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The MoneyPot LIVE: The Promise of BaaS in Transforming Financial Services in Asia with Sachin Sharma
Embark on a financial odyssey with Sachin Sharma from audax, uncovering the game-changing realm of Banking as a Service (BaaS). Grasping the keys to this kingdom isn't just for the tech-savvy; it's for anyone who's ever made a digital purchase or pondered the future of banking. From audax's inception in the competitive incubator of Standard Chartered Ventures, Sachin breaks down how BaaS is weaving into the fabric of our daily online activities. Imagine leveraging branded credit card perks without leaving your favorite game—yes, it's that integrated. Sachin's storytelling demystifies the complexity and draws a clear line from the revolution of mobile banking to the bright horizon where banking meets us exactly where we are.
This episode is more than a peek behind the curtain; it's a strategic masterclass in the evolution of banking product capability. We traverse the landscape of emerging technology with examples such as the synergy between e-wallets and banking services, harmonizing with established process like KYC without causing a system overhaul. The conversation sheds light on the importance of cloud-agnostic approaches in a sector where tradition meets innovation at a crossroads. And as we wrap up with a heartfelt nod to the Money Pot community, we're not just saying goodbye—we're stoking the fires of curiosity and inviting you to add your voice to the chorus calling for financial enlightenment. So, if you're ready to understand where the future of your money is heading, this is an episode you can't afford to miss.
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Rachel Morrissey:Welcome to The Money Pot. My name is Rachel Morrissey, I am the co-host and the head of content for the US show, and I am here with my co-host, Sheryl Chen, who is the Head of Content for the Asia show. How are you doing, Sheryl?
Sheryl Chen:I am doing okay. It is very overwhelming and also very surreal seeing everything that you've been working on for the past 11 months come to life. Yeah, it's an amazing feeling.
Rachel Morrissey:I was gonna say how are you feeling about the show now that it's open? Are you like, are you feeling good? Because it looks amazing it looks amazing.
Sheryl Chen:I am feeling good, but also being cautiously optimistic. You know, with live events, things might always happen.
Rachel Morrissey:You are always cautiously a little bit of a knock on wood going on there. Well, today we are speaking with Sachin Sharma of audax.
Sachin Sharma:That's right.
Rachel Morrissey:You know I was reading up on your philosophies as you guys were starting Audix and I just wanted to kind of get a little bit of background on you for our listeners, give them an introduction to you. So could you kind of provide a little bit of an overview of what you guys, what inspired you to start Audix?
Sachin Sharma:All right. First of all, thank you for having me. Oh, we're so glad it's a very exciting venue here at Money 2020 Asia For the listeners. We are sitting in a glass box in the middle of a bustling conference. It's very exciting. A bit about me and audax. I started Audax with a couple of co-founders way back in 2018. Way back, Ancient history by now.
Sachin Sharma:We were incubated with Standard Chartered Ventures oh nice. And our first use case was implementing end-to-end banking as a service platform for Standard Chartered Bank itself. So that's a bit about me and Audax. The origin use case was essentially a situation that retail banks are facing almost everywhere across the world, which is how do we acquire and maintain retail customers profitably? So that was our origin problem statement and essentially we said that you got to have a different business model if you want to scale profitably in digital, in retail.
Sachin Sharma:And for us it was very clear that the new business model will have something to do with the whole lot of digital activity that was happening through e-commerce, through social media, through ride-hailing companies, and essentially our answer to acquiring customers profitably was to collaborate with these companies and essentially bring the bank to where the customers are, rather than asking the bank to come to the traditional channels of RMs or branches or sales teams sending you forms at the train stations, right. So that's the business model we changed. Now, in brief, banking did not have a platform to connect the old bank technology to these new digital players right, and that's what we've built over the last four years now this.
Rachel Morrissey:This is interesting because basically, when we went to solve this problem, this has been a problem of a lot of different geographies and a lot of different places. Banking as a service has been going through some growing pains in certain geographies and in other areas is flourishing. What are you seeing in the markets that you're in that is kind of making you feel like it's actually a really good time to be in this particular space?
