Re­search Notes – Gold ETF

Banking Frontiers - - Contents -

Till re­cently, bank­ing so­lu­tions de­liv­ered as a ser­vice were pri­mar­ily adopted by non-bank­ing fi­nan­cial in­sti­tu­tions that wanted to tran­si­tion from a lend­ing only model to a de­posit-tak­ing firm. It was also con­sid­ered a good op­tion for smaller banks that did not have the ca­pa­bil­ity to mas­ter the com­plex­ity of in­te­grat­ing and man­ag­ing mul­ti­ple tech­nolo­gies and so­lu­tions. How­ever, new bank­ing for­mats that have been around for the past cou­ple of years and in­creas­ing cus­tomer ex­pec­ta­tions and reg­u­la­tory re­quire­ments have chal­lenged banks to es­tab­lish new ca­pa­bil­i­ties quickly and of­fer new cus­tomer-fo­cused prod­ucts and ser­vices.

Bank­ing-as-a-Ser­vice (BaaS) is an in­te­grated set of tech­nol­ogy ca­pa­bil­i­ties that al­lows a bank to es­tab­lish a com­plete and in­te­grated bank­ing ap­pli­ca­tions tech­nol­ogy base work­ing with a BaaS ser­vice provider. It can be highly scal­able and cost-ef­fec­tive, and i ncludes a host of ca­pa­bil­i­ties cov­er­ing Core De­posit and Lend­ing sys­tems, Di­rect and As­sisted Dig­i­tal chan­nel ca­pa­bil­i­ties, Com­pli­ance-re­lated and Reg­u­la­tory re­port­ing ca­pa­bil­i­ties, au­to­ma­tion of Orig­i­na­tion pro­cesses, ca­pa­bil­i­ties to op­ti­mize cus­tomer ser­vices and sales, and a com­pre­hen­sive span of pay­ment so­lu­tions to­gether with all ex­ter­nal in­ter­faces that are es­sen­tial for a bank to func­tion. The ser­vice can also be used by the Bank to fur­ther ex­tend its ca­pa­bil­i­ties via other owned tech­nol­ogy as­sets that use th­ese un­der­ly­ing ser­vices.

Typ­i­cally, a hosted bank­ing plat­form i s pro­vided by an ap­pli­ca­tion ser­vice provider. This could be de­liv­ered as cloud-based host­ing or host­ing in a data-cen­ter with co-lo­cated in­fra­struc­ture man­aged by the provider. In ad­di­tion to the Ap­pli­ca­tions them­selves, the of­fer­ing in­cludes all el­e­ments of in­fra­struc­ture main­te­nance and sup­port needed for th­ese ap­pli­ca­tions cov­er­ing com­pute, stor­age, net­work­ing and se­cu­rity com­po­nents, with the as­sur­ance of poli­cies and stan­dards ad­hered to, de­liv­ered via ded­i­cated or shared en­vi­ron­ments. The BaaS ser­vice provider also mon­i­tors the ap­pli­ca­tions and tech­nol­ogy in­fra­struc­ture health, based on the bank’s ser­vice level re­quire­ments and takes pre­ven­tive and cor­rec­tive mea­sures as re­quired. Cus­tomer and in­ter­nal user sup­port ca­pa­bil­i­ties that can be de­liv­ered for use by the banks in­clude con­tact cen­ter ca­pa­bil­i­ties, and end-user op­er­a­tional sup­port help desks. The stack can also in­clude tech­nol­ogy ca­pa­bil­i­ties to sup­port fur­ther au­to­ma­tion of cus­tomer-fo­cused busi­ness, trans­ac­tion and pay­ment pro­cesses.

A pre-in­te­grated set of so­lu­tion com­po­nents can re­duce the to­tal cost of im­ple­men­ta­tion and own­er­ship, pro­vid­ing cost ben­e­fits to clients, ul­ti­mately adding value back into the Bank’s busi­nesses. This also pro­vides a sound base to help ex­pe­dite fu­ture im­ple­men­ta­tion costs and time­lines.

