Banking-as-a-Service (BaaS) will hit mainstream adoption within two years, according to a report from Gartner on the future of digital banking.
Indeed, Gartner predicted that 30 percent of banks with greater than $1 billion in assets will launch BaaS in the search for new revenue by the end of 2024, and that non-banking entities will start to embrace BaaS offerings.
BaaS is a set of financial services offered by chartered banks or regulated entities to power new business models for companies like fintechs, neobanks, and non-financial entities. This new model has deep implications for how organizations will build financial features into their customer-facing experiences and products.
The benefits of BaaS are particularly clear for non-banking entities, which can leverage a regulated bank’s license to create innovative customer experiences rather than applying for their own charter.
As Jeff Casey, Senior Director Analyst at Gartner, said:
“Technology innovations like these are driving bank and nonbank competitor activity, influencing customer demand for product and services, and shaping regulators’ actions globally.”
Alongside BaaS, Gartner predicts that chatbots, public cloud for banking and payments via social messaging apps are innovations poised to disrupt the customer experience in the banking world and beyond.
“Chatbots represent one of the primary use cases of artificial intelligence (AI) in banks and will impact all areas with communication between machines and humans,” said Gartner in the report.
The company pointed out that chatbot uses are diverse, highlighting that the change from “the user learns the interface” to “the chatbot learns what the user wants” has implications for onboarding, training, productivity and efficiency among the company’s employees.