#TIL: “Platformification v/s platformization: What do these terms mean?”
We live in a rampantly digital world and with it, new terminologies that sound increasingly made-up abound. A few phrases that get thrown around casually these days are “digital platforms”, “online marketplaces”, “platformization”, “platformification”, etc. Let us examine the last two more closely, and try to understand the differences between these terms and their usage.
Platformization is when a digital marketplace is created and is itself the service. The participants in the marketplace- be they sellers or buyers on it- are the service users. Such platforms may charge a small user fee for the services hosted on them. Types of services include connecting buyers with sellers, product discovery, quality assurance, payment protection, etc. Therefore, platformization benefits small scale users like Small or Medium Enterprises, and retail buyers the most, due to increased affordability and agility of a software platform. Thus, platforms mediate two-sided markets.
Platformization also sets off network effects whereby increased usage of the platform leads to greater efficiency, and more integration between platforms and other services. Therefore, the community that participates in the platform economy has a huge role to play in the upkeep of the system. The data thus generated through these interactions, also find unparalleled application. Examples of such systems include common digital platforms in India such as Ola, Flipkart, or UrbanCompany.
On the other hand, platformification is a term more contained in its scope, and mostly applies to the fintech world. It is used to describe the role of traditional banks in the wake of emerging technology enterprises that provide financial services. Platformification allows for conventional banks to be responsible for core financial transactions, while permitting customers to access banking and other services through a fintech platform. Therefore, the platform acts as a one-stop shop for end users while banks become corollary to a host of financial services on the platform. The platform in this context too, integrates data and services of multiple providers, while using the customer base and reach of the traditional bank to expand access.
A prime success story in this regard is the IndiaStack infrastructure and its corollary, the United Payments Interface (UPI). Through the layers in the stack, the platform has transformed the way we conduct day-to-day financial transactions, a far cry from the cash-based society of just five years ago. The platformification in this context integrates the source of our credit, the authorisation to release it, and allows for inter-bank interactions as well.
Therefore, platformification best describes the changes in the wake of increased technology application in finance, and is different from the wider platformization phenomenon evidenced across urban services the world over.
Today I learnt (TIL) is a weekly series by OMI that brings you interesting nuggets of information that you didn’t know you needed.
