5 of the Top 10 Financial Institutions are now platforms

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Technology has radically changed finance over the last decade. From posing challenges such as how to digitize the incredibly huge amounts of data, to opportunities beyond what we could imagine possible, the financial services industry of 2020 is long distanced from how we knew finance back in 2010.

But, how has this decade of technological changes affected the world’s top 10 financial institutions? We have asked their market capitalisation for answers. Here is what they’ve told us:

Chart comparing the 10 top financial institutions by market valuation in 2010 and 2020. In 2020, 5 in the chart are platform business models.

Only 4 of the Top 10 financial institutions in 2010 remain at the top

A decade in finance has not gone without change. Back in 2010, the top 10 financial institutions making the list were all traditional banks. But looking into the business model of the top 10 as of today, we see quite a significant change.

5 of the 6 new entrants in the chart have moved away from traditional banking to be heavily involved in payments and leverage a platform business model – a sign of how clients have also changed their needs and requirements for financial institutions in the last decade.

And not only that, but in many instances, they have overcome the remaining 4, making them move down in the chart from their 2010 position.

Half of the Top 10 are now platforms which leverage network externalities of digital

Chart displaying the top 10 financial institutions by market cap in 2020 and how they have changed since 2010.  5 FIs dropped to give space to 5 new platforms.

Visa, MasterCard, Paypal, Ant Group and Tencent Fintech have all overthrown major banks from 2010 in market capitalization and now climbed to be included in the top 10 for 2020. Above their enormous increase in valuation since 2010 (Mastercard leads with almost 1000% increase!), they have one more important common denominator: they all have platform business models.

Digital platforms are rising in finance – and they will be key in the near future

Today, platform business models are allowing financial institutions to leverage network effects, leading to increased efficiency in their operations and the possibility of tapping into new markets, among other advantages. For this reason, the correlations we found between increased market capitalization over the last decade and having a platform business model comes at no surprise to us.

Platforms business models are rising in finance today. According to a McKinsey research report, more than 30% of the global economic activity – some $60 trillion — could be mediated by digital platforms in six years’ time. Yet, experts estimate only 3% of established companies have adopted an effective platform strategy.

But, why so? The answer is simple: many business leaders do not fully understand platforms and how they fit in their industry structure.

And you? Are you ready to deploy platforms in your organization?

For more information on our sources and analysis click here.

Read this article in french on our French Media partner’s website Finance Mag: https://finance-mag.com/5-des-10-premieres-institutions-financieres-sont-desormais-des-plateformes/

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