The traditional vertically integrated business model of banking faces significant profitability pressures, driven largely by low margins and declining interest income on core products. Banks are looking at opening up new sources of revenue and new methods of creating value. Some institutions are exploring Banking-as-a-Service (BaaS) as a new business.
Celent defines BaaS as being “the producer/supplier of products and capabilities, leveraging third parties to either distribute the product or add value on top of supplied functionality.” There are a few reasons why we find this compelling:
- BaaS opens new revenue streams for institutions and enables institutions to tap into the power of the platform business model.
- BaaS significantly broadens the reach of BBVA, allowing it to act as the infrastructure provider for functionality and customers far beyond its own distribution networks.
- APIs are making it much easier to launch banking products, as institutions can begin leveraging a more “plug and play” approach which offers increased agility and flexibility.
BBVA has been a consistent leader in digital banking, being one of the earliest banks to launch an API developer portal and modern digital functionality. It continues this commitment to being at the forefront of innovation with the launch of BBVA Open Platform, a development platform which gives third-parties access to financial services that they can white label as their own.
“Banking-as-a-Service becomes a powerful vehicle for innovation when it enables companies to infuse banking services across industry verticals, beyond financial services.” - Abhishek Gupta, Head of BBVA Open Platform
