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Banking-As-A-Service and the Transformation of the Finance In- Dustry an Empirical Investigation

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Banking-As-A-Service and the Transformation of the Finance In- Dustry an Empirical Investigation Department of Informatics Banking-as-a-Service and the transformation of the finance in- dustry An empirical investigation Master thesis 15 HEC, course INFM10 in Information Systems Authors: Petrus Aleksi Tuoma Walter Edward Ekegren Supervisor: Osama Mansour Grading Teachers: Nicklas Holmberg Asif Akram BaaS and the transformation of the finance industry Ekegren, W. & Tuoma, P. Banking-as-a-Service and the transformation of the finance industry: An empirical investigation AUTHORS: Petrus Aleksi Tuoma, Walter Edward Ekegren PUBLISHER: Department of Informatics, Lund School of Economics and Management, Lund University PRESENTED: June, 2021 DOCUMENT TYPE: Master Thesis FORMAL EXAMINER: Christina Keller, Professor NUMBER OF PAGES: 111 KEY WORDS: Banking-as-a-Service, Digital Banking, Digital Ecosystems, Digital Platforms, API Economy. ABSTRACT (MAX. 200 WORDS): This thesis aims to provide a deeper look into the current status of Banking-as-a-Service through digital ecosystems, digital platforms and API economy. Research was conducted as qualitative research, which had a purpose of examining the lightly researched concept of Banking-as-a-Service, and shed light on what is the current status of Banking-as-a-Service by pondering its benefits and disadvantages. The topic was approached from the perspectives of business, technology, and legislation. It turned out that most of the current benefits that Bank- ing-as-a-Service creates, are business benefits, but most of the disadvantages are in the con- text of technology and legislation. At the moment it can be said that there exists a variety of understandings regarding what exactly Banking-as-a-Service is seen as. Our results bring many new and interesting perspectives to the table, and it can be said that the more and deeper we dive into the whole of what Banking-as-a-Service includes, the more there is width and possibilities, but also disadvantages and immaturity. At the moment the ultimate meaning of Banking-as-a-Service depends on how it is packaged and what it contains, as it is mostly pro- vided for trusted partners, and other actors may then use the APIs according to what the PSD2 enables. I BaaS and the transformation of the finance industry Ekegren, W. & Tuoma, P. Content 1 Introduction ......................................................................................................................... 1 1.1 Introduction to the topic .............................................................................................. 1 1.2 Problem background .................................................................................................... 2 1.3 Purpose, research task and research questions ............................................................ 4 1.4 Frame of reference, perspective, and delimitation of research .................................... 4 1.5 Previous research and source material ......................................................................... 5 1.6 Thesis outline ............................................................................................................... 6 2 Literature review ................................................................................................................. 7 2.1 Digital Ecosystems ...................................................................................................... 7 2.2 API Economy .............................................................................................................. 8 2.3 Digital Platforms ........................................................................................................ 11 2.4 Concepts for delivering digital banking services ...................................................... 15 2.5 Second Payment Service Directive (PSD2) ............................................................... 17 2.6 Literature review conclusions .................................................................................... 18 3 Methodology ..................................................................................................................... 19 3.1 Research strategy ....................................................................................................... 19 3.2 Data collection techniques ......................................................................................... 20 3.2.1 Survey ................................................................................................................. 20 3.2.2 Interviewing ....................................................................................................... 22 3.3 Target sample and respondent selection .................................................................... 24 3.4 Analysis ..................................................................................................................... 26 3.4.1 Analysis of the survey ........................................................................................ 26 3.4.2 Analysis of interviews ........................................................................................ 28 3.5 Quality of the Study ................................................................................................... 29 3.6 Ethics ......................................................................................................................... 30 4 Results ............................................................................................................................... 32 4.1 Survey results ............................................................................................................ 32 4.2 Interview results ........................................................................................................ 46 4.2.1 General Banking-as-a-Service ............................................................................ 46 4.2.2 Technological context ........................................................................................ 47 4.2.3 Business context ................................................................................................. 48 4.2.4 Legislation context ............................................................................................. 50 5 Discussion ......................................................................................................................... 52 6 Conclusions and Future research ...................................................................................... 57 – II – BaaS and the transformation of the finance industry Ekegren, W. & Tuoma, P. 6.1 Conclusions ............................................................................................................... 57 6.2 Further research ......................................................................................................... 59 Appendix 1 – Survey Posts ...................................................................................................... 60 Appendix 2 – Survey Form ...................................................................................................... 62 Appendix 3 – Interview invitation ........................................................................................... 68 Appendix 4 – Interview Guide ................................................................................................. 69 Appendix 5 – Interview Transcription (Respondent 1) ............................................................ 71 Appendix 6 – Interview Transcription (Respondent 2) ............................................................ 86 Appendix 7 – Interview Transcription (Respondent 3) ............................................................ 98 References .............................................................................................................................. 108 III BaaS and the transformation of the finance industry Ekegren, W. & Tuoma, P. Figures Figure 1.1: Frame of reference.. ................................................................................................. 5 Figure 1.2: Structure of the thesis.. ............................................................................................ 6 Figure 3.1: Research timeline ................................................................................................... 19 Figure 3.2: Respondent’s type of organization. ....................................................................... 24 Figure 3.3: Respondent’s roles ................................................................................................. 25 Figure 3.4: Field respondents works within.. ........................................................................... 25 Figure 4.1: Familiarity with the concept of Banking-as-a-Service .......................................... 32 Figure 4.2: Impact of Banking-as-a-Service to the financial markets ...................................... 33 Figure 4.3: Impact of Banking-as-a-Service to the relationships ............................................. 34 Figure 4.4: Benefit of Banking-as-a-Service ............................................................................ 36 Figure 4.5: Issues within security within Banking-as-a-Service .............................................. 37 Figure 4.6. Issues within privacy within Banking-as-a-Service ............................................... 39 Figure 4.7: Issues within transparency and openness within Banking-as-a-Service ................ 40 Figure 4.8: Issues within transparency and accountability within
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