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Creating higher-order ecosystems
Business researcher and analyst Simon Wardley describes this sort of
industry sector commodification as a "climactic pattern" that leads to the
creation of "higher-order systems." He gives the analogy of electricity.
There may be multiple forms of electricity generation (coal, wind, solar),
but they are all fed into a single connector, the electrical power outlet in
the home. Because of this standardization, new products like televisions
became possible. But it doesn't stop there. Televisions make it possible to
have whole broadcasting channels (and now online streaming services)
that create programs for television viewing. There are also satellite
services, VPNs, out of home displays — a myriad of new industry sub-
sectors were generated now that each business does not have to create
their own electrical outlet (or to even create a basic TV set for that matter).
By creating PSD2 open banking API standards, a higher-order system
is enabled that will see payments catalyze a whole new ecosystem.
And beyond that there will be new features and services built. Our
imaginations, and the thinking within banks, is still very limited in terms
of what this new higher-order system will look like. When televisions
were first released, no one thought a subsector of mobile satellite repair
businesses would be a future ecosystem player, or that there would
be a whole creative industry emerge that specializes just in television
commercial jingles and voice-overs.
In open banking, at least in Europe, we now have the electrical outlet: the
PSD2 APIs. If we stick to this analogy, two things can happen. Banks can
focus on building televisions. Or banks can become like the channels
that have a diverse collection of programs that can be streamed onto a
common television. If each bank builds their own televisions, that is still a
limited play. They might differentiate on sound or visual display quality, or
on size, but by and large TVs are mostly commoditized now as well. Where
the true competition lies is in the programming (and related ecosystem)
that is streamed onto the television.
LUXHUB, the new Luxembourg initiative, is focused on the second model.