Banking as a service will hit mainstream adoption

Gartner predicts that 30% of banks with greater than $1 billion in assets will launch BaaS for new revenue by the end of 2024, but half will not meet targeted revenue expectations.

Speaking at Gartner IT Symposium/Xpo 2022 on the Gold Coast today, Jeff Casey, senior director analyst at Gartner said: “These banks typically have ambitions to generate and diversify revenue streams, or to a lesser degree, aspire to extend previously sunk regulatory investments, such as PSD2 in Europe, into revenue-generating machines.”

BaaS is one of four technologies that Gartner says have potential for high levels of transformation in the banking sector and are likely to mature within the next couple of years.

The other technologies include chatbots, public cloud for banking and social messaging payments apps. Bank CIOs should consider how key innovations are shaping their industry and prioritize their technology investment strategies accordingly.

BaaS sits at the peak of the Hype Cycle (see Figure 1). The technology is gaining traction from both banks and nonbanks aspiring to establish or enhance direct and intermediated revenue streams.