The ecosystem trap: Why app stores perpetuate vendor lock-in

And how FDC3 appD can solve this problem

The term ‘application ecosystem’ has a pleasant ring to it, and, upon searching, you’ll find a variety of definitions examining the metaphor—words like symbiosis, connection, and collaboration—making the term seem harmonious and all-inclusive. After all, an ecosystem does refer to interconnected communities in nature.

However, upon closer inspection (and with the tide rising in favor of a truly open system), we are starting to see behind the curtain. App store purveyors are actually gatekeepers to ecosystems, and behind every ecosystem is the provider who holds the key. What at first glance seems harmonious is, in fact, a situation that is anything but open and free.

In this article, we’ll examine why the status quo for financial applications providers (app stores, content stores, and application ecosystems) create vendor lock-in, why FDC3—Financial Desktop Connectivity and Collaboration Consortium—has the capability to displace the status quo, and why FDC3 appD is the antidote to vendor lock-in.

The app store contradiction

Application vendors want to get their offering on the screens of as many users as possible, and users want to be able to pick and choose from apps that are right for them. The origins of the app store were built on that premise: give application vendors exposure in a unified, trusted environment and let the users ‘shop’ for the best solution. While beneficial in many ways to both vendors and users, over time, we can see that app stores limit, rather than foster, innovation and choice in a number of ways.

Let’s pick on the biggest one in the world—Apple’s iOS App Store—which controls the distribution and monetization of applications available in its store. App vendors must submit their application to Apple and abide by the store’s guidelines, and Apple then takes a cut of the revenue (up to 30%). It’s a system that benefits Apple and limits options for vendors themselves. More importantly, users cannot switch to Android and keep all their apps, further locking them into iPhone ownership. The app store model means users are locked into a particular set of apps or a particular operating system—without the flexibility to choose.

This ‘lock-in’ effect is particularly relevant in the finance industry, where historically financial application vendors have followed a narrow path to distribution. You might see in-house app directories built by internal stakeholders (a sell-side bank distributing tools to their trading desks), but the prevailing ‘app stores’ for finance are proprietary vendors who claim to be ‘open’. Once a vendor builds their application on one of these platforms, they are then permitted to join the ecosystem (aka content store), though often with fees and even stipulations that they can’t operate on other platforms—completely anathema to the open ethos of interoperability.

In this way, it’s lock-in or bust. As a financial application provider, your path to distribution has been extremely limited, and, as an end user, you’re limited to a set of applications your platform provider picks for you (and the likelihood of not being able to take those apps over to another platform if you want to switch). However, being part of this closed ecosystem has historically been the best route to see your app in front of the most potential users. It’s the same model as the Apple App Store.

The new frontier: FDC3 appD

FDC3, or the Financial Desktop Connectivity and Collaboration Consortium, is an open standard for desktop interoperability in the financial industry. It provides a set of common APIs and protocols for communication between different applications on the desktop, enabling seamless integration and collaboration.

From its website: The mission of the Financial Desktop Connectivity and Collaboration Consortium (FDC3) is to develop specific protocols and taxonomies to advance the ability of desktop applications in financial workflows to interoperate in a plug-and-play fashion, without prior bi-lateral agreements.

Delivering on the promise of interoperability requires not just a standard API for apps, intents (verbs) to launch them, and context messages (nouns) to pass between them, but directories to discover applications. In short, applications implementing FDC3 are of no use if you can’t find them. And being forced to only access FDC3 apps within a single, proprietary app store limits choice and is counter to the goal to “interoperate in a plug-and-play fashion, without prior bi-lateral agreements.”

What is FDC3 AppD?

Like FDC3 itself, FDC3 appD is a standard for firms to adopt, it’s not itself a directory or app store. The brilliance of appD is not just that there’s a standard interface (an ‘API’) to connect to a directory and discover its applications, it defines that any FDC3 2.0 certified platform must be able to connect to any FDC3 appD-compliant directory. It’s as if your iPhone were required to be able to connect to competing app stores.

Small fintech vendors will list themselves in an open directory, the Finos App Directory (which is hosted by Finos, the open-source foundation that houses FDC3). Large vendors with portfolios of applications will host directories of the many apps they offer tied to their own authentication and entitlement systems. End-user firms will host their own internal directories of in-house-built apps.

The Finos App Directory is a community-driven initiative that allows vendors to submit their FDC3-compatible applications for inclusion in the directory. The directory is maintained by the FDC3 community and is intended to be a comprehensive resource for financial industry professionals to find the applications they need to do their work. Note that this is open and absolutely free from any license restrictions or lock-in.

To submit an application to the Finos App Directory, vendors must first ensure that their application is compatible with the FDC3 standard (note: for guidance on this, check out the Finsemble-Finos-contributed FDC3 workbench). Vendors then submit their application to the directory through the FDC3 website, where it will be reviewed by the community and added to the directory if approved. For users, they can select, search, and build their own internal app stores using the appD model. It’s a win-win for both vendors and users looking to be free from lock-in—as it’s a zero-cost, open-source, and non-proprietary way to discover, search, and distribute applications.

The one catch? The applications must be FDC3-compliant, which enables communication with all of the other applications using one common language, designed by the 40-plus members of the Finos/FDC3 community. This is an ecosystem we can get behind.

The benefits of appD across the industry

With FDC3 appD, the tides are turning—freeing both vendors and users from lock-in. Let’s examine the benefits of escaping the ‘ecosystem trap.’

AppD benefits for end-user firms:

  • Within appD, applications are easily readable, discoverable, and the data on each app is all in one place. It makes it easy to create a customized smart desktop.
  • Users are no longer tied to one platform provider. As mentioned above, switching from Apple to Android means you lose control over your apps, as you’ve left one proprietary ecosystem for another. With appD, you can switch platform providers without having to switch applications.
  • Reduced fragmentation in the market. Users have more flexibility when ‘shopping’ for applications to include in their desktop, as they aren’t limited to a proprietary store.

AppD benefits for vendors:

  • Massive distribution: you can reach the clients of every FDC3-compliant smart desktop vendor.
  • You don’t need to pay to participate in a proprietary ecosystem.

FDC3 adoption is reaching record levels, and vendors are eagerly joining the all-inclusive interoperability ecosystem. Naturally, FDC3 appD does not bode well for app store gatekeepers, and why should it? It’s not in their best interest for vendors and users to have open access when the gatekeepers’ proprietary, closed systems are a huge revenue driver and business model for them.

Traditionally, app stores have been the dominant mode for users to discover solutions to help them work smarter, and additionally for vendors to distribute their applications to users. Until now, the status quo for vendors has been: if you aren’t part of a proprietary ecosystem, users won’t be able to find you. As the era of the ‘ecosystem trap’ comes to an end, this is no longer the case.

It’s 2023. It’s time for a new system—an ecosystem that does what it says it does: promises a free and open landscape for all participants.

Dan Schleifer is the CEO and co-founder of desktop integration platform provider Finsemble.

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