When Federal Treasurer Jim Chalmers hands down the budget on 14 May, the pressing need for fiscal responsibility is likely to trump spending programs.
In an era of fake news, it’s getting more difficult to separate fact from fiction. Yet it’s imperative we do so because the consequences for being deceived can be enormous.
‘Banking-as-a-Service’ demand surges despite end of lockdown
Throughout the pandemic, forced lockdowns and city-wide restrictions forced the transformation of digital technology, with demand to enable greater transparency, quicker speeds and higher efficiency sped-up by several years.
According to a McKinsey report, the pandemic accelerated the digitisation of the customer and supply-chain interactions by three to four years. And one area that has been brought to the forefront are the Banking-as-a-service (BaaS) platforms.
BaaS platforms are end-to-end models that allow digital banks such as neobanks, and other third parties, to connect with banks’ systems directly via application programming interfaces (APIs). This then creates a unique opportunity for this third party to build a bank offering on top of its existing product offering. This has the potential to reshape the global financial services landscape.
For example, a non-financial business such as an airline company can distribute financial products under its own brand, such as a savings account. The customer experience is of buying a product from that brand, but the financial product is from the financial institution.
What’s the benefit?
- For a financial institution – it means acquiring more customers at a lower cost.
- For the third party – being able to offer clients financial products that will in turn open up new revenue streams and attractive margins.
The beauty of a BaaS service is that your customer is able to access banking services directly through the company (airline) website without actually being directly involved or having to fulfil regulatory duties that a bank must undergo. Basically, the product is white-label banking.
Australia is home to two BaaS players that we now take a closer look at:
Douugh (ASX:DOU) – One of the first neobanks to list in Australia, Douugh has actively pursued branded and white-labelled licensing partnerships to leverage a wholesale BaaS model. It also delivers a software-as-a-service (SaaS) delivery model.
With its next generation neobank app, Douugh can offer its BaaS model to potential clients. It uses AI and machine learning to interrogate a user’s personal income and spending data to help produce individually tailored financial solutions aimed at helping its customers become better savers. So far, Douugh has partnered with credit unions, doubled its US customer base and grown its funds under management (FUM) to more than $4.5 million.
The next big step for Douugh is “Autopilot,” the company’s unique automation feature that distributes your salary using the perfect ratio of funds to your “savings,” bills” and “emergency” Jars, and checking account. Automating money management is Douugh’s solution to reaching goals and living financially healthier.
Change Financial (ASX:CCA): Change is a global payments Banking as a Service (BaaS) platform that offers solutions to businesses and financial institutions, providing innovative infrastructure and tools for building customisable payment solutions. It has built its platform as a global enterprise payments and card issuing platform that spans more than 120 customers in 36 countries. It boasts some of the biggest ASX-listed clients which include the big four Australian banks, major Australian supermarkets, Asian and South American banks and fintechs. The attractiveness of its platform solution is that it allows its customers to offer mobile banking applications under their own brand i.e. a white labelled Banking-as-a-Service (BaaS) solution. It also features InstallPay, a BNPL platform that offers payments to be split.
And that’s BaaS. It’s an evolving ecosystem of banking product providers without borders that can cater for specific needs and payment challenges.
