“Everyone can be a fintech”. Behind the Banking-as-a Service Boom.

“Everyone can be a fintech”.

Behind the Banking-as-a-Service Boom.

In the age of modern business, nearly everyone is becoming a tech company. We’re all familiar with this idea but increasingly, we’re operating in a world where most organisations can become a fintech too. Covering a range of specialties, fintechs can be defined as any entity which provides the offering of financial institutions to the hands of everyday people.

This term is growing beyond traditional banking providers as we are seeing non-financial companies open up their doors to financial services - and to great success.

So how did we get here?

To meet consumers’ growing search for financial convenience, it became key for services to become more accessible. Cloud technology helped drive this. More specifically, its emergence has allowed banks to service their banking licenses to non-financial companies or non-banks. Banking as a Service (BaaS) was spun out of the possibilities that were brought about by cloud technology and is now booming.

The race across sectors to deliver integrated user experiences

Consumer behaviours are driving the growth of BaaS because of their desire to access financial services when and where they need them. Non-banks are utilising BaaS not because they want to enter the industry, but because it’s a natural extension of their product offering. Take Tesla Insurance for example. Through their new insurance extension, Tesla can offer auto and insurance customers a frictionless buying experience. Partnering with BaaS providers also opens new revenue streams - something very valuable post-pandemic.

BaaS allows non-banks to migrate to a business model which integrates digital banking services directly into their product offerings. This enables them to diversify their offerings and reach more customers as a result. When systems communicate via APIs and webhooks, customers can access digital services through any app or website they’re using.

This is blurring the boundaries between sectors as companies surge towards delivering frictionless and convenient customer journeys. BaaS models push banking services into consumers’ hands through different industries, meaning those operating under this structure can offer the accessibility that consumers desire. Mambu’s recent study shows that 24% of global banking consumers are driving this growth. Termed as “convenience cravers”, they want all-inone services and pay little attention to who provides them. Whether you’re a bank or a non-bank, consumers simply want easy-t0-use services at the tip of their fingers.

A direct tell of this demand is illustrated through bank branch closures across Europe. Financial services are moving online and this tells us exactly what matters to consumers. Who provides these services has become less important. As such, forward thinking players are capitalising on the appetite for embedded finance services. In Germany, Raisin Bank does this by offering a marketplace showcasing a range of saving account offerings. Powered by a cloud-native BaaS model, they now can offer customers deposit and savings accounts at extreme speeds. In the Nordics. digital consulting firm Knowit connected its loan application programme, Dploy, with a cloud model in order to streamline the customer journey. Now customers can benefit from the flexibility and security of the platform.

But, this is just the beginning of this service.

The ever growing $12.2 billion market opportunity of BaaS

BaaS is becoming a huge opportunity for most. When using such a service, non-banks can expect to see new revenue streams and an expansion of their customer base post-pandemic.

At a time when consumers’ attention is split and marketing expenditure is increasing, we are seeing customer acquisition costs shooting through the roof. Often, financial

institutions are not using their existing technological assets to their full potential. Hence, adopting the BaaS model allows for such companies to migrate towards digital banking, tap into non-bank customer networks, and decrease cost per acquisition. This integrates modernity into their DNA whilst distancing themselves from players of the past.

For the non-banks, BaaS opens up a whole new revenue stream. By offering a wider variety of services, these companies can capitalise on cross-selling opportunities and expand their brand recognition. Not only that, it significantly improves the customer experience. By providing the right offering at the right moment, the cloud native BaaS model deepens the relationship with customers.

Those using BaaS models are set up to challenge neo banks and give them a run for their money.

Going toe-to-toe with traditional core banking providers

Cloud-native technology has thrown down the gauntlet for non-banks as traditional banking providers remain stuck in the mud with their legacy systems. Such systems are incapable of being reactive. Thus, non-banks leveraging cloud-native core platforms are becoming the best option for consumers looking for flexibility and speed in financial product offerings. the cloud technologies used by modern financial institutions allow for streamlined and automated customer journeys. Because of the real time flexibility offered, time-to-market for new products are boosted without compromising on the customer experience.

This will be the deciding factor for banks and non-banks of the future. Whoever develops a frictionless customer experience that is integrated with personalised and unique offerings will take the throne. As it stands, traditional banks are falling behind whilst non-banks are stealing the crown thanks to BaaS, proving once and for all that “everyone can be a fintech”.

Bent Winkel, Nordics GM

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https://www.mambu.com/disruption-diaries-financial-tribes https://www.raisin.bank/en/ https://www.mambu.com/insights/press/nordic-saascollaboration-set-to-challenge-core-banking-providers https://www.profitwell.com/recur/all/how-is-cac-changingover-time