Are we headed towards a Banking as a Service revolution?
By Madhur Kumar Jain, Senior Vice President and Global Head of Solution Consulting, SunTec Group
Customers today expect the same experience and convenience that they can get online from any marketplace to be delivered from their bank too. They want to plan, compare, assess and then only purchase what is a hyper-personalised offering for them, rather than take up any standardised product or service from the bank. With Open Banking and an API driven ecosystem, this is slowly becoming feasible and the banks are increasingly collaborating with fintechs, independent developers and non-financial lifestyle institutions like restaurants, retail outlets, etc. to make the move towards making Banking as a Service (BaaS) a reality, sooner than later.
Since the entry into the financial services industry of Big Tech companies, such as Google, Amazon, Facebook and Apple, the focus on revolutionising the customer experience has never been so great for banks. But to truly compete with Big Tech companies/non-traditional competitors, banks must be able make the transition from providing a banking service to truly owning the customer value chain experience – including, offering Empathic banking and humanising the banking experience.
Banking, as it was traditionally envisaged, was supposed to be a service. However, over time, banks have become more internally focused, looking out for their own needs and pushing their own products to their customers, regardless of whether that product meets the needs of the customer or not. By focusing on their profits first, banks have forgotten that each customer has unique and individual requirements. As we enter a new decade, and beyond, banks must consider the needs of the customer more deeply and look outside of its own products in order to offer BaaS and put the customer first.
Collaboration in banking equals choice
Banking has become a commodity marketplace and as a result, banks are restricted by the products that they manufacture, leaving the customer with little choice but the products on offer from their own bank. But if banking was really a service then banks should be able to work with other providers to give the customer what they desire. If banks can work with two or three other service providers as a BaaS provider, the choice to customers is greater, and the customer is more likely to be provided with the right solution for them.
Over the last few years, we have seen non-traditional players, like Amazon, entering the banking space and trying to build customer ownership by working with different banking providers. There is an opportunity to work together and collaborate to take advantage of each other’s strengths rather than just compete. The fact that consumers’ trust the banks to handle their financial data, their ubiquitous presence and industry expertise provides banks a good opportunity to collaborate with Big Techs which have expertise in handling big data, AI, analytics and building customer centricity.
Although this creates additional layers, bringing in an extra layer of technology, would not dramatically increase the cost. If a bank becomes a BaaS provider, there is no significant additional complexity but its portfolio gets larger with products from traditional and non-traditional providers. Plus, if you are an independent BaaS provider, you will also have your own products being sold to other parties; in effect, you are not shifting far from today’s existing model but that model becomes ubiquitous. In fact, bringing this together provides a holistic solution to the customer, which will reduce the cost of service to customers.
Delivering an optimal enhanced customer experience
BaaS has another important component – empathic banking. The bank manager of yesteryear need not be a thing of the past; imagine a digital bank manager being able to give a customer exactly what they want. For example, customers are never looking for a mortgage, they are looking to buy a house. Empathic banking takes this to the next level by allowing the bank to slip in under the radar to make sure the customer gets both the product and service they need to make these life choices – the bank is simply there to assist the customer to buy the house.
The question remains, are customers getting what they need from their bank?
Undoubtedly, companies and consumers are the ones who will decide the future of BaaS. As the new decade begins, banks will need to accelerate their digital transformation and deliver the optimal enhanced customer experience – without the need to replace costly legacy systems.
Ultimately, banks need to show more empathic understanding of their customers and their real needs. As organisations, they have spent money, time and effort to make customer interaction more efficient and seamless across different channels. Now is the time for these banks to look at investing in how they can work with their customer to ensure that the customer’s personal choice is being met. They have the intelligence on the customer; the means of interacting with the customer and the capability to put it all together. Working with third party providers will allow banks to become a truly open organisation and offer very specific customised solutions to the customer as well as the benefit of having a dynamic portfolio that can be offered to the customer and the market – a win/win situation for both the parties.
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