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BaaS providers see demand for digital heat up as banks seek to modernise their tech

Joe O'Connor
Joe O'Connor
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What's this all about?​

Global fintech body Innovate Finance hosted a webinar in June 2020 exploring the latest trends and the future of Banking-as-a-Service (BaaS). Among the panel of experts was Head of Innovation at LEVERIS, Conor McAleavey who shared his views on the challenges and opportunities within the industry. The following article outlines the general sentiment among guests in light of COVID-19 as well as some of the other webinar highlights.

Read on if you:

  • Want to understand what BaaS is all about
  • Have an interest in the future of banking
  • Want to understand the impact COVID-19 is having on financial services
  • Have an interest in BaaS industry trends

The current global pandemic is accelerating digital plans that most banks had in place and putting added pressure on those financial institutions that still need to up their digital game.

That was the overriding message from an Innovate Finance webinar on Banking-as-a-Service (BaaS) that had representatives from companies such as Global Processing Services, Project Imagine, SaaScada, 10x and LEVERIS.

Of course, that’s good news for BaaS providers. The sooner financial institutions understand that much of the technology they are using will not allow them to respond efficiently to black swan events such as COVID-19, the sooner they will take action.

Without sounding too macabre, Nelson Wootton, CEO of SaaScada, said this is an exciting time to be in fintech. He believes the pandemic has shone a light on how equipped – or ill-equipped – banks are for a future that centres on digital. “Some banks have had absolute disasters, while some of them have responded well,” he said. “Some of them have used this opportunity to try new technology and found that it wasn’t as scary as they thought it was going to be. All of that really plays to a digital provider.”

Conor McAleavey echoed that sentiment and believes that we will now see an acceleration of digitisation in banking. He stated that while most traditional banks are currently focused on pressing issues resulting from COVID-19 such as managing payment breaks and implementing social distancing in bank branches, that focus will widen in the months ahead.

“Their priorities are narrow in focus right now but as they look to re-platform specific business lines to deal with the enormity of the payment break requests that they are experiencing, it gives them a technological base to build on,” he said.

“While they might believe that they are slowing down in terms of technological advancement, they are in fact speeding up.”

That’s one positive that banks can take from this pandemic – it has forced their hand when it comes to modernising their technology. As summarised by moderator Tom Graham, MD – Banking at Accenture, “banks are taking baby steps now in response to the crisis, which is a good enabling platform for practical learnings and technology fundamentals to move further.”

Flexibility, Adaptability And True Transformation

What the future of banking really comes down to is flexibility and adaptability to change. According to James Barker, Commerical Director EMEA at Mambu, “banks used to be built to last, now they are built to change. With modular architecture, you can adapt your business. Composability is the future of banking technology.”

Meanwhile, Tam Holmes, Chief Client Officer at 10x, said that banks have to genuinely do something transformational to get transformational outcomes. “Renovating the house while you’re living in it is a really challenging approach, which means banks are looking for a new approach,” he said. “The global circumstances around COVID are simply accelerating those trends.”

Joanne Dewar, CEO of issuer processor Global Processing Services (GPS), said that despite the current restrictions, her company continues with geographic expansion having launched in Asia-Pacific last year. While the majority of GPS’ business is EU-based, as the different regulators open up to new digital licences, new opportunities continue to emerge.

While there was plenty of optimism among the panel regarding the future of BaaS in financial services, Nelson Wootton reminded us that the industry is not without its challenges. “I can’t remember a time that our pipeline was as wide as it is at the moment, but getting things through the pipeline in the past eight weeks or so has been tougher than it’s ever been,” he said.

“That’s because financial institutions have had a lot to deal with, especially the existing banks. There’s been a lot of demand on them to deal with government initiatives being pushed through and some of them just didn’t have systems in place to cope with that and hurriedly went out to market to find something.”

Webinar highlights

The webinar discussion was wide-ranging. Here’s a quick breakdown of the other topics covered and the times at which you can find them:

  • Defining BaaS
    • 13mins: How do you define BaaS and what does it mean to your business?
  • BaaS Savings
    • 30mins: What are the main savings banks can make by moving to a BaaS model?
  • TPPs and BaaS
    • 36mins: Where do the open banking third-party providers (TPPs) fit into the various BaaS infrastructures?
  • UX Delivery
    • 37mins: In the composable architecture model, how do you best manage front-end user experience delivery?
  • BaaS Reliability
    • 38mins: Are we seeing the end of mainframe systems and how do we prove that the BaaS infrastructure stays reliable and resilient?
  • Fintech V Bigtech
    • 46mins: Will BaaS providers end up competing with major tech companies like Amazon and Google that move into finance?
  • BaaS and Regulation
    • 46mins: Will BaaS providers end up competing with major tech companies like Amazon and Google that move into finance?
  • The Speedboat Strategy
    • 54mins: What are the views on incumbents creating digital banking spinoffs that can operate like a fintech (i.e. speedboat strategy)?
  • BaaS and Inclusive Products
    • 59mins: Does flexible banking support more inclusive products?

This webinar was part of a spotlight series by Innovate Finance. You can check out the organisation’s upcoming events here.

Joe O'Connor
Joe O'Connor
Joe used to put words in magazines, newspapers and online. That was until he spotted LEVERIS building something special. He's been our Content Editor ever since.
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