The term BaaS refers to the ability of companies and FinTechs to offer financial services through banking APIs (or application programming interfaces). These “plug and play” applications take advantage of the infrastructure of institutions to provide end users with all kinds of products, such as credit cards, checking accounts or loans. Through the internet and when they need it.
An alliance that fosters financial advancement and inclusion
This system encourages collaboration between FinTech and traditional banks, which translates into an improvement in the consumer experience. In this way, you can enjoy a wider range of options when contracting a product and the offer is hyper personalized. Furthermore, due to BaaS, FinTechs are focused on innovation and creating cutting-edge UX without worrying about the underlying banking infrastructure.
Imagine the acceleration that this flexibility can bring to the financial sector! That is why significant progress is being made in very short periods of time. One of the most important is the democratization of access to banking products. An important part of the world population does not have access to the financial system.
By removing barriers and simplifying entry processes, companies can reach traditionally excluded segments. Despite what it may seem, the fact that services are offered through digital and mobile channels makes their consumption easier for this group, due to the penetration of smartphones. In this way, people enjoy greater autonomy and control over their domestic economy.
Fast and totally secure changes: FinTech shield themselves
In terms of security and regulatory compliance, BaaS also has multiple advantages. By using existing banking infrastructure, fintechs take advantage of banks’ rigorous security systems and legal practices. This provides greater confidence to consumers and regulators. The security and protection of sensitive data is under control at all times.
In addition to the security measures put in place by banks, there are specific rules and regulations that apply to BaaS. For example, in Europe, the General Data Protection Regulation (GDPR) and the Payment Services Directive (PSD2) are two key legal frameworks. These regulations guarantee security in financial transactions.
In addition to regulatory compliance, fintech companies that offer BaaS services must comply with specific regulations if they offer services outside the EU and undergo external audits and controls. This includes the implementation of security measures for data protection, the prevention of money laundering and compliance with regulations against the financing of terrorism.
The customer comes first, always and on all channels
Personalization is to the digital environment what the branch office is to the physical world: a way for banks to interact with the customer. Instead of handshakes and coffee, it’s about getting to know customers well enough through data to anticipate their needs and engage them in real time through multiple touch points.
Thanks to the BaaS, many banks have embarked on this journey, using data to create emotional connections with customers. New segments are identified and easy onboarding processes and user-centric experiences are created. And all this due to the collaboration with FinTech companies. The adoption of new technologies and platforms manages to knock down internal walls that seemed unbreakable!
Data is critical to identifying potential customers, personalizing their experience, and fostering a close, lasting relationship. However, banks struggle with data quality, structure, availability, etc., to unlock its full potential. In this fight, they also count on FinTech, experts in data enrichment.
Focus on the value cycle to attract, engage and retain
As the CTO of Akoya US states: “The secret sauce to effective use of data is cutting out the noise and looking at customer patterns to understand their needs or pain points.” The executive affirms that the institutions “need to expand the sources of data and improve the capacities to use them to go beyond the clutter and find what matters most to people.”
Customers are already used to seamless, hyper-personalized experiences in their other digital interactions, and they expect the same from their banks. However, many CEOs continue to pursue multi-channel engagement strategies aimed at general audiences, which translates into onboarding processes that are not completed and the deterioration of the brand image.
CTOs should lead coordination efforts to collect, aggregate, and enrich user data. Thus, customer journeys are mapped and their needs are anticipated. Their experiences are real and valuable, no matter the channel. Many FinTech companies are leveraging these methodologies to turn growth into sustainable profitability and long-term loyalty.
In Capgemini’s “Voice of the Customer 2022” survey…
75% of people said FinTech’s fast and affordable services motivate them to consider leaving their current bank.
And it is that its developments are more accessible and easy to use. But it is not a competition, both entities and startups can benefit from the new tastes of the consumer.