BaaP (Banking-as-a-Platform) is an operational business model that “puts banks at the
forefront of consumers.” In their latest whitepaper, the researchers highlighted “how BaaP can help traditional banks regain their competitive edge against neobanks.” This, according to the Juniper Research team.
Through collaboration with innovative vendors, banking institutions can “offer new services from partners, including embedded insurance, lifestyle offers with leading brands, or access to HR services for small businesses,” the team Juniper Research explained.
Juniper Research defines a Banking-as-a-Platform as follows:
“Banking-as-a-Platform is a business model that enables third-party partners to
build products and services for bank customers; most commonly a technology
company that can provide APIs while the bank manages data exchange, oversees
authentication and ensures compliance.”
As noted in the report from Juniper Research, BaaP is a business model “that allows third parties, such as software or technology companies, to build apps and functionalities on the core platform for consumers.”
As explained in the Juniper Research report, the bank is “a net consumer of partner APIs and open data, because it aggregates its traditional solutions alongside the new digital services from third-party developers.” As a result of this, banks are able “to offer a wide range of services on top of their core banking system.”
The Juniper Research report added that the core banking platform “includes areas such as banking licences, bank accounts, customer database, credit/debit cards, compliance and eWallets.”
As noted in the update, third-party partners are “selected by banks depending on the best offer/bidder for each service.” The key areas third-party services “can cover include investing, trading, brokerage, wealth management, insurance and many more.”
The platformization movement we observe in most sectors “refers to a shift from individual products and services as intermediaries for transactions.”
As mentioned in the Juniper Research report, banks that “recognize the value of AI and technologies that enable better customer success and business experience are moving towards a BaaP operating model.”
The main or primary strategic goal of banking institutions “when adapting to a platform banking business model is to become involved in partnerships which can improve their product offering for both retail and corporate clients.”
As mentioned in the report, banks level command-and-control structures “to speed decision-making and bring people together in teams that focus on delivering solutions that customers value.”
Each platform is largely self-contained in “producing business and technology outcomes, and autonomous in prioritizing its work to meet strategic goals and clearly defined areas of specialization.”
The report further revealed that the majority of products and services “focus on financial services.” The Juniper Research market report also “covers the solutions that are common across the majority of banking platforms, such as payments, wealth management, foreign exchange, insurance, lifestyle and crypto.”
The report further noted that global revenue “from BaaP (Banking-as-a-Platform) services will increase to $49 billion globally in 2028, from $4 billion in 2023.”
Juniper Research also noted that BaaP can “help traditional banks regain their competitive edge against neobanks.”
The research report pointed out that “through collaboration with innovative vendors, banks can offer new services from partners, including embedded insurance, lifestyle offers with leading brands, or access to HR services for small businesses.”
The report also mentioned that banking institutions can “utilize partnerships with industry leaders to build upon their core banking model; helping them compete with fintechs by offering more user-friendly services.” Compared with traditional acquisitions, BaaP partnerships “are highly flexible and can be easier to integrate, as banks transition to API-focused models.”
By offering a wide range of services via BaaP, banks can gain a competitive edge “without having to stray from their core business.”
As stated in the report from Juniper Researach, banking marketplaces “are the most effective way for banks to adapt to the digital age; helping them create financial services ecosystems that offer personalized customer experiences, without developing services themselves.”
For example, digital bank Revolut has extensively “expanded its lifestyle offerings in-app; creating its own ecosystem of services, without taking on the costs traditional banks have faced in expanding services.”
In turn, customers benefit from innovative solutions “that are tailored to their needs; increasing satisfaction and improving the stickiness of their banking relationships.”
The report from Juniper Research concluded that banks must “evaluate which services are core, and which services can be replaced by working with innovative third parties; enabling banks to improve services being offered, while reducing costs in a difficult economic climate.”