The data shows how democratized banking services promise a greater range of niche solutions at competitive prices to benefactors.
A market assessment report based on the opinions of 1,600 senior industry executives about the opportunities presented by Banking-as-a-Service (BaaS) has shown greater interest among respondents in APAC compared to those of EMEA and the Americas.
BaaS is defined as the provision of provide retail or wholesale banking products and services to customers in context, as a service, using an existing licensed institution’s secure, regulated infrastructure with modern API-driven platforms.
Some findings of the research include:
- 88% of APAC respondents in a number of sectors (including banking, healthcare, retail and technology) indicated an appetite for BaaS services compared to 80% in EMEA respondents and 87% in the Americas.
- Over 46% of APAC distributors in the survey (the consumer brands that supply embedded financial products to consumers at the point of need) currently offered, or planned to offer, credit cards to their customers using BaaS. For savings accounts and payment cards, the incidence was 41% and 38% respectively.
- Globally, more than 80% of regulated financial services providers in the survey expected the overall BaaS market to grow. Of these, 30% expected it to grow by more than 50% per year over the next five years.
- Distributors in the survey were spending US$10–$50m per year on financial products and service partnerships across APAC
- Globally, 60–70% of distributors including retailers, e-commerce firms and other consumer brands in the survey wanted to increase their spending on financial partnerships (including BaaS) and expected overall growth to exceed 70% per year over the next three years globally.
The survey by Finastra indicated that financial services providers need four key capabilities to work with distributors and enablers and to monetize BaaS. From a technology perspective, these include:
- an open API platform
- an integrated data and analytics platform
- specialized digital solutions to seamlessly integrate customer journeys
The research also assessed the monetization strategies of distributors, enablers and providers in BaaS, and explored the importance of partnerships. Respondents were in favor of a transition to a platform and marketplace model, where a greater range of niche solutions at competitive prices can be sourced by end customers.
Said the firm’s Chief Revenue Officer of BaaS, Angus Ross: “Financial institutions can reach a greater number of customers at significantly lower cost, while distributor brands can open up new lines of revenue and build deeper relationships with their customers. Consumers (retail or corporate) are changing where they source financial services and shifting to non-bank channels. This trend will only accelerate as integrating regulated products into the customer journey becomes as simple as creating a social media account.”