The Australian bank Westpac views “banking-as-a-service” as a way to evolve with changing customer demands.
Westpac is collaborating with Uk-based cloud-native banking technology provider 10x Future Technologies to create a standalone digital “banking-as-a-service” (Baas) platform. It is scheduled to be launched by the end of next year.
Westpac CEO Brian Hartzer described the bank’s plans to build a greenfield platform on 10x’s next generation core banking stack. The open banking platform will enable Westpac’s institutional customers and fintech partners to offer Westpac banking products to their customers.
“A modern core banking stack allows you to support customer needs with new data and AI applications, while also significantly lowering the cost-to-serve. And that’s what 10x is. While it’s still young technology, we see this as a way for Westpac to test and explore new capabilities that might become directly relevant to Westpac’s core business in the future.”
10x was founded in 2016 by former Barclays CEO, Antony Jenkins. The platform leverages advancements in data security, artificial intelligence, predictive analytics, and chatbot technologies delivered through an intuitive user experience.
Banks all around the world are undergoing transformations to develop their digital capabilities. Banking-as-a-service is a recognition by legacy banks of changing consumer preferences.
“Being a truly digital-ready bank is about more than having a cool app. Because apps can be copied, customer experience can be copied. Of course, you need to have that great customer experience, absolutely, but you also need to be set up to run yourself in a digital way internally, but also to partner with some of these news fintech companies and new services that we want to make available to our customers,” said Hartzer.
BaaS is an increasingly attractive revenue opportunity for banks. As open banking has taken hold in the industry, banks are searching for new ways to use their existing infrastructure in creative ways. Opening their platforms to third parties is one such way for banks to capitalize on their assets while meeting customers’ needs.
With that being said, it can be difficult for legacy banks to shake their historical roots. They still show a determined commitment to their core business, as demonstrated by Hartzer in announcing Westpac’s digital banking foray: “In the long term, if that platform proves up in the way that we think it may, it’s potentially something we can fold back into our own core operating environment and thereby drive our own cost and flexibility in a better direction.”
The collaboration between Australia’s second-biggest bank and a British fintech startup will be one to follow throughout 2020.