Sachin Sharma:Yeah. So I think, for your viewers, also to your audience, rather to give an idea of where we are on the timeline of banking as a service. Now imagine you are in early 1990s and someone comes around and says hey, you know what, we're going to have this mobile phone. It's going to be a smartphone and you're going to log into that and do all your banking. And people are just going to look at you and say you know, you're smoking something, right.
Rachel Morrissey:Or that you belong on Star Trek. But yes, exactly exactly right.
Sachin Sharma:So we are somewhere in that timeline for banking as a service. It is from our perspective and from all the study that we have done and all that we see happening around us, this is going to be the largest, fastest growing channel for banks to acquire and service customers from, so you cannot ignore this anymore. Now, of course, just like mobile banking or internet banking or SMS banking before that, it's something new. So people need to have their processes in place, their governance in place, their understanding of the regulations in place, to be able to be implementing banking as a service effectively. And actually that's where a company like Audax comes in, because we have gone through this entire cycle with a major international bank and we understand all of these pieces and how to put them together for more banks now that Audax is serving.
Sheryl Chen:You know, I really like the homage that you paid to 1990s, because I was going to ask you like. Everyone is talking about banking as a service, right, but how would you explain banking as a service to, let's say, my five-year-old niece, olivia, who is going to be like this is going to be part and parcel of her life when she maybe not even when she grows up, but soon.
Sachin Sharma:Yeah, that's a great question and I have some practice with that because I have an eight year old. He was probably four when we started, so we have been so I think. Imagine Olivia is playing a video game on your mobile Right, which her mother doesn't want her to, but since you're the aunt, you're spoiling her and she's, she's, she's playing a video game right. And then, essentially, she sees a pop-up which says hey, you know what. You can get all of these additional superpowers in this video game if you buy these credits. And her mom thinks that you know what she's spending so much on this, on these payments that we are doing on video games.
Sachin Sharma:If apple play store had a solution where I could just get a better deal out of all the stuff that olivia is buying through the apple play store, all the stuff that Olivia is buying through the Apple Play Store, and lo and behold, you see an Apple card which is giving you 5% off on all your iTunes purchases. That is a really great use case of banking as a service, where Apple is not the card issuer. There's a bank behind it. Apple doesn't have a banking license. There's a bank behind it. Apple doesn't have a banking license. There's a bank behind it and there's a technology layer which connects Apple to the bank and gives this fantastic experience to Olivia and her mom. Of course, olivia needs to make sure that mom is aligned before she makes those purchases.
Sheryl Chen:But it's a great deal.
Sachin Sharma:You don't need to go hunting for an iTunes card or something that gives you a value proposition to iTunes. Apple created it for you and that's how you need to understand banking as a service. It's a fully serviced financial product backed by a regulated entity, but exposed at a non-financial front end. And imagine this can be extended infinitely to different customer segments, different types of digital platforms, so it's really powerful.
Rachel Morrissey:I mean, in a nutshell, that is exactly where you see everything going. I mean, it's not that surprising that you would see tech companies like Apple or some of these others get into the payment side of it and be the front man, because they have the hardware, they have the customer trust also, and so it's kind of an interesting marriage, so to speak. One of the things that was curious to me when I was reading about you was that your philosophy is that the banking as a service is actually inviting collaboration, not just competition, and the collaboration is going to be key to how all of this works. Now you can obviously say how a partnership between Apple and its bank would be a collaboration, but what is it about the nature of collaboration that you think is going to make a big difference in the way that this system works?
Sachin Sharma:It's going to make all the difference. And again, for your audience, there will be people on the side of the digital platforms which are really trying to innovate into financial services and there will be people from the mainstream banks which see them as direct competition. Now my request to them is to kind of open your eyes and see the possibilities that are coming out of working together and collaborating, and I will lay it down as a use case. So let's say you are a big e-commerce player in a market like Thailand. You want to make it easier for your customers to make purchase decisions on your platform. Now, how does that happen? One, you need to understand your customer. You need to understand their needs better, and you may not have all the data to understand their needs. Second, you need to be able to give them more options of being able to check out credit facilities, low transaction fees, all of those things.
