Lessons for banks from how neos are embracing platforms

  • By Christine St Anne

Momentum behind banking as a service platform will grow, and with neobanks as early movers, there are a number of lessons for the big banks.

Westpac already announced it would adopt a BaaS model. The shift to this type of platform is also being eyed by a number of mutual banks.

Most recently Volt Bank introduced a BaaS platform which enabled it to pivot its business amid challenging time, a move that could signal a new future in banking. 

Volt Bank CEO Steve Weston outlined the bank’s approach at the RFi Group Australian Banking and Innovation Summit/

Weston was on a panel, moderated by Backbase regional vice president Malcolm Macnaughton that included Up co-founder Dom Pym. 

The neobank recently launched the BaaS platform dubbed Volt 2.0 which is slated for release in 2021. 

The digital platform allows Volt’s approved business partners use its full-service banking and payments to their own clients and will act as an extension of pre-existing Volt partnerships with a number of household brands.

Weston said the platform will bring in multiple brands and diverse customer types, delivering “unique and “valued” customers with the opportunity to  white-label banking where retailers could offer financial services to customers directly or via their existing loyalty programs.

Volt is also eyeing a third rollout of the platform – which will have a “longer gestation period”.

This rollout will mean Volt 2.0 can be used by other banks, that through a white labelled platform. 

“We will look at testing and rolling out that platform first in Australia with smaller banks and then if it is a proved model it will become a global play for Volt.” 

For Up’s Pym, this approach has already been driven years ago through his firm Ferocia. 

The business worked closely with Bendigo Bank to build the digital bank Up on top of the core banking facilities of Bendigo.

Pym sees this as the future of banking. 

“There are essentially two approaches to delivering these technology solutions,” he said.

“One approach is to build it yourself and the other is so work with partners to build it out.”  

He highlights the “experience” and “pedigree” of Ferocia has garnered from working 10 years with businesses like Bendigo.  

A number of Bendigo’s different brands now use the Ferocia platform in order to service their customers through mobile and internet banking. 

“It’s been a really good opportunity for us to develop that kind of banking as a service type of model.” 

Like Volt’s aims, Ferocia has also licensed this platform a few years go to several of the bigger banks in Australia and overseas.  

Lack of collaboration 

However, the strategy remained as a proof of concept. 

Nevertheless, Pym sees the bank’s interest as spearheading the work done form other banking as a platform/service provides around the world.  

“This is definitely the future.” 

Incumbents are of course are burdened by legacy systems but for Pym, banks should not be too caught up on concerns around outdated systems. 

Instead, banks should have “one eye on the future,” by building great customer experience, engagement, channel management, features, functionality and user experience that can be “back-ended” by these legacy systems or even through cloud-based systems. 

“We should be more worried about how we deliver this type of platform in order to customize and deliver a unique user experience for different cohorts or different customer groups. 

“That is where banking has been heading, and certainly illustrative in what Steve [Weston] is doing with Volt”.

For Pym, however, this shift towards models like BaaS does not have the same momentum in other global markets, in part due to lack of collaboration. 

“What I would say in Australia is that there has been a lack of collaboration between those banking as a service providers, fintechs and the major banks.” 

According to Pym, since the Ferocia/Bendigo tie-up, there has been a “bunch of others” come along, highlighting examples such as the Douugh/Regional Australia Bank tie up. 

Most recently of course is Afterpay’s joint venture in Westpac’s new BaaS. 

“We are starting to see a little bit more momentum,” he said.

Pym recognises that in Australia, the sector has benefited from a reliable trustworthy financial system, compared with turmoil in other markets. 

This turmoil has driven global peers to rethink new approaches, looking at new different models and new ways to evolve. 

As Australia’s neobanking sector grows, Pym sees a market ripe for disruption. 

“While we have not had the same impetus in Australia, but now with the neobanks launching and chomping at the heels of the incumbents, we are starting to see these different models start to take shape and evolve. 

“But we're really at the infancy. Over the next decade, we'll see it, we'll see it growing out and becoming more commonplace.”