers/Issues/2019/06/27/Fintech-The-Experience-So-Far-47056
Kearney, A. T. (2021). Retail banking radar: Change looms in Europe (Report).
King, B. (2012). Bank 3.0: Why banking is no longer somewhere you go but something you do. Wiley.
KPMG. (2016, October). The profitability of EU banks: Hard work or a lost cause? (Report). https://assets.kpmg.com/content/dam/kpmg/xx/pdf/2016/10/the-profitability-of-eu-banks.pdf
KPMG. (Author: Ruddenklau, A.). (2020). Can fintech lead innovation post COVID-19? (Report). https://home.kpmg/xx/en/blogs/home/posts/2020/05/can-fintech-lead-innovation-post-covid-19.html
Llewellyn, D. T. (1999). The new economics of banking (No. 5). SUERF studies.
Lusch, R. F., Vargo, S. L., & O’brien, M. (2007). Competing through service: Insights from service-dominant logic. Journal of Retailing, 83(1), 5–18.
Ma, F., Wang, L., & Xu, H. (2011, August). Dynamics mechanism and innovation model of service modularity. In 2011 2nd International Conference on Artificial Intelligence, Management Science and Electronic Commerce (AIMSEC) (pp. 1077–1080). IEEE.
McKinsey. (2017). Data sharing and open banking. https://www.mckinsey.it/sites/default/files/data-sharing-and-open-banking.pdf
Microsoft, Avanade, Accenture. (2017). PSD2 and open banking: Using regulation to kick-start the transformation of banking (Report).
Moon, S. K., Shu, J., Simpson, T. W., & Kumara, S. R. (2010). A module-based service model for mass customization: Service family design. Iie Transactions, 43(3), 153–163.
Moore, J. F. (1993). Predators and prey: A new ecology of competition. Harvard Business Review, 71(3), 75–86.
Oliver Wyman. (Authors: Belinky, M., Rennick, E., & Veitch, A.) (2018). The Fintech 2.0 paper: rebooting financial services (Report).
Omarini, A. (2015). Retail banking: Business transformation and competitive strategies for the future. Palgrave Macmillan. https://doi.org/10.4172/2223-5833.1000240
Omarini, A. (2019). Banks and banking: Digital transformation and the hype of Fintech. Business impacts, new frameworks and managerial implications. McGrawHill.
Omarini, A. (2022). Unbundling and re-bundling the open industry of banking. In K. T. Liaw (Ed.), The Routledge handbook of fintech. Routledge.
Prahalad, C. K., & Ramaswamy, V. (2004). The future of competition: Co-creating unique value with customers. Harvard Business Press.
PwC. (2016). Blurred lines: How FinTech is shaping financial services (Report). https://www.pwc.com/il/en/home/assets/pwc_fintech_global_report.pdf
PwC. (2018a). Open banking … and so what? (Report). https://www.pwc.com/it/en/industries/banking/future-open-banking.html
PwC. (2018b). Five ingredients to catch up open banking (Report). https://www.pwc.com/it/it/industries/banking-capital-markets/OpenBanking/doc/Five-Ingredients-Banks-Open-Banking-Article.pdf
PwC. (2020). Retail banking 2020: Evolution or revolution? (Report). https://www.pwc.com/gx/en/banking-capital-markets/banking-2020/assets/pwc-retail-banking-2020-evolution-or-revolution.pdf
Rahikka, E., Ulkuniemi, P., & Pekkarinen, S. (2011). Developing the value perception of the business customer through service modularity. Journal of Business & Industrial Marketing, 26(5), 357–367.
Schueffel, P. E., & Vadana, I. I. (2015). Open innovation in the financial services sector-a global literature review. Journal of Innovation Management, 3(1), 25–48. https://www.researchgate.net/publication/275027680_Open_Innovation_in_the_Financial_Services_Sector_-_A_Global_Literature_Review?enrichId=rgreq-20faaa7a608e929520cbd84b0ac73317-XXX&enrichSource=Y292ZXJQYWdlOzI3NTAyNzY4MDtBUzoyMTg3ODk0NTE5NjQ0MTZAMTQyOTE3N
Silvestro, R., & Lustrato, P. (2015). Exploring the “mid office” concept as an enabler of mass customization in services. International Journal of Operations & Production Management, 35(6), 866–894.
Smedlund, A., & Faghankhani, H. (2015, January). Platform orchestration for efficiency, development, and innovation. In 2015 48th Hawaii international conference on system sciences (pp. 1380–1388). IEEE.
Tuunanen, T., Bask, A., & Merisalo-Rantanen, H. (2012). Typology for modular service design: Review of literature. International Journal of Service Science, Management, Engineering, and Technology (IJSSMET), 3(3), 99–112.
Vargo, S. L., & Lusch, R. F. (2008). Service-dominant logic: Continuing the evolution. Journal of the Academy of Marketing Science, 36(1), 1–10.
Vargo, S. L., & Lusch, R. F. (2014). Evolving to a new dominant logic for marketing. In The service-dominant logic of marketing (pp. 21–46). Routledge.
Voss, C., Roth, A. V., & Chase, R. B. (2008). Experience, service operations strategy, and services as destinations: Foundations and exploratory investigation. Production and Operations Management, 17(3), 247–266.
Wilson, J. D., Jr. (2017). Creating strategic value through financial technology. Wiley.
Wintjes, R. (2017). Interplay between technological an social innovation (SIMPACT Working Paper).
Yang, L., & Shan, M. (2009, April). Process analysis of service modularization based on cluster arithmetic. In 2009 First international workshop on database technology and applications (pp. 263–266). IEEE.
Yoo, Y. (2010). Computing in everyday life: A call for research on experiential computing. MIS Quarterly, 34(2), 213–231.
Yoo, Y., Henfridsson, O., & Lyytinen, K. (2010). Research commentary—The new organizing logic of digital innovation: An agenda for information systems research. Information Systems Research, 21(4), 724–735.
Zachariadis, M., & Ozcan, P. (2017). The API economy and digital transformation in financial services: The case of open banking. https://ssrn.com/abstract=2975199
Zhou, Z., Lin, Y., Ma, S., & Yue, F. (2010, July). Modularity of service design for IT company. In Proceedings of 2010 IEEE International Conference on Service Operations and Logistics, and Informatics (pp. 136–141). IEEE.
Zomerdijk, L. G., & Voss, C. A. (2010). Service design for experience-centric services. Journal of Service Research, 13(1), 67–82.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2023 The Author(s), under exclusive license to Springer Nature Switzerland AG
About this chapter
Cite this chapter
Omarini, A. (2023). Shifting Paradigms in Banking: How New Service Concepts and Formats Enhance the Value of Financial Services. In: Walker, T., Nikbakht, E., Kooli, M. (eds) The Fintech Disruption. Palgrave Studies in Financial Services Technology. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-23069-1_4
Download citation
DOI: https://doi.org/10.1007/978-3-031-23069-1_4
Published:
Publisher Name: Palgrave Macmillan, Cham
Print ISBN: 978-3-031-23068-4
Online ISBN: 978-3-031-23069-1
eBook Packages: Economics and FinanceEconomics and Finance (R0)