Understand new BaaS trends for the financial community

A different mindset is permeating the banking sector with the adoption of BaaS trends. A retrospective view of the banking industry was quite different- closed shops focused on selling their own products and services to increase leads and revenue.

However contemporary banking industry works distinctly. More and more non-banking organizations/ fintech’s are providing financial services, such as payments, lending, bank accounts, and wallets. It has been found that more than 90% of the financial institutions advocate that Open Banking and Banking-as-a-service is a must-have for growth as per the Financial Services State of the Nation Survey 2021. In order to reap the rewards of these contemporary services, we need to start embracing change in operating principles, thinking strategies, and cultural norms. In short, banks must learn to bring the outside in.
Understand new BaaS trends for the financial community

What do you understand by the term BaaS?

Baas (Banking as a Service) stands for reconfiguring the banking value chain through third-party providers to provide customer-centric banking products and services. In particular, banks integrate with financial service providers or fintechs to make the banking journey seamless for their customers, while non-financial organizations embed banking products/services into their offerings.

What the BaaS trends mean for financial services

As more organizations and ecosystems are embedded financial services in their products and services offerings, banks should take the opportunity to decide on their role in this model. ECS Fin has listed six trends to watch to help the financial community understand, identify opportunities, and plan for upcoming threats.

image

Integrated Experiences

The first and significant trend for financial services in the area of banking-as-a-service is providing simple, holistic, embedded, and direct experiences for customers. Seek an ecosystem that offers as much integration as possible to keep the customer connected to the business.

image

The birth of Openness

The regulatory trends, including open banking, open API, and PSD2, promote the development of open culture and universal access. The need to stay compliant with these new requirements is driving banks to consider new Baas business models to take advantage of tech builds and recoup costs.

Adoption of technology capabilities

With the adoption of digitization, including APIs and automation, the financial community can upscale Baas faster, putting embedded finance within reach to enhance the customer experience and create a new source of revenue without incurring the overhead associated with operating a bank. Big techs and Fintech firm like ECS Fin embed financial services into nonbank platforms and apps, helping them stay competitive in the banking ecosystem. ECS Fin priorities are to offer the following:

  • A scalable, stable, and secure API platform and marketplace
  • End-to-end payment processing models.
  • System integration and digitization capabilities.

Challenges and opportunities for the financial community

ECS Fin discovered that nonbank companies across distinct sectors could experience numerous challenges and opportunities. To get it on the right track, we suggest considering three critical questions:

  • Does incorporating new banking models make sense within the journey or user experience we offer?
  • Do we have the operational and technological capacity to work with a bank?
  • Do we have enough resources to reach the necessary volume to justify the build's expense?
Banking as a Service is transforming the financial industry

However, on the bank side, leaders should debate the following questions:

In what geographies and products should we offer Baas?
Where do we stand on white label vs. cobrand?
What benefit do we have for the integrated user experiences?