How Banking-as-a-Service Will Sustain Financial Institutions Through COVID-19…and Beyond
By Christopher George, SVP of Client Strategies at NYMBUS
As COVID-19 has given rise to a new age of social distancing, the need for uninterrupted digital access to all financial services has never been greater.
A recent Arizent survey found that the biggest areas of investment that financial service companies are making right now as a result of the crisis is for technologies that can enable remote work. Consumer behaviors are also changing with this event, making it equally important to have the adequate tools and staff in place to support the rising demand for digital banking services.
Prior to this epidemic, banks had been warned to make bold changes to reinvent themselves or else face struggles during the next financial downturn. Investments in technology were urged in order to stay competitive with newer rivals and as more consumers are trusting big technology companies to handle their financial needs.
Though it had been roundly predicted, few imagined that a worldwide pandemic would be the driving force behind that next economic disruption. And bold change is no longer just about acquiring tech-savvy millennials or niche digital audiences. This is a far bigger do-or-die moment that had been predicted.
An unprecedented demand for digital
Now is the critical time for banks to digitize both their back-end operations and customer-facing channels in order to compete and survive. For the majority of traditional institutions who are still feeling trapped by legacy providers with outdated and costly banking infrastructures and middleware, modern banking technology is at their fingertips. However, transformation cannot be accomplished with technology alone.
Today’s unprecedented rise in demand for digital availability needs to involve an end-to-end business change that encompasses the bank’s technology, operations and customer management. Core banking technology replaced, internal processes rebuilt, and additional expert staff hired to engage and support the entire digital customer journey.
An end-to-end transformation of this magnitude can take years. Time, however, is not on our side. In order for financial institutions to achieve immediate and complete digitalization, a different business model is required.
Banking-as-a-Service for sustained business
Banking-as-a-Service (BaaS) has progressed to provide all of these mission-critical functions at a fraction of the time and cost previously available to financial institutions. Today, 24/7/365 call centers, business process management support, full-service digital marketing, and all other standard operating functions of a bank can be outsourced to secure, remote and experienced workforces.
This model is also not dependent on a full-blown conversion. Digital-first technology can be implemented on-demand to quickly stand up customized and competitive digital banking experiences. The legacy operation isn’t disrupted, although there is always the opportunity to undertake a larger technology transformation which will ultimately help with future innovation and long-term success.
By bundling entire financial industry solutions with best practice outsourcing, what would cost hundreds of millions of dollars or more can now be achieved in record time for fast return on investment. It allows financial institutions to buy back decades of lost time and get to market almost instantly with modern digital solutions and operational support that their customers demand now more than ever before.
BaaS in response to COVID-19
NYMBUS SmartLenders is a timely example of the speed for transformation provided with BaaS. As our nation’s small businesses face an unprecedented economic disruption due to the COVID-19 outbreak, Congress passed the CARES Act on March 27 which included the very important Protection Program (PPP). With funds available on a first-come, first-served basis, the administration of these loans took center stage. Many institutions are not set up with either the SBA authorization or the modern digital lending tools and services required to process these as instantly as business owners critically demand.
NYMBUS immediately stood up the SmartLenders Program as soon as the legislation was passed, to break down these barriers and help make the PPP loans process simple and fast for participating banks and credit unions to urgently help their local communities. Due to the breadth, depth and flexibility of BaaS, this unified solution replaces the institution’s legacy technology infrastructure for this urgent use case into a rapid deploy PPP solution for banks where they require no knowledge or skills to operate the system. Everything is handled as a service in order to process at speed a high volume of these loans with no changes to their systems or additional work required for their personnel. From the hosted technology platform that operates in Tier 4 Data Centers – to the end-to-end loan processing – to remote and full-service technical professional services (similar to Accenture and others) – to automated communication and forgiveness of the SBA loan. All of this is packaged and ready to go for the bank to immediately assist their customers with fast access to these loans. A short-cut to innovation that is only made possible with BaaS.
The new “banking as usual”
Over two thousand U.S. consumers surveyed in March for this report found that 52 percent of those who regularly visited a bank branch prior to the COVID-19 pandemic are now avoiding them, while another 39 percent are reducing their visits. By contrast, just 14 percent of those surveyed are avoiding grocery stores. How consumer habits are changing as a result of the outbreak is clearly impacting certain business types differently, with banking being profoundly altered.
As social distancing has become a standard precaution in the workforce and daily life, COVID-19 has fast-tracked the world’s digital dependency. When it comes to banking, the luxury of time has run out for financial institutions to implement the digital banking services consumers demand now more than ever. Financial institutions must shed the old brick and mortar model now and leverage an efficient BaaS strategy in order to survive.