Banking-as-a-Service (BaaS): How rethinking finance is revolutionising banking

By Ge Drossaert, chief commercial officer, Fidor

September 25, 2018 | Fidor

In banking today, we’re seeing a seismic shift – big banks and tech players are moving their approach from products to services. Doing so offers more flexibility, faster go-to-market agility, and a better consumer experience.

“As-a-service” as we know it has already revolutionised software, platforms, transportation, music…the list goes on. But where it offers real value is in its ability to give anyone – customer support willing – to launch their own version of whatever has catalysed the serviceability of the product in question.  

We’ve seen it in other industries: Spotify, for example, transformed listeners’ experience, making it easier access their favourite artist or song without having to purchase, download and store MP3s. Amazon Web Services and Microsoft Azure similarly have made dedicated servers obsolete, and companies like Salesforce and GoogleApps have made storage simple.

So, where does banking fit?

In 2018, the fact is that people are fed up traditional banking models. And this goes beyond a lack of trust. On the contrary, an Accenture survey from May this year found that, in the UK, consumer trust in their banks is the highest it’s been since 2012. But the decreasing reliance on physical bank branches has led many to reconsider their relationships with traditional providers, often opting for newer, fintech options.

This has posed an enormous challenge for the big banks, as well as a massive opportunity for others looking to step in and woo customers.

The effect of this is that players in other areas, such as supermarkets and telecom providers, have gotten in on the banking game. In 2016, O2 launched O2 Banking in Germany. Existing infrastructure allowed the telecom provider to take advantage of its massive 42 million customer base and provide financial services without the required infrastructure a traditional bank would need.

What’s powering this revolution? Ultimately, it’s software. While software development used to be difficult, today engineers have instant access to libraries of assets, ready to plug and play in in their programming. This enables developers to focus on differentiating their offering, rather than getting buried in the nitty-gritty details of operation.

Banking-as-a-Service means that, now, providers can offer more services, across audiences, whether B2C, B2B, or B2B2C. As BaaS, and the other “as-a-service” offerings continue to flourish, software will continue to play a crucial role in the building blocks of what’s on offer.

This new reality has brought with it new ways of thinking. For any company thinking of integrating banking services, an open mindset toward different and innovative technologies and partners will be necessary. With the growth of open banking, utilising and optimising APIs is now more important than ever to connect the underlying infrastructure that makes BaaS possible.

As BaaS providers partner with companies to create insta-banking with existing infrastructure, they’re then able to spend their time optimising where the most value can be added for customers.

The idea of Banking-as-a-Service will continue to drive innovation and empower businesses and tech providers as consumers continue to see and reap the benefits.

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