Basker Rangachari, SVP and Head of Brand, Marketing and Customer Experience, Mashreq Bank

Zafin is a provider of relationship banking technology solutions to many of the world’s largest and most respected banks. Founded in 2002, the company has offices in the USA, Canada, UK, Switzerland, UAE, India, Malaysia and Singapore.

With the rise of challenger banks and fintech competition, banks are recognizing the need to embrace Fintech partnerships in order to satisfy customer demand for new and inventive offerings.

Large scale process change can be risky, expensive and difficult to execute, especially in large banks. Aided by superior technology and accommodative regulatory environments, newer and more nimble competitors have made material inroads. They started in lending and payments, but it’s becoming clear that Fintech’s sights are set on disintermediating banks for much more of their core revenue pie.

As a result, banks are increasingly keen to form partnerships with the very Fintech competitors that they initially perceived as a threat.

But how can a bank with multiple, complex legacy technology systems undertake such a partnership? By adopting a Banking as a Platform (BaaP) approach, banks can implement global best practices in back office platform ecosystem architecture.

Within a BaaP ecosystem, banks smooth the way for easier API integration and distribution channels, giving customers access to the products and services they demand in a ‘Fintech-style’ customer experience. Banks can then better engage and serve their customers by delivering innovative financial solutions that drive revenue, rather than constantly defending against competitive forces. This leads to deeper customer engagement, satisfaction, and stickiness – and better profitability.

So, what is BaaP and how does it Benefit the Bank?
By shifting to Banking as a Platform, banks can create a Fintech-friendly integration ecosystem that leaves inherently anti-innovation legacy IT models behind. The right ecosystem is a virtual hub, an “open banking” environment that allows banks to integrate and adopt fintech APIs more rapidly, and respond to customer demands and trends more quickly.

Based on a Master Data Management (MDM) model for both products and customer transactions, the hub aggregates transaction data that can then inform and shape market segmentation and strategy.

The ideal platform would be data-agnostic, accepting and pushing out data in any format without the need to re-map data across disparate systems. This platform hub would take data from payments, clearing, securities, settlements, and API plug-ins; process the transactions; and then push the data out to the core system and general/distributed ledger for proper account debiting or crediting.

This silo-breaking platform creates a “single source of truth” for all products, pricing and customer transactions and offers a clearer picture of the whole customer relationship. Business users are now able to make real-time adjustments to products and prices, automating the changes across up- and down-stream systems. This single change point is easily audited and tracked, thus improving accuracy and transparency.

If you can’t Beat them, Join them
The business case for partnership between banks and fintech is robust. Instead of competing, banks can redirect their budget and labor toward the innovation of better channels and more human, intuitive customer experience design across those channels.

They can then look to their fintech partner as the bank’s outsourced, agile ‘innovation hub’ to deliver the latest in mobile, interactivity, gamification, and more instead of suffering the longer and more costly in-house build.

While banks focus on delivering core offerings and client service, Fintech partners can focus on innovating to identify and solve new market needs. Together, banks and fintech can build a better mousetrap.