“BaaP is a technological and cultural revolution”
Luis García is CTO at Banco Sabadell and has a very clear vision of banking as a platform (BaaP): “It will be revolutionary in terms of how we are going to offer our products and services to customers and how customers will use them”. He also believes that this new model won’t bring new competitors to the world of banking, but rather new partners.
What is banking as a platform?
Until now, the production and distribution of services were fully integrated in the financial sector’s model. However, with BaaP we are opening new channels to offer third parties an opportunity not only to distribute our services but also to provide new ways in which to access them and offer our customers personalised experiences.
Are we close to seeing its implementation?
We are in the preliminary stages. The PSD2 regulation represented a significant boost for the model of banking as a platform but, as with all disruptive changes, there is an initial stage in which it is difficult to tell what the future will look like.
We know that it will form part of the future of banking and that it will change banking as we know it today, but we don’t yet know what the final scenario will be.
What is it supposed to lead to?
In the medium term, it will lead to a surge of innovation in new products and services. Financial institutions don’t have the capacity to seize all existing business opportunities and niches or to meet all of its customers’ personalisation requirements.
This is why banks can’t possibly be expected to apply this innovation using the traditional model. However, the BaaP model will allow all parties that have a value proposition to launch it.
What is the role of APIs in this process?
APIs are one of the entry points of banking as a platform. It is the technology that we use to show customers what services are available, for example, checking account balances and movements or beginning a payment.
APIs are very closely linked to banking as a platform. However, BaaP implies a cultural transformation of the organisation which is profound and very difficult to achieve, as well as the creation of a value chain from the design of our services to their marketing and sale.
How will this model affect personalisation?
The degree of personalisation is going to reach a point when we will be able to launch products and services that have been specifically adapted to each individual customer.
The BaaP model implies combining our products with those of third parties, which can be other financial and non-financial institutions.
What type of products?
At present we have only envisaged combining telecommunications and security products with financial services, but in the future we will be able to combine them with new products that have been adapted to meet specific requirements. For this reason, it is important to show our customers’ data in a secure, regulated and controlled way.
Are banks prepared to implement this new model?
The BaaP model is not only a technological transformation, but also a cultural one. Explaining the concept is not enough to transform people in organisations. They need to start seeing the new products and services and how they can benefit end users.
At Sabadell we are well prepared for adopting this new model. We were the first bank to open our own Open API over three years ago. We have first-hand experience and knowledge that allows us to focus on our cultural transformation. The aim is for BaaP not to be an isolated model, but an important part of how we build and launch our new services.
What about customers?
They are better prepared than banks. There are different customer profiles, but customers who frequently use digital channels to access our services are prepared for this model and they are demanding its implementation.
Although the BaaP business model itself is not all that advanced yet, there are many fintech companies that are making use of the model and it has been well accepted among users. We need to keep up with the times and promote this trend.
How will this affect cybersecurity?
Opening a new channel increases the complexity and risks involved. In this case, we are opening a new channel that allows third parties to access users’ data in a secure manner, with all of the necessary authorisation and authentication measures in place.
At Sabadell we have quite a mature cybersecurity model which is continuously evolving and has been producing excellent results, which makes us confident that we can successfully take on this challenge.
Who will be the new competitors?
‘Competitors’ is the way that we will naturally see them. It is evident that the BaaP model poses a threat, as by separating production from distribution we enter a model in which we are exposed to disintermediation.
However, the opportunity that it presents far outweighs the threat. It will open the doors to new types of products and services and new business models in which we want to take part.
The position of Banco Sabadell, and banks in general, will not be defensive. It won’t be based on implementing only that which is specified in the PSD2 regulation, but on taking the reins and creating a digital ecosystem of services in which we can work together with those who we initially regarded as our competitors.