What is Banking as a Service (BaaS) and should traditional banks worry?

Sidhartha Sharma (Views are Personal)

People will always need banking, but the banking services may or may not come from Banks.

Industry use cases/Partnerships

Customers will always be doing few transactions that revolve around human needs:

  1. E-commerce or Shopping
  2. Travel and holiday
  3. Education and Upskilling
  4. Healthcare
  5. Telco and entertainment
  6. Searching for a place to rent/own
  7. Running a business/capital requirement for SME’s

For more details on the hooks and customer journeys check

With Banking as a Service (everyone wins)

And all of these require some money to transact that they may or may not possess immediately.

All of these services and offerings are currently being provided by ‘NON-BANK’ players, but they can emerge as new Channels for the Bank/Fintech players.

  1. Thus banking lending and credit products can be made available on these platforms via the API’s creating a win-win situation.
  2. The transaction data and verified ID can further reduce the fraud or default risks.
  3. Banks lower the cost of customer acquisition and get new access to channels and data
  4. The platform/SaaS providers get a bigger opportunity to convert a customer who has creditworthiness but no immediate money to the transaction.

“You’re probably all familiar with SaaS –it’s basically paying for applications as you use them, rather than buying them. These services used to cost you a fortune, but are now free or near enough. That’s where banking is going. Banking becomes plug and play apps you stitch together to suit your business or lifestyle. There’s no logical reason why Banking shouldn’t be delivered as SaaS”

Chris Skinner

Traditional and incumbent Banks must prepare for further unbundling

With digital-only banks coming up in SG in the year 2022, deposit accounts, lending, and SME solutions will be offered by them, directly impacting the retail business of the incumbent banks.

Most of the platforms like Grab+Singtel, SEA-Shopee, Alibaba (3 of the 4 players) already have a loyal customer base who will now enjoy the benefits of a bank directly from the platforms.

This is the right time for traditional banks to rethink their API models and digital partnerships to provide best in class BaaS solutions to compete with the platform/social/e-commerce first banks

Many Examples of Banks building BaaS Solutions

  1. Last year in 2020, Standard Chartered bank launched Nexus- its banking as a service solution

2. BBVA has BaaS platform

3. DBS has a full API Ecosystem- Access over 150 APIs that help business customers complete their jobs to be done. Experiment and test new features in its secure API sandbox

Best regards,

Sidhartha Sharma

Digital Transformation and Fintech Expert

~15yrs Consulting- McKinsey & BCG-Digital Strategy, Ecosystems & Ventures | Start-Up Mentor | Platforms | Digital-First | Author & TEDx Speaker. Views Personal