Traditionally, banks have owned end-to-end service delivery by tightly integrating experience, processes and products. However, this approach is under attack from all sides. Consumer-centric, born-digital fintech firms are competing directly for customers by providing superior user experiences, enabled by accessing application services and data across financial services providers.
Traditional banks are forced to rethink their value proposition to stay relevant in this high-stakes battlefield. As banks respond to this secular shift, BaaS has emerged as an effective weapon in their competitive toolkit. As banks embrace BaaS, they must also be cognizant of the factors that influence success.
A look at early BaaS entrants that have implemented digital initiatives and continue to innovate reveals the following success factors:
- Ensure sustained senior leadership commitment and engagement. BaaS is more than IT. Success typically pivots around effective organizational change management that opens senior leaders’ minds (and pocketbooks), to the concept of open APIs and new business models that spawn new revenue generation opportunities. By establishing an internal task force to incubate BaaS, banks can establish a dedicated team focused on market scanning, benchmarking and best practice initiatives.
- Develop a holistic BaaS strategy and roadmap. The strategy should extend beyond IT into business process, organizational and attitudinal change. Banks need to nurture a startup mindset and an entrepreneurial culture, and follow agile principles such as “start small, scale fast.”
- Build an ecosystem of partners. Industry experts or outside vendors can help with building and scaling the model.
- Consider the impact of service design to existing business processes/models. Integration or process reengineering may be required.
- Actively promote the bank’s API to attract consumers to the ecosystem. Banks can sponsor campaigns and industry-wide competitions to build momentum and appeal to developers and third parties.
- Communicate, communicate, communicate. Education and training can help inspire enthusiasm throughout the organization and among partners.
Read more in the report How Banking as a Service Will Keep Banks Digitally Relevant and Growing.