BaaS can represent an opportunity for banks to expand their revenue sources. But to be successful, it’s important to keep in mind some key success factors. Chief among these is an internal, top-down organizational alignment around pursuing these opportunities. A scalable, API-based technology platform is also necessary, along with a fintech partner who is aligned in terms of the institution’s capabilities, risk tolerance, and target customer profile.
The payments space is evolving rapidly. Key trends in 2023 include real-time payments and the increasing adoption of business-to-business digital payments. Digital wallets are continuing their rapid growth trajectory, and digital currencies will likely survive the FTX debacle and continue to evolve. While digital identities still have a host of implementation challenges, they will likely be an important longer-term play. In developing strategies in these areas financial institutions need to research the appropriate technologies, embrace partnerships, and maintain a focus on security.
Creating quality customer experiences that mirror those offered by fintech and big tech companies can be a major challenge for traditional financial institutions. Often product and data silos, outdated technology and processes, and a risk-averse culture get in the way of success. This creates an opportunity for partnering with startups and other third-party solution providers that can bring their strengths to these areas, along with the agile mindset needed to deliver enhanced experiences.
New customer acquisition is the number one concern for bank executives as we enter 2023. The competition is intense, and convincing customers to change financial institutions is challenging. The biggest opportunities may lie with Gen Z and Millennials who are more willing to try new service providers as their financial needs grow. Key to attracting these demographics is having a strong digital banking platform. The organization’s reputation and values are also important. And while most of these customers prefer to use digital channels, having a branch network available can also be an advantage.
‘Tis the season for predictions, and here’s another list of banking industry trends to watch. Open banking will continue to gain momentum, particularly as the CFPB continues its work related to consumer data rights. Real-time payments will get a big push with the introduction of FedNow. And small to medium-sized businesses continue to be a huge opportunity, particularly for institutions willing to partner with fintechs to deploy innovative solutions.
