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The experience of buying something on Amazon is arguably one of the most pleasant as compared to the rest of the world (and the real world!). Let’s think about why it is so easy and fun to shop - because Amazon constantly works to remove friction. Be it saving your cards, offering one click checkout financing or providing recommendations that are personalized. Amazon knows you better than you’d reckon and uses that information to optimize your experience.
Now, let’s take a detour for a bit and think about our respective banking experience. The slick experience is replaced immediately by friction and irritabile customer care calls, emails, requests and app crashes. It’s not the bank’s fault as much as it is their inertia to modernize for a modern customer base. In fact, 37% of consumers want their bank to be more like Amazon, delivering quick and relevant feedback and recommendations as they search for new products.
While certain banks are modernizing consciously, most are lagging behind in their digital transformation journeys and hence, see new-age NBFCs and FinTechs eating their lunch. To be fair, it’s not an easy task to digitize a multi-billion dollar institution that’s survived on ‘not changing’ as its core competency.
However, legacy financial institutions such as banks have some help at hand. The rise of various infrastructure providers and FinTech platform-as-a-service players is a godsend for institutions trying to build the airplane while flying it.
The complexity involved in building, running, and maintaining a new technology stack steals resources away from core business functions and banks can ill afford to shutter down their consumer operations while they build a digital core.
And this is why Platform as a Service (PaaS) proves to be the optimal solution for financial institutions looking to upgrade their operations and add new products. It’s a plug-and-play deployment model that supports the creation, deployment, and management of new applications. It allows them to access key middleware services without being directly responsible for hardware and software intricacies.
Why PaaS works for banks on a modernization spree
Speed and ease
The PaaS development environment is accessed over the internet, which means development teams across locations can collaborate easily for faster go-live. In addition, pre-coded application components are built into the platform (e.g. workflows and security features) - so it’s quicker to get started and it cuts down the time the bank’s development team spends on building the application. Post-launch maintenance too is taken care of by the PaaS provider.
Agility and scale
Developers have the freedom to use their choice of programming languages, and can run any kind of app on PaaS - be it web, mobile, or an application programming interface that connects apps and systems. The reusable code within the platform also allows them to onboard new functionalities easily and scale as per demand. This is especially relevant considering that companies today are building apps that constitute several back-end and front-end services. PaaS thus makes it easier to deploy new microservices in response to evolving market trends.
Cost and resources
Leveraging PaaS removes the need to purchase expensive hardware and high-tech development tools. Basics such as servers and business intelligence tools are provided as part of the PaaS package, which also brings down overhead expenses and the cost of prototyping. What’s more, the subscription-based or per-use based payment plans eliminates the up-front expenses involved with purchasing on-premise software.
With ready to go tools at their disposal, and a better handle of digitized services, banks can channel new sources of data to make their products and services highly attuned to customer needs. The name of the game is real time, and with PaaS, banks can quickly bring in new insights from various channels and work them into product versions. This plays a big role in banking - where profitability is a matter of vetting customers and assessing risk with creditworthiness.
Up until now, with a static product portfolio (say home loans at 9% interest rate), banks have typically shied away from lending to new-to-bank or new-to-credit borrower cohorts. By improving their credit risk assessment methodologies (also a play of big data analytics), lenders can tweak products based on individual borrowers, lending at higher rates to risky borrowers and lower rates to prime borrowers. PaaS can enable such granular modifications, on a case by case basis, helping the bank retain and attract customers.
At its core, PaaS is so much more than just a way to save lenders time and money. It’s a strategic tool that will allow them to stay relevant in a constantly shifting world. Consumer demand for instantaneous services and instant gratification is creating pressures on IT departments. PaaS offers speed of product deployment with no compromise on quality.
Banks can launch new products such as buy now, pay later or accelerate time-to-service for new loans across their credit offerings while also customizing and optimizing their conversion rates on the go. The possibilities are compelling.
FinBox’s Embedded Finance solution brings together the entire credit stack - from risk assessment to collection - on one low-code platform. The APIs are designed by engineers in collaboration with financial experts, and our developer tools ensure that you have a hassle-free experience while you build and launch next-gen financial services and credit products. In less than six lines of code. To learn more about how you can launch FinTech offerings or upgrade your existing financial offering stack, reach out to us here for a free demo.