Q1: Why did Financial Institutions Developed Crowdsourcing Platform
Initiatives?
Assessing the Rationale for Crowdsourcing Platform Initiatives in Financial
Institutions
1. Introduction
The upsurge in technology innovations and contemporary threats from fintech, digital giants, has
made the on-demand economy to revolutionize on how people work. To confront such threats,
majority of key banks are recognizing the significance of embracing new, agile ways-to-work
(Lauter, 2019). It’s now obvious that internal operations have to change, in order to win customers
and gain their loyalty using new digital services. Conversely, the need for flexibility in working
environment is rapidly gaining traction amongst the millennials with recent studies indicating that
one in three workers in the US are freelancers (Lauter, 2019). Here, the author asserts that,
crowdsourcing fits in a broader change within enterprise, as large firms gradually embrace it,
leading to the rise of ‘gig economy’. The gig economy is a free market system providing temporary
positions where workers are hired for short-term commitments. The economy includes:
contractors, freelancers, part-time workers, offshoring models, work-from-home, and virtual
teams. As such, the crowdsourcing concept was readily embraced by a Russian bank, Sberbank as
one of the open innovation approaches to exploit on best propositions from both staff and clients
(Ideaconnection, 2014).
Consequently, crowdsourcing has the potential to unlock vast treasures of new talent for financial
companies, helping them to accelerate the innovation process (Lauter, 2019). However, wholesale
transformations to organizational structures and new performance metrics cannot not happen
overnight, hence the need for gradual development. In addition, majority of staff in large financial
organizations are simply not familiar to working in dynamic digital environments. While such
financial institutions are grappling with their internal transformation programmes, there are a few
crowdsourcing platforms that can trigger new opinions and quicken the pace for digital innovations
to the market (Lauter, 2019). In recent years, crowdsourcing has matured enormously, resulting to
vibrant communities of specialists across the globe, bringing new opinion to local customers. It is
also predicted that technology-led crowdsourcing will establish 20% of all business application
development initiatives on the next two years (Lauter, 2019).
2. Goals for Developing Crowdsourcing Platform Initiatives
Different institutions have divergent objectives for implementing crowdsourcing platforms. The
main aims in the financial institutions can be extracted into five key goals; namely, to:
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2.1. Accelerate speed of accessing expertise and ideas
Crowdsourcing platforms ‘throw’ business challenges to the community enabling fast-tracked
shortlisting and finalization of the same in short span of time. There is also reduced recruitment
and onboarding at implementation phase.
2.2. Concurrently run several programmes
At financial institutions, in-house management team players may have a number of different
crowdsourcing programmes running concurrently. Internally, the only resources needed are those
that provide planning and strategic layer at the top. This can deliver multiple programmes evolving
at unlimited speed and scale.
2.3. Obtain high quality of the work done
Crowdsourcing platforms are built on the ideologies of healthy competition, as different members
of the community strive to submit the best ideas, find the most elegant solutions to problems, and
deliver the best possible outcomes. Subsequently, the most successful community members are
rewarded with greater access to opportunities and bigger financial rewards. The platform also
enables tracking in the progress in the development of back-funded projects that at long run
compels quality production and good use of resources (Bott & Young, 2012; Mendez & Houghton,
2020).
2.4. Cost control and certainty
Crowdsourcing platform enable projects to be generally quoted on the overall basis, contrary to
traditional methods of outsourcing that usually follow an hourly rate model. This provides clear
outcomes and deliverables; hence banks can be guaranteed of the cost effectiveness, free from
budget over-runs.
2.5. Optimize transparency in resource allocation and governance
Crowdsourcing has been extensively used to track flows of aid, reporting on poor governance, or
helping to organize grassroots movements (Bott & Young, 2012). Accordingly, crowdsourcing has
the ability to change the reality of civic participation in development projects funded by financial
institutions. This notion gets a considerable backing by (Certomà et al., 2020), who describes it as
processes towards democratization of public opinion. They show how the digital-supported
participation processes are able to enhance an open governance agenda. Accordingly, (Khan,
2019), argue that a significant gap remains for crowdfunding, where they focus on types where
source of solutions is uncertain and of high-risk. They assert that, there is increasing appeal to
crowdfunding, yet little is known about an effective donation/charity-based model. The author
farther proposes a model underpinned by stakeholder and system theories for Islamic banks for
social entrepreneurship development where crowd fund might be of instrumental in poverty
alleviation, increasing dynamism, and creating employment in Islamic economies.
2.6. Access a broad set of skills
Crowdsourcing provide banks with a wide of pool technocrats ranching from app developers, data
scientists, designers; unto specialized skills niche like blockchain consultants. Such skillsets could
be either very expensive or hard to find on traditional basis.
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2.7. Attain global experience and significance
Majority financial institutions engage with other institutions on multi-national system integrator
level to give them a notion of application modernization, development and testing. Global
crowdsourcing platforms, brings the rare experience on board without importing such skills into a
country.
1. Modalities used on Crowdsourcing Platform Initiatives
Financial institutions have employed various approaches in adopting crowdsourcing platform
initiatives. Some of the modalities include the following:
1.1. Formal Approach
A formal approach is when a financial institution is put under certain restrictions by regulators for
Innovation to grow independently because they know little about the innovation but swiftly are
allowed to adopt them upon regularization. Regulators can develop new policies to provide
appropriate and balanced legal framework for both current and new stakeholders. As such the
main idea of this approach is to control any form of innovation (Setiawan & Maulisa, 2020;
Zetzsche et al., 2017).
1.2. The Wait and See Approach
This is the most conventional approach that begins with the concept of Laissez-faire paradigm. In
this modality, any innovation that is deemed to be “too small to care,” is allowed to thrive without
any regulatory intervention until it reaches the tipping point when it becomes “too large to ignore”
or “too big to fail” to grow without regulatory supervision (Setiawan & Maulisa, 2020). At the
peak, the regulator may create a specific legal framework for the changes and shift to a more
comprehensive regulatory approach to address the issue. China is the perfect domain that has
manifested this approach and also experienced both its negative and positive consequences
(Setiawan & Maulisa, 2020). The People Bank of China is usual regularly celebrated for adopting
the laissez-faire paradigm before proceeding to design a more all-inclusive test and learn
environment. The wait and see approach may have been beneficial for the developmental growth
of china's financial inclusion, but it does not exclude ramifications in terms of price to pay. The
main price that China regulator has to paid is the difficulties in cracking down the practice of
shadow banking, which reached its peak in 2016 and formed about 78% of china’s GDP (Hsu,
2016).
1.3. The Test and Learn Approach
While proper set of regulations are needed to rule an innovation, it yet better to first test the
innovation under certain circumstances, rather than letting it to run wild until it becomes “too big
to fail”. Some financial institutions and regulators in particular have opted to use the test and learn
approach to filter any innovation that will enter their domain. Based on the context, institutions
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can either swiftly experiment on case-per-case or design an open space framework to their
innovation (Setiawan & Maulisa, 2020).
2. Conclusion
This study has investigated reasons as to why financial institutions developed crowdsourcing
platform initiatives. Consequently, a number of goals were identified that suited majority financial
institutions. These objectives include: Access to broad set of skills; accelerated speed for accessing
expertise and ideas; ability to concurrently run several programmes; ability to obtain high quality
work done; Cost control and certainty; and ability to optimize transparency in resource allocation
and governance. Equally, the study established three key modalities used by these institutions to
adopt crowdsourcing platform initiatives.
References
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