Most of us think that banks lack true innovative power. I guess that’s true in a structural sense – they have huge legacy systems and to release any kind of integrated applications have to do a lot of work on Cloud or other intermediary platforms.
But recently I had a long chat with Sean Belka who runs Fidelity Labs, the innovation arm of Fidelity, the fund managers.
Fidelity Labs is experimenting with a number of user interface and user experience technologies like Google Glass. Sean made the point that Fidelity is interested in working out how it can differentiate itself in all the major social platforms. Social is a must-have but it can also provide some competitive advantage.
It’s interesting to see such a powerful player with a strong interest in social as a channel but more interesting still is the story Sean tells about Fidelity as a platform company (I’m going to write elsewhere about how we define platform. In short I think we call many things “platform” but the term covers a lot of different activities).
In the case of Fidelity their funds platform has all the characteristics of an extensible platform of the type we saw emerge in different sectors like mobile from about 2008 onwards.
It is similar to a two-sided marketplace in some respects but it is also a rich information market, a facet you don’t see in two-sided markets; and it brings in intermediary as well as primary players in the market. Thousands of funds and brokerages and other third parties do business through it. It is often called a “supermarket” but supermarkets do not have rich information markets.
This type of platform is, however, now working its way into retail as competitors grapple with how to compete with Amazon.
Sean was making the point that the platform has been around for nearly 20 years and provides a continuous source of durable advantage.
That advantage is “utility-like”. It is both a source of low-cost competition and a differentiator – the significant convenience of a single shop for investments. And Fidelity can now make more of the differentiation as it increasingly turns to social channels like Facebook and LinkedIn, increasing the usability of services and improving UX.
These improvements defy traditional low-cost competitor rules – they don’t lead to lower qualities of service. Better UX leads to better service and fewer hurdles for making trades or taking other actions.
This platform-platform strategy is also picking up. While Facebook is currently about social communications it must surely edge its way towards taking full advantage of its audience reach.
The fact that fund managers have developed incredible platforms – Fidelity’s serves over 5,000 partners – is an oversight in most accounts of platform business. We tend to think of the tech-first examples like Apple and Android and Amazon.
But like eBay, Fidelity predates both. And next steps: Cloud, deeper personal service and service integration, allied to AI, all on the platform. Financial services could, in fact, be a pace setter.