Implementation and risk
In essence, banks as service-providers can offer nearly all banking services to third parties. This could be really everything a bank has to offer:
- Regulatory services
- Risk services
- Compliance services
- Treasury services
- IT Services (Platform)
- Operational Services (Storage, Scanning, etc.)
- Accounting Services (local and international accounting, etc)
- Audit Services
- Underwriting services
- Collections Services
As mentioned above, almost all banking processes can be offered by the service provider. For Collections Services, for example, the service provider can handle dunning notices, collections itself, reporting, and legal support. Key Performance Indicators can be used to measure the quality of the services and make it transparent to both the service provider and the BaaS customers how the services are to be evaluated. The partner must consider to what extent he would like to outsource services and where the break-even between cost savings and efficiency lies.
To enable the integration of services between service-providers and a third-party, it is advisable to use the SIPOC (DMAIC tool) as a Lean Six Sigma method. SIPOC stands for the column names of the SIPOC diagram.
S – Supplier
I – Inputs
P – Process
O – Outputs
C – Customer
The SIPOC is used to record an overall process at the beginning of a process change and is used to clearly delimit processes in process chains. The output of one process becomes the input of another process. This is comprehensively documented and used as the basis for the process change.
The risks of being a service provider:
As outsourcing service providers, banks must bear in mind that they themselves should maintain customer contact via their own brand. The banks must not degenerate into pure infrastructure providers, as was partly the case in the telecommunications industry. This means that offering services exclusively to third-party service providers, who then have and maintain customer contact, should not be the goal. Customer ownership is an important success factor for future development. What is important is that service providing to other banks, specialist institutions or fintech companies must remain an additional business to the core business of the bank.
The business case must therefore include the following components 1. how high the investments and implementation costs are; 2. which revenue components flow to the bank and 3. whether or how high the cannibalisation costs of the bank’s own customers are. Continue reading