Banking as a service, among the technologies with the greatest potential for disruption in the sector

The banking as a service it will become a popular adoption service within two years. And according to Gartner it is among the four technologies with the greatest transformative potential in the sector a couple of years from now. According to this consultancy, 30% of banks with more than 1,000 million dollars in assets will launch banking services as a service (BaaS) to obtain new income by the end of 2024. Of course, half will not meet the income expectations they had as target.

The other three technologies that have the potential to achieve high levels of transformation in banking are chatbots, the public cloud for banking and social messaging payment apps. Given what they are, entity CIOs should consider how key innovations are shaping their industry, and prioritize their technology investment strategies accordingly.

Banking as a service has the most potential to bring about notable changes. It is gaining relevance for both banks and non-bank companies that aspire to establish, or improve, direct and intermediated business flows.

BaaS can be a discrete or broad set of financial services functions put forth by regulated entities or state-owned banks to fuel new business models deployed by other banking market participants such as fintechs, neobanks, traditional banks and others.

Entities participating in the market are increasingly drawn to corporate models that allow for improved customer experiences. These include richer features, more variety of products and innovative customer experiences. Non-bank industry participants benefit from quick entry access to the banking market by leveraging a regulated entity’s license, rather than seeking their own access.

The chatbot they are one of the main cases of the use of Artificial Intelligence in banks, and will have an impact in all areas with communication between machines and humans. Although they are mainly used in customer service, IT service management or human resources, the uses of chatbots are very diverse.

The shift from “the user learns the interface” to “the chatbot learns what the user wants” has implications for entry, training, productivity, and efficiency in the workplace.

The sophistication of the enterprise AI conversational platform market has led to the development of enhanced banking tools, which are used to build and maintain chatbots that employ non-IT resources. The operationalization of non-IT business units is making chatbot production a more productive activity.

Refering to public cloud adoptionis becoming a very transformative element for the banking sector, as banks can achieve greater efficiency and agility with it by moving workloads to the cloud.

Public cloud for banking offers specific software in a public cloud ecosystem integrating these applications to varying degrees, ranging from cloud-based to completely native.

Banks achieve agility by rapidly scaling up and down to support changes on demand, as well as compliance with regulations covering temporary needs. Resources are released for the development of digital assets by centralizing and optimizing them.

Fixed costs are reduced by avoiding oversized infrastructures, and cost structures are optimised. Banks can also centralize applications and platforms that facilitate development and testing, avoiding duplication and overlap.

The payment apps for social messaging they rely on instant messaging platforms to originate payment transactions. The interface of messaging apps is used to register payment accounts, as well as to initiate and monitor related transactional activity.

The modernization of the payment infrastructure, and the ability to use open banking and payment APIs offer new entrances for social messaging apps to offer payment services.The adoption of social messaging apps has transformed the behavior of both purchasing as payment. Especially in Asia, with apps like Kakao Pay, WeChat Pay and WhatsApp Pay.

According to Jeff Casey, Lead Analyst at Gartner«these banks typically have ambitions to generate and diversify their business flows, or to a lesser extent, aspire to extend already-made regulatory investments, such as PSD2 in Europe, in revenue-generating machines. Innovations in technology, such as these, are driving the competitive activity of banks and non-banks, influencing customer demand for products and services, and shaping the actions of regulators globally.«.

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