Is Banking as a Service BaaS the future for fintechs and Banks?

In 2022 we came across a few Banking as a Service #BaaS cases studies. Is it a fad or has the concept truly matched expectations?@Adrian Toynton from @fisglobal shares his view in what the future looks like.

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TRINA: Adrian, I’ve got another question for you.

So acquiring a license imposes not only significant capital…capital requirements but more importantly compliance with strict regulations on money laundering and deposit protection to name a few. Some have reverted to a banking as a service solution. We recently had some success stories from this front. Some are already offering this as an option. Is this the future of banking and if so, what does this mean to modernize your technology? 

ADRIAN: I’m going to do a very typical Australian thing. Yeah… No. It’s not necessarily the future of banking but it could be! I look after asia-pacific and I think a lot of the countries in APAC are moving towards banking as a service. (BaaS). 

There’s two sides to the coin. I mean, first of all, does Banks want to look at different channels for how they get their customers to access? So, they’re going to form relationships with FinTechs or with Telcos or … with retailers. And, they’re going to look to provision Banking and in a different way. And so, that would, by definition, be banking as a service. 

The other side of the coin is whether it be, you know, social media or retailer or telcos… same list. They want to get into banking. So, how do I provision banking services, how do they offer additional services? So yeah, is it going to happen? Absolutely! 

I think from a Technology perspective, the bank’s challenge is … and I know a particular Bank that run four cores, right? and they run one core for their core. one core for their digital and they run one core for a wallet and… and one core for a corporate entity. That’s not sustainable moving forward. 

So, if you’re going to do banking as a service and you have to then look at new architecture so you have to look at multi-tenant based solutions, you have to look at multi …multiple entities running on those solutions. So, as an organization, you can set your hierarchy, you can understand how all of your different parts of the business are running, whether they be you or whether they be a partner. And, then you are able to actually understand and differentiate and segment the kind of products and services that you do. So, I think as you move towards banking as a service in that multi-tenant, multi entity based technologies … can enable you to do that.

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