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Banking as a Service set to impact financial services in next 12 months

Finastra research reveals that Banking as a Service (BaaS) and embedded banking services are set to have a notable impact on the industry in the next 12 months. 

BaaS set for a prominent role

While all markets broadly anticipate this trend - 85% of respondents at global financial institutions - Hong Kong (92%), the UAE (90%) and Singapore (87%) expect the impact to be greatest.

The ‘Financial Services: State of the Nation Survey 2021’, also finds that most organisations are now deriving the benefits of Open Banking and Open Finance, with the latter considered the natural evolution for the sector. Globally, 94% of those surveyed agree that Open Banking is important to their organisation, with 63% reporting that it’s enabled them to improve customer experience and 59% stating that it’s helped attract new types of customers.

Other banking trends

Alongside BaaS, mobile banking and artificial intelligence are identified as the other top technologies which will be improved or deployed in the next 12 months. 95% of organisations are forecasting that they will look to improve or develop technology in this period. The UAE (44%) and Hong Kong (42%) lead the way when it comes to interest in mobile banking, compared to an average of 36% across all seven markets

Collaboration remains important to 94% of financial services institutions, though there remain several existing and new barriers surrounding regulation, security, and technology. Complex regulations have been identified as a significant barrier, with 40% of global respondents agreeing. France (47%), Singapore (45%) and Germany (44%) picked this as their number one barrier. An increase in security risk was identified as the top barrier by banks in the US, Hong Kong and the UAE (all 40%), while legacy systems and IT was cited as the top barrier to collaboration in the UK (48%).

COVID-19 has acted as an accelerator for businesses to adapt and invest in new technology and innovation, according to 8 in 10 global organisations. Respondents in Singapore (87%), the UK (82%) and the UAE (82%) are most likely to agree.

Financial services organisations are increasingly looking at their organisational purpose. 86% agree that 'financial services and banking is about more than just finance, and we have a duty to support the communities we are serving'.

"Our findings show how financial institutions are already benefiting from Open Banking and, new this year, a growing role for BaaS," said Eli Rosner, chief product and technology officer at Finastra. "We believe that these initiatives have already started paving the way to true Open Finance, helping financial services institutions to develop and enhance the services they provide to their customers. For BaaS specifically, 81% of global respondents see it as a means to grow business, enhance their distribution channels, shorten time to market and streamline operations. Valuable insight from so many financial institutions sets the tone for the evolution of financial services as banks and their customers adapt beyond the pandemic and, together with the industry support they provide, serve their communities better."

Methodology

785 professionals (at managerial level) at financial institutions and banks across France, Germany, Hong Kong, Singapore, the UAE, the UK and the US, are included in the 2021 research. These financial institutions represent a gross total of just over US$34bn in turnover over the past 12 months, employ approximately 2.4 million staff and have approximately 237 million client/customer/member relationships. As a result of rounding up percentage results, the answers to some questions might not always add up exactly to 100%. Respondents were also able to select more than one answer for some questions.

Comparative analysis was made from results of similar surveys run by Finastra in January 2020 and March 2019 which were also conducted online among financial institutions and banks across the same markets (the 2019 survey did not include the UAE or Hong Kong). Research was conducted by Savanta via an online panel (during March 2021).

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