Banking as a Service — the Next Evolution of Real-Time Digital Banking Experiences
What does it mean to create banking experiences for mobile-first consumers? As the banking industry continues its digital journey, consumers are coming to expect more control over their data, greater convenience, and “anytime, anywhere” accessibility. This has turned the traditional models of how people make purchases and secure services upside down.
A simple definition of BaaS is that it extends banking services outside of traditional brick-and-mortar branches; offering an invitation to do business through the mobile and web experiences our customers increasingly favor. If you can hail a rideshare or book a place to stay from your phone within minutes, why should banking services be any different? In our digital age, customers don’t want their access to financial information to be limited by operating hours and proximity to tellers. That closed system mindset has become outdated as more and more financial services are being offered outside the physical boundary of the bank.
Therefore, in order to compete and succeed, we must acknowledge that the customer is at the center of their own life and we must provide them with safe, real time, automated, intelligent solutions to their financial needs. By integrating into their digital lives, all hours become operating hours, all locations banking locations, and our ability to meet our customers’ needs is greatly expanded.
This Disruption Can’t Happen in Silos
It’s crucial for the financial services industry to shift to a more open way of conducting business. As consumers embrace more open networks and shared technologies, we must embrace more open collaboration as well.
Capital One has built relationships with subscription-based services to ensure access to the movies and music you love isn’t disrupted by issues with your payment method. Together, we’ve teamed up to build an experience, not just an API, which reduces friction from subscription-based services so the customer never sees a disruption in that service.
Why would a bank enter into this kind of partnership? Because this disruption can’t happen in silos. We no longer live in a day and age where one single company or individual can build the ultimate experience. Collaboration and consolidation are key to BaaS; especially as real time, instantaneous, trusted results become the consumer expectation. To think any one company can be the sole proprietor of this shift is living in the dark ages.
The Winners Will Be Tech Companies First, Banks Second
Central to BaaS is the belief that great banks need to take all the things banks have historically excelled at and incorporate technology into them. It isn’t enough to have the best investment team or financial analysis team — banks also need the best teams building software, leveraging data analytics, incorporating machine learning, and creating transformative customer experiences to win.
Therefore, you will increasingly see the winners in banking operate more like leading technology companies, centralizing the digital experience in their roadmaps for the future. After all, there is a lot of complexity in banking and with so many customer touch points, there’s really no other industry with more opportunity for rethinking what’s possible with data, with the digital transformation, with the customer experience.
The Future Will Be Platforms
This disruption also can’t happen without a platform mindset. Whether you’re looking for a place to stay, finding a ride, or managing your finances, it is increasingly likely that you’ll rely on a platform company to make it happen. And with good reason. By decoupling technology from distribution, platforms allow customers to get more of the services they want, when and where they want it. Encouraging greater openness and information-sharing gives platform companies an edge, allowing for massive scale and faster access to the newest features.
You’re seeing this shift across industries, from banking to the automobile industry. Take a look at what Tesla is doing with self-driving cars — they are taking the best of already existing services (such as using Google Maps for the mapping system, steering wheel column from Mercedes Benz, etc.), leveraging those in their cars. And the on the flip side, they made some of their patents available and open for others to use “in good faith” in their automobiles.
BaaS — Evolution or Revolution?
While there are sparks of revolution, I believe that BaaS has been more of an evolutionary process. A major change like this doesn’t happen overnight. It’s a total mindset and cultural change within an organization, effecting everything from the way you build products, to how you implement checks and balances, to how you ensure that the customer experience remains front of mind at all times.
What we’re seeing today with BaaS is a necessary shift in the bank/customer relationship. Driven by decreased branch reliance and a greater adoption of digital and mobile capabilities, we’re focused on building solutions that provide our customers with valuable, effortless, trusted, and personalized experiences. This is really the heart of what we’re doing as a bank and an industry — making things simple, straightforward, and providing an experience that fits more naturally into people’s digital lives. That way, our customers can live their best lives confident that we have their back at all times, not just during business hours.
DISCLOSURE: The opinions in this blog are the opinions of the authors/interviewees and not necessarily the opinions of Capital One. Unless noted otherwise in this post, Capital One is not affiliated with, nor is it endorsed by, any of the companies mentioned. All trademarks and other intellectual property used or displayed are the ownership of their respective owners. This blog post is © 2018 Capital One.
