In a keynote address at the Fintech Frontiers Conference, Sammeer, the Managing Director & Head of Consumer, Private and Business Banking at Standard Chartered Malaysia, shed light on the pivotal role of Banking-as-a-Service (BaaS) in the bank’s strategy.

The innovative new distribution method that BaaS represents — enabling bank-like functions such as credit lending on third-party platforms — is reshaping the traditional banking landscape as it relates to retail and services. BaaS is one of the channels enabling Standard Chartered to adapt to evolving client preferences, expand its reach, and foster financial inclusion, according to Sammeer.

Embracing Change: Digital Initiatives

Despite having a global presence of more than 170 years, the bank maintains a challenger mindset and innovative spirit. It has ventured into partnerships and platform-based solutions across various domains, such as digital asset custodian services and embedded finance, the latter involving a partnership with BNPL operator Atome.

On the digital banking front, Standard Chartered has also launched Trust and Mox in Singapore and Hong Kong respectively – both of which are rapidly becoming among the fastest-growing digital banks globally.

One of the most significant steps in Standard Chartered’s journey into BaaS was the launch of their BaaS venture in Indonesia with Bukalapak, a marketplace platform turned major e-commerce site, boasting a client base of 100 million. This partnership alone has tripled Standard Chartered’s presence in Indonesia’s BaaS space.

Efficient Scaling the Motivation Behind BaaS Foray

Sammeer went on to elucidate the driving force behind Standard Chartered’s foray into BaaS.

“The problem statement we have been grappling with as a bank for the longest time is, how do we scale up?”

he questioned.

Despite its sturdy position in the local market as a long-established player with 148 years of history in the country, Standard Chartered aims to enhance its presence in Malaysia further, to be as prominent a player here as it is in affluent markets like Hong Kong and Singapore. The challenge, as Sammeer highlighted, is achieving growth in a sustainable and cost-effective manner.

Traditional approaches, such as opening hundreds of branches or hiring thousands of additional staff, are expensive and no longer aligned with evolving client preferences.

“Client preferences have changed drastically. Nobody wants to go to a branch anymore,”

Sammeer noted wryly.

Standard Chartered recognised the need for a solution that allowed them to scale up efficiently and reduce the cost of client acquisition. This is where BaaS came into play.

3-Pronged Approach to BaaS Framework

Standard Chartered’s journey into BaaS involved a three-pronged approach. Sammeer articulated the essential components:

“One is obviously you need a platform or distributor who will be the front for you and induce the client,”

Sammeer explained. Partnering with platforms that both have a substantial client base and can create engaging digital experiences is critical.

The second component involves enablers, often tech providers, who supply the necessary technology solutions to connect banks with distributors. These enablers play a pivotal role in facilitating seamless interactions between banks and clients on various platforms.

Lastly, providers, or banks like Standard Chartered, bring essential elements to the table, such as licenses, banking products, and expertise in running banking operations. In Standard Chartered’s case, they are uniquely positioned as both providers and enablers, leveraging external technology while investing in their stack.

Sammeer reiterated,

“We decided to heavily invest in technology and redefine banking for customers globally.”

This investment led to the creation of nexus, a banking as a service solution launched by Standard Chartered in 2020.

Expanding Horizons with BaaS

BaaS is not limited to a single use case. Sammeer underscored that while lending is a primary focus in the BaaS space, the possibilities extend much further.

“From a BaaS standpoint, you are working with partners to create an ecosystem where clients return to the platform repeatedly,”

he explained.

In Indonesia, Standard Chartered already offers lending and deposit products through BaaS, but the potential scope includes supply chain management and wealth solutions.

Sammeer highlighted the opportunity to educate clients and build wealth awareness, especially in markets like Malaysia. Standard Chartered aims to address this gap by providing access to millions of potential clients through BaaS, thus facilitating financial inclusion and increasing engagement.

Key Considerations for BaaS Implementation

Sammeer emphasised the importance of addressing several key considerations when venturing into BaaS. One of the main points is, partnerships must align their objectives clearly.

“Partners should focus on both generating revenue and enhancing client stickiness,”

Sammeer noted. Understanding the partner’s primary objective is vital to ensuring a mutually beneficial partnership.

Clarifying roles and responsibilities is also crucial, the retail and business banking head continued. Banks like Standard Chartered have a unique role in ensuring regulatory compliance and risk management, while platforms excel in creating user-friendly client journeys.

Early engagement with regulators and internal stakeholders is also imperative for sustained market presence. Sammeer stressed the need to understand the regulatory landscape, especially in areas like KYC standards and data security.

Given the growing importance of data in banking, managing client data securely and responsibly will be a top priority, he added. Initiatives to create central repositories for client data authentication were suggested as potential enhancements.

Standard Chartered BaaS Solution Gains Independence as audax

Responding to an audience member query about potential conflicts of interest, Sammeer clarified that Standard Chartered has separated its BaaS proposition nexus as well as formed an independent company, known as audax, which will continue to serve Standard Chartered in a commercial capacity by powering nexus for current and future BaaS partnerships.

“It’s spun off as an independent company with an independent management team,”

he asserted. This separation ensures that audax operates autonomously and allows for a clear division of roles and responsibilities when engaging with partner banks.

In closing, Sammeer reiterated Standard Chartered’s commitment to innovation and its role as both a provider and enabler in the BaaS ecosystem. The bank’s journey into BaaS is a testament to its determination to adapt to changing client preferences, expand its reach, and contribute to the evolving landscape of digital finance.

As BaaS continues to reshape the banking industry, Standard Chartered Malaysia stands as a trailblazer, leading the way in leveraging technology, partnerships, and innovation to enhance financial services for clients in Malaysia and beyond.