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Banking-as-a-Service (BaaS) enables firms to fill business model gaps and address three core challenges – Accessibility, A data-centric approach to credit risk and Cost of banking- related to the unbanked/underbanked segment, says a report.

The World Retail Banking Report 2021 from Capgemini and Efma explores an era where banking is invisibly embedded within customer lifestyles to provide a sustainable, experiential customer journey.

As the economic fallout of COVID-19 continues, post-pandemic disruption has ignited a new era of value-based customer-centric banking, which the report refers to as Banking 4.X. To succeed in Banking 4.X, banks must embrace digital transformation and implement BaaS platform models, which utilize APIs to embed banking in everyday life, making it more accessible and inclusive for banking customers.

“To improve financial inclusion, banks and FinTechs must focus on three things. Facilitate quick, economical and seamless onboarding in real-time,” says Agora Services, US, CEO and Co-founder Arcady Lapiro.

“Emphasise customer experience by communicating through the right channels and offering products consumers, need. And complement core bank products with value-adding services for customer delight,” he added.

The Report draws on insights from two primary sources – the Global Retail Banking Voice of the Customer Survey 2021, and the Retail Banking Executive Surveys and Interviews 2021. The report includes insights from 23 markets, over 8,500 banking customers and over 130 senior executives of leading banks and non-banking firms across regions.

Flexible banking

Over the last 10 years, neo-and challenger-banks have attracted more than 39 million customers. The report finds that currently 81% of consumers said easy access and flexible banking will motivate them to switch to a new-age financial provider, in lieu of their traditional bank.

Meanwhile many traditional banks are seeking to retain and grow their customer base and have already embarked on their digitalization and costs optimization journey, as the COVID-19 pandemic forced them to substantially accelerate their efforts.

In addition, retail banking customers faced with pandemic-driven realities now expect on-demand, fully digitalized experiences, hyper-personalized services, and around-the-clock assistance.

However, of those surveyed, 46% of bank executives say they are unsure how to embrace open banking, orchestrate ecosystems, and become a truly data-driven organization. These actions are essential components of the new way of doing banking, identified by Capgemini as Banking 4.X.

“By overcoming outdated legacy mindsets and adopting Banking-as-a-Service, financial institutions will move beyond their core banking products, create new offerings, and provide their customers with personalized experiences,” says Capgemini’s Financial Services CEO and Group Executive Board Member Anirban Bose.

“Banks must focus on how they can add value to their customers to retain and engage them. Through platformification and by leveraging data, banks can better cater to the needs of the modern customer as well as create new revenue streams,” he added.

Platformification defines a new era for the industry Incumbent banks can unlock new value in open ecosystems via BaaS platforms, which offer access to new data sources and monetization opportunities.

Banks need to quickly turn to experience-driven, platform-based approaches, which embed banking and other services within consumer lifestyles. On a positive note, 66% of banks claim to already use a BaaS platform, while 25% are in the process of developing one.

“Banking and non-banking firms have the opportunity to come together and empower better customer service,” says Efma CEO John Berry.

“These strategic partnerships enable new, creative offerings that reflect customers’ lifestyle, needs, wants, and even personalities. Banks should focus on improving support, reducing the costs of banking products and services, and offering sustainability initiatives. The future of banking relies on a strong digital foundation and a flexible attitude toward embracing innovation,” he added.

BaaS offers unprecedented opportunities to gather data through ecosystems, with more than 86% of consumers saying they would share their data to gain a better, more personalized experience. Incumbents need to build digital capabilities to harvest these data ecosystems to create, retain, and increase value in the Banking 4.X era.

Banks, however, need to act quickly. Capgemini and Efma’s report found that 61% of firms lack a dedicated customer experience (CX) management team to define customer roadmaps. Banks can drastically improve their customer experience by deploying a digital CX layer and reimagining branches as experience centres, to offer consistent and secure omni-channel experience across all touchpoints.

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