The Consulting of Banking-as-a-Service
In the last couple of years, every single Big Three and Big Four consulting firm has drafted a detailed report on Banking-as-a-Service (BaaS). Now I don’t expect you to understand what that means or why that is even especially relevant, but perhaps this article will shine a brief light on the undeniable traction of this steadily growing financial revolution.
What is BaaS?
Without getting overly technical, BaaS refers to a model in which an authorized banking institution can provide digital access to its traditional services to a third party without said credentials . Essentially, this means that your typical bank forms an alliance with, for instance, a FinTech provider so you — as the free spirit youngster that you are — can open a fully banking operational account and also buy crypto on the FinTech without it actually having to forgo the regulatory abyss of a banking license . This process is done typically through the use of Application Programme Interfaces (APIs) which are a set of technological procedures that ultimately connect and allow to transfer the customer information on the side of the non-banking segment to the bank and vice-versa .
The reason this is seen as a smart move is that it is a mutually beneficial endeavor. The non-bank can grant its customers a far more comprehensive set of financial tools, while the bank gains access to customers who have been enticed by the modernity of the FinTech and would have otherwise probably not opened a traditional savings account like generations before them .
Why do Consultants Care?
The second, and potentially even more relevant question, is why this phenomenon has enticed the entire consulting sphere. The short and sweet answer is that it is the mid-term future of commercial banking . I say mid-term because in the immediate short-term a bulk of banks — especially in developing nations — will continue to persist with their traditional models and try to expand their digital service platforms without recognizing the growth of this design. Once they realize the inevitable modernization landscape, they will start seriously evaluating the prospect .
The other key accompanying factor is that this transformational phenomenon requires a lot of consulting legwork . A more conservative bank wishing to adopt this model needs significant technological, strategic and marketing consulting. Similarly, a rising FinTech evaluating whether the legal landscape favors a BaaS partnership with a banking giant needs a detailed consulting outlook of what is to come  .
In the end, I guess only time will tell whether this model is already the rising powerhouse of banking, whether it will sustain times of crisis and whether consultants will be there to lead this paradigm shift.
Written by Iñigo Sancho, Chief Research Officer at KJC
 McKinsey & Company
 Boston Consulting Group
 Bain & Company