A couple of years ago, the Pollinate team came together to future gaze and anticipate some of the big trends we expected to be shaping the future by 2025. Well, time flies and now we’re here in 2025.
So, how did we do?
In our white paper, Meet the Bank of the Future, we noted that “in the race for customer primacy, banks have the right to win – all the ingredients for success are within their grasp, they just need to create the winning recipe” but that “this is easier said than done.”
Technological trends are emerging however which allow banks to capitalise on the natural advantages they have in the financial services market, while also competing with fintechs on CX and UX to win the audiences of the future.
With a growing proportion of business banking customers being "digital natives" CX is an area where banks are going to need to be able to compete. Success will mean offering customers not just core products, but also an experience. With one study suggesting that US banks are providing at best "suitable" experiences however, there’s a way to go, so we can expect further investment and innovation in experience.
Looking back to our earlier predictions, what developments did we anticipate and how accurate were we?
Back when we wrote Bank of the Future, we predicted that:
“Banking-as-a-Service is the engine that will power the global growth of embedded finance. The BaaS sector is expected to reach a value of $7 trillion by 2030 as banking services become embedded in a broader range of use cases within financial and non-financial organisations.
“As more non-banks adopt BaaS products they will embed services such as deposit accounts, payment services and lending tools into their offerings, which increases customer engagement and loyalty.”
It remains the case that significant growth in BaaS is expected by 2030. There are a variety of predictions out there with our own prediction of $7 trillion being at the higher end of the range, we’ll check in again in five years and see how close we were!
In the meantime however, embedded finance has become a hot topic and, with a favourable regulatory regime in the US, open-banking makes ever more innovative delivery of financial services possible.
We also speculated that; “Banks already have the established infrastructure and products to address the needs of business customers, but fintechs have the data-rich experience layer that customers have come to expect. Through partnerships and adapting products for Banking as a Service, there is more opportunity to power customer experiences at scale.”
This remains a key dynamic likely to shape financial services as fintechs and the banking sector continue to tussle over the future of finance. This is why we predict a key trend likely to emerge over 2025 and beyond will be "experience as a service". This is a means for the banking system to deliver, in partnership, the kind of UX and CX that people expect from a fintech, combined with the banking sector’s natural advantages of trust, scale and product offering.
So, we think we did fairly well in anticipating BaaS. This dynamic still has time to play out but, we expect the market to shift and evolve and for Experience as a Service (EaaS) to become the dominant theme in coming years.
Watch this space!
Back in 2022 we wrote that:
“Through "platformification", banks can focus on better serving customer needs and being able to offer services beyond a limited portfolio.
“This approach establishes the bank at the centre of an ecosystem of services and suppliers, which engage with customers through its platform. The bank’s services to its end-users are enhanced by a curated list of external suppliers that plug into this platform.”
We highlighted Indian payments business Paytm as an example of a pioneer in this emerging space and noted that: “A PaaS approach exploits the bank’s advantage of data, scale and trust to attract customers, but success will rely on constant platform innovation to retain a competitive edge.”
There’s no doubt that the PaaS market continues to grow in the financial sector and in many other sectors with Statista forecasting the PaaS market to hit $208 billion this year. Autumn 2024 also saw a flurry of announcements around industry partnerships and product launches aiming to bring banking PaaS products to a wider audience of customers.
So, our prediction holds up and "platformification" is a core strategy for banks looking to compete with the fintechs and engage younger, digitally native audiences. As above however, we see the core question for banks as being not whether to build a platform but why build a platform?
This is again where experience comes in. Experience is an ever more valuable commodity in finance and elsewhere so, as we look to the future, forward looking banks will realise they’re not selling their customers a platform, but rather an experience. That’s why we see EaaS as shaping the next few years in banking tech.
A third and final prediction we made was that banks would increasingly be looking to drive growth with bespoke, sector focused offerings.
We said: “Banks can drive growth by defining themselves as the go-to sector specialist with a laser-like focus on a particular area.
“This may be a sector-specific play, such as construction or healthcare, for example by becoming THE bank for the world’s 1 million dentists. Alternatively, it could be a particular specialist area of finance, such as being the bank for SMB access to capital.”
This is undoubtedly still a major theme in finance. The emergence of open-banking, embedded finance and white label finance products has seen a huge array of players emerge to service bespoke, highly specialised market segments. In many ways this is the story of capitalism in general in the twenty-first century.
If the twentieth century was the era of mass-production and the Ford production line, ours is a century of market fragmentation and business specialisation. Fintechs have led the charge on this but banks can compete with stand-alone brands offering tailored products.
This is not something that comes naturally to the banking sector but, the themes described above of PaaS and EaaS mean it’s increasingly possible for banks to retrofit the kind of specialised services and experiences needed to compete in niche markets.
So, we stand by this prediction and expect to see it continue into 2025 and beyond!
You can read the original white paper, Meet the Bank of the Future, here.