In­sti­tu­tions that can ben­e­fit from the BaaS model

Firstly, small fi­nance banks have re­cently made foray into the In­dian bank­ing sec­tor and more such SFBs are ex­pected to be launched over the next few years. With sub­stan­tially smaller tech­nol­ogy in­vest­ment cap­i­tal, th­ese in­sti­tu­tions can greatly ben­e­fit from this model. Through the BaaS model, they can not only avoid high capex costs but also di­rect valu­able cap­i­tal to­wards the busi­ness, thus show­ing bet­ter IRR and bet­ter prof­itabil­ity.

Ex­ist­ing and new Non-Bank­ing Fi­nan­cial In­sti­tu­tions (NBFCs) look­ing at ven­tur­ing into new prod­uct ar­eas can also ben­e­fit by adopt­ing this model. It en­ables them to en­ter new seg­ments and mar­kets with­out large-scale in­cre­men­tal in­vest­ments in tech­nol­ogy, hu­man re­source, etc., and can use this as a way of ex­pand­ing into new ca­pa­bil­i­ties speed­ily.

Smaller ur­ban co­op­er­a­tive banks and re­gional ru­ral banks (RRBs) can lever­age the BaaS so­lu­tion providers’ ex­per­tise and scale to of­fer a ma­ture so­lu­tion stack that can en­able them to fo­cus on their busi­ness. Such plat­forms of­fer an easy model of scal­ing up as their busi­ness ex­pands, and takes off the large load of man­ag­ing tech­nol­ogy, to al­low them to fo­cus on busi­ness growth with no re­straints.

Or­ga­ni­za­tions that have got the new par­a­digm right

Glob­ally, across many ma­ture mar­kets such as the US, many fi­nan­cial and non-fi­nan­cial in­sti­tu­tions such as co­op­er­a­tive banks and lend­ing in­sti­tu­tions have ben­e­fited from hosted and SaaS so­lu­tions. There are many ex­am­ples of such ser­vice providers in th­ese mar­kets who ser­vice hun­dreds of in­sti­tu­tions in such a model suc­cess­fully while of­fer­ing a sta­ble, com­pli­ant, scal­able and com­pre­hen­sive set of bank­ing tech­nol­ogy ca­pa­bil­i­ties to their cus­tomers.

Some of the other ben­e­fits they de­liver in­clude:

In­creased speed to mar­ket for new prod­ucts and of­fer­ings

Min­i­mized up-front cap­i­tal ex­pen­di­ture with vari­able pric­ing mod­els

En­hanced cost syn­er­gies out of ac­qui­si­tions pro­vid­ing cost/in­come im­prove­ments Re­duced reg­u­la­tory in­vest­ment over­heads Sig­nif­i­cant op­er­a­tional ef­fi­cien­cies through out­sourced trans­ac­tion pro­cess­ing

Lower costs in launch of seg­mented prod­ucts Ac­cel­er­at­ing per­for­mance and com­pli­ance

Con­tain­ing costs while ac­cel­er­at­ing prod­uct and ser­vice time-to-mar­ket

In sum­mary, the BaaS model is an in­no­va­tive, easy to adopt so­lu­tion that en­ables fi­nan­cial in­sti­tu­tions to avail of a com­pre­hen­sive set of ca­pa­bil­i­ties pro­vided by the ser­vice provider. There is sig­nif­i­cant busi­ness value to be ex­tracted through such of­fer­ings across:

Cap­i­tal re-di­rec­tion to busi­ness

Lever­ag­ing ser­vice provider’s economies of scale in re­la­tion to tech­nol­ogy com­po­nents and ex­per­tise

En­abling speedy ex­pan­sion of prod­uct range and foot­print

Al­low­ing fi­nan­cial in­sti­tu­tions to fo­cus on a roadmap that is cen­tered on busi­ness goals rather than ap­ply­ing mind­share to man­ag­ing tech­nol­ogy

Har­ish Prasad

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.