Sibos 2023: How Economy-as-a-Service is shaping the way we work

Written by Dave Wallace
22nd September 2023

The Economy-as-a-Service (EaaS) model is progressively reshaping multiple sectors, most notably financial services.

The EaaS model is revolutionising the financial services industry

The model is based on providing access to goods and services on a subscription basis rather than outright ownership. Customers pay a recurring fee to access a particular service or product without worrying about the upfront costs of purchasing it outright.

EaaS is turning traditional financial services into modular, scalable, easily customised and integrated offerings, perfect for a perpetually evolving sector adapting to meet the complex demands of modern economies.

Due to its extensive nature, EaaS is also changing how we work and live.

For example, companies can now offer employees access to a broader range of services and tools, such as remote work software, without bearing the costs of purchasing and maintaining them. This leads to a more flexible and agile workforce, which can better adapt to changing market conditions.

EaaS is transforming ownership and consumption. Businesses can offer their customers a broader range of services and products without investing in expensive infrastructure or equipment, ensuring more efficient use of resources. Also, enterprises can rent out their excess capacity to other businesses or individuals.

The benefits to the industry of taking this approach are many, including:

Enhanced operational efficiency: Firms can delegate non-core activities, conserving resources for value-adding services such as customer engagement and innovation. They also benefit from reduced operating costs.
Superior customer experience: It enables more intuitive, responsive services, allowing companies to offer personalised experiences and bolster customer satisfaction and loyalty.
Scalability and flexibility: EaaS allows financial institutions to adapt to market fluctuations, regulatory changes and evolving consumer preferences, benefiting start-ups and established banks seeking to diversify their services.
Fostering innovation: It cultivates an environment where cutting-edge technologies like blockchain and artificial intelligence (AI) can be swiftly integrated without major system overhauls, keeping financial firms on the vanguard of technological advancements.
Market expansion: The model allows financial institutions to extend their reach into unexplored markets through streamlined, modular service offerings. This is particularly valuable for entering emerging economies with nascent infrastructure.
Effective risk management: Real-time analytics within the EaaS framework enable more proactive risk mitigation strategies.

So what have been some of the critical drivers for the move to the EaaS model? According to Jonathan Vaux, head of propositions and partnerships at Thredd, the emergence of app-based banking has been a significant catalyst for the move in the retail banking space.

Jonathan, who prior to joining Thredd was head of innovation for Europe at Visa, says: “Mobile apps have revolutionised how banking and financial services are consumed. From applying for a bank account to managing finances, the mobile interface has fundamentally changed user interaction, and it is this app-based model that has transformed how products and services are distributed, consumed and utilised, affecting various sectors, including Cards-as-a-Service and Credit-as-a-Service.”

The pace and nature of product development have changed. Instead of releasing a static product which gets updated episodically, there is now a focus on continual updates, monthly release schedules and iterative improvement. This technological shift along with the cultural and process-oriented change needs the flexibility that service-based models afford.

The model is starting to take hold outside of retail finance as well. For example, Philip Freeborn of Delta Capita is seeing massive changes in approach in the capital markets and investment banking industry. According to Philip, the inadequacy of traditional IT outsourcing, which focuses on a single client or process and often doesn’t yield economies of scale or longevity, is causing the move to the services model. Delta Capita provides a mutualised managed services platform across technology and operations.

Delivering services which are crucial to banking but not necessarily client-differentiating, like post-trade activities and KYC, allows banks to focus on their unique value propositions. The emphasis is on recognising which processes add value to clients and which are merely core functions that could be outsourced.

2023 seems to be the year of services for Delta Capita. According to Philip, the company has experienced more inbound inquiries this year than in the last five years.

But the move to an EaaS model is not necessarily a one-way street. Abdeslam Alaoui Smaili, the CEO of HPS, believes that the decision to outsource or insource must be dynamic and evolving depending on the business lifecycle, growth and risk assessment. For example, a company may initially outsource its payments platform but, as it becomes critical to the business, later insources it despite higher costs to mitigate risks. According to Abdeslam: “Companies must be prepared to outsource or insource activities based on multiple factors, including cost, control, risk and competitive landscape.”

There’s no one-size-fits-all approach. Each business has to weigh the pros and cons of outsourcing versus insourcing at various stages of its lifecycle, constantly evaluating and re-evaluating its strategies based on growth stage, risk tolerance and control requirements.

The EaaS model is revolutionising the financial services industry by enabling modular, scalable offerings, boosting operational efficiency, improving customer engagement and facilitating quicker adoption of technological innovations. It is impossible to imagine how financial services would be able to respond to the evolving market and environment without it.

About the author

Dave Wallace is a user experience and marketing professional who has spent the last 30 years helping financial services companies design, launch and evolve digital customer experiences.