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16-02-2012

Think radical, think Banking as a Service (BaaS)

What if you were to think about traditional banking upside down

You have been running the huge back-end called banking which is both complex and regulated. And you also interact with the consumers directly. The customer touch-point has over time become much dependant on technology.

Can you think of giving up customer centric structure to a third-party technology company and restrict your direct sphere of influence to running the back-end banking structure.

This radical thought is propounded by Anastacia Anishchenko, a researcher with Quid Software which specializes in data analysis and visualization for decision makers.

Anishchenko says that there are very different skills to be a bank which is a highly regulated industry. The banks have to grow to be reliable institutions capable of taking large risks. With customer behaviour changing very fast, banks are forced to adapt to it. They have to engage customers using new technologies. "To do this we need agility and fluidity. That's what banks do not have. They may not be able to afford it," says Anishchenko.

Bank as a Service (BaaS) could be a winning model. Banks sit on vast amounts of structured data and if a technology company can combine this with vast amounts of unstructured data generated through social media interactions of customers, then it can be a win-win situation for all. A BaaS model can make this happen more rapidly than a bank trying to grow technologies to handle such data or innovate technologies to interact with customers.

While the idea is radical, Anishchenko is not lost to the reality that stringent regulations may not make this entirely possible. However, she pointed out to some of the examples of BankSimple (now Simple) in California which is front-ending for banks selling their products to the customers. They are able to tap into a customer base hitherto ignored by banks, thanks to tapping to unstructured data.

Such small revolutions are entering the Indian market as well. There are companies in India who are specializing in taking banking and financial products to customers. There are huge regulatory impediments to such engagements, though.

World over banks work very closely with technology companies. Either they are home-grown and spun off technology divisions or service providers who work with banks over long periods of time. It won't be long before both banks and technology companies think up radical BaaS models. When it does, be ready.

 

By Our Asia Correspondent


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