How Platforms Can Help Banks Achieve Economies of Scale

Platform technology has emerged as a transformative force in the modern business landscape. It refers to a digital infrastructure that facilitates interactions and transactions between multiple parties, often connecting producers and consumers in innovative ways.  

Among the many benefits of platform technologies, a significant one is economies of scale. More so in the payments industry, where platform technology can empower businesses to achieve significant economies of scale, a crucial factor in driving growth and competitiveness. Here’s how. 

Shared resources 

Payment infrastructure: Payment platforms provide a common infrastructure, including payment gateways, fraud detection systems, and compliance tools, that multiple financial institutions and merchants can utilize. This eliminates the need for each entity to invest heavily in building and maintaining their own complex payment infrastructure, reducing upfront costs and spreading ongoing maintenance across a larger user base  

Expertise and talent: Payment platforms attract a pool of experts in payments, security, and regulatory compliance. Businesses can leverage this specialized knowledge and expertise without having to hire and manage an extensive in-house team, leading to cost savings and access to cutting-edge payment solutions  

Efficient matching 

Transaction routing: Payment platforms utilize sophisticated algorithms and real-time data analysis to intelligently route transactions through the most efficient and cost-effective channels. This optimizes processing costs, reduces transaction fees, and ensures faster settlement times  

Smart payment routing: Platforms can implement smart routing solutions that dynamically select the best payment provider based on factors like cost, acceptance rates, and risk profile. This maximizes transaction success rates and minimizes processing costs for merchants  

Streamlined processes 

Automated reconciliation: Payment platforms automate the reconciliation process, matching incoming payments with corresponding transactions and accounts. This eliminates the need for manual reconciliation, reducing errors, saving time, and freeing up resources for other critical tasks  

Standardized APIs: Platforms offer standardized APIs (Application Programming Interfaces) that allow easy integration with various payment methods, merchant systems, and accounting software. This simplifies the onboarding of new merchants, streamlines payment processing, and improves overall operational efficiency  

Global reach 

Cross-border payments: Payment platforms facilitate cross-border payments by connecting to a global network of financial institutions and payment processors. This enables businesses to accept payments from customers worldwide in their local currencies, expanding their reach and unlocking new revenue streams  

Currency conversion: Platforms often integrate with currency exchange services, enabling seamless currency conversion for international transactions. This simplifies the payment process for both merchants and consumers and eliminates the need for manual currency conversion  

Innovation ecosystem 

Value-added services: Payment platforms provide a platform for third-party developers to create innovative value-added services, such as loyalty programs, fraud prevention tools, and data analytics solutions. This expands the platform’s functionality and attracts a wider user base of merchants and consumers  

Open banking: Platforms embrace open banking initiatives, allowing secure access to financial data and enabling the development of new financial products and services. This fosters collaboration between financial institutions, fintech startups, and other stakeholders, driving innovation and improving the overall payment ecosystem  

By leveraging these capabilities, payment platforms create a powerful engine for economies of scale in the payments industry. They empower financial institutions and businesses to leverage shared resources, optimize transaction routing, streamline processes, expand globally, and foster innovation, ultimately leading to reduced costs, increased efficiency, and accelerated growth in the rapidly evolving digital payments landscape. 

Which brings us to FSS BLAZE™ – a state-of-the-art, new-age payments technology platform. FSS BLAZE™ has a multi-layered architecture that decouples core services for modular development, easy upgrades and integrations. 

Find out more about FSS BLAZE™ here. 

To understand the role of technology platforms like BLAZE™ in the payments industry, download our whitepaper – Reimagining Payments – The Platform Way.