The banking industry is witnessing a major technological transition. Thanks to technological advancements and pervasive online accessibility, banks have been compelled to join the transformation bandwagon. Banking as a Service (BaaS) is a way to enhance the end-to-end customer experience while still acquiring new customers. This innovative and revenue-generating entity has arisen to fuel development because of intense competition from fintech, digital banking solutions such as digital wallets, rapidly changing customer demands, regulations, and compliances, and to have the best possible customer experience.
Even though banks pioneered process automation, they are also unable to stay current with today’s digitized, consumer-centric financial services. Thus, to excel, banks must consider these 3 vital factors to support and harness the potential of BaaS.
- API revolution
The evolution of BaaS coincided with the mass adoption of API technologies. APIs are not new in the market, but their use in banks has been largely confined.
Recently, the open-source initiative has prompted tech providers to make APIs available to any user who intends on using them. As the open-source trend gained ground, software vendors began making their products accessible to users who expected to access them through APIs.
Banks take advantage of API benefits to allow data sharing with fintech and developers. This will also assist third-party partners in developing corporate digital applications for consumers such as mobile payments, peer-to-peer lending solutions, digital wallets, and many more. Furthermore, with these categories of advances, banks must recognize their position as active participants, rather than owners, in the end-to-end user experience.
- Open Banking with BaaS
Banks use open banking to allow customers to access and share financial data held by banks. Customers will use open banking to compare the products delivered by different financial institutions and choose the ideal one that serves their criteria and needs. Customers can easily transfer funds and accounts from one financial institution to another using open banking.
However, while a customer can obtain information about the functionality of a transaction account from plenty of banks, he should transact with a bank with that he has an account, which is not the case with BaaS. BaaS enables a customer to use every regulated bank’s transaction facilities even though he is not a customer of that bank.
- User experience
Customer demands are increasingly fluctuating. They expect the company to acknowledge their needs and arrive at an immediate solution to their concerns. When the company can consistently overcome the consumers’ pain points and resonate well with them and create a relationship with them, you can ultimately obtain their loyalty and retention.
Contrarily, since financial offerings have become more tailored to modernized customer demands as technology has progressed, there is no clearly defined rule mandating that the end-user must be acquainted with BaaS. They are mostly cautious that the service and product they receive are highly secure, reliable, and efficient.
Traditional banks are being called into question by BaaS to become modular and platform-based to be competitive in the financial ecosystem with other market players. With all due merit, BaaS has nonetheless catalyzed both banks and third-party providers to enhance additional revenue.