Sachin Sharma:On the other side, you're a bank which is trying to increase their spends on e-commerce platforms, because now they're seeing that 20-30% of the purchases are happening on e-commerce they're not happening on retail stores.
Sachin Sharma:So one thing is that you can keep on doing independent offers and trying to attract the same set of customers and pull them in two different directions.
Sachin Sharma:The second way to do this, and probably the right way, is to collaborate pretty heavily, and collaborate not just from a point of view of referring customers to each other, but creating a value proposition and a data stream which flows both ways. The bank shares data with the e-commerce company to target their customers better. You create a joint value proposition which gives much better benefits for using this particular credit card or credit line or payments facility on the e-commerce platform, and the bank also gets data from the e-commerce player to do KYC, to do risk assessment, to understand the transactional behavior of their customers better. So it's really a win-win-win situation. And I think at the beginning of the show you talked about the brands that have now come up on digital right. People trust these brands and bankers need to understand that an e-commerce company has now a very strong relationship with the customers that are, you know, are using both services. So it's all about collaboration.
Rachel Morrissey:You know it's always interesting because I have for years I've always heard this banking. You know a relationship with your bank and I was like I don't believe I've ever felt like I had a relationship with my bank. I feel like I've had an account with my bank right.
Rachel Morrissey:And sometimes multiple accounts with my bank, whether I think I should have multiple accounts or not. And I think about this idea of trust that you're talking about, and the fact is is that there are companies or brands that I have built up trust with and that I trust a lot more, whether it's my bank or not. So how do you see this collaboration, kind of enhancing trust or deepening the relationships that you have with your bank, because I, you know, I still am I'm still a little bit suspicious of using that word for your bank account.
Sachin Sharma:You spot on because let's go back in time 50 years back, where meeting your relationship manager or walking into your you know, friendly neighborhood bank branch was the only way that you could do banking. Things have changed. You don't want to go to a bank branch anymore till you really need to. You don't wake up in the morning on a Saturday morning and say, hey, let's go do banking tonight. No one does that.
Sheryl Chen:So you spot on with that.
Sachin Sharma:The important thing is that you do want a trusted counterparty to hold your funds, and it may not be an e-commerce company, but you also trust the e-commerce company for bringing in great value, engaging you in a meaningful way, and you have this trust which has grown over time with a lot of these digital brands.
Sachin Sharma:Now banking as a service actually combines the two things. So, if you see the proposition that we've been launching, it is you have an Amazon account powered by Standard Chartered, so your front end is the brand that you really like to interact with on a daily basis. You spot on. You don't want to interact with your bank on a daily basis, doing things that you like to do, which is buying things, gifting things, booking your travel, making your travel plans. Those are the things that people like to do, but, at the same time, with the trust that a regulated entity is in the back end and all the controls are in place to keep your transactions and your funds safe, and that is again you can say it's a trust multiplier model. You can say it's a trust multiplier model, right, and that's what we see where the future is really in terms of your basic transactional needs, your savings and your loans.
Sheryl Chen:So we were talking about collaboration just now, right, and I want to ask you, as a CPO, who maybe will have to advise other CPOs, right, because I think something that people often struggle with is how much am I building something for myself? Because you guys do white label solutions, right? So where do you draw the line between white labeled solutions and I'm actually ending up? It seems like I'm building a feature for them, like, how do you draw the line?
Sachin Sharma:Yeah, again, a great question.
Sachin Sharma:So the fact is that there is no one standard implementation which has been understood very well with all the different parties involved.
Sachin Sharma:The way we have solutioned our product capability is that compatibility is a key product principle that we followed, which is, essentially, we implement our solution in the context of the existing technology of the bank and of the partner that they want to collaborate with.
Sachin Sharma:Let me give you a pretty simple example. One of the implementations that we have done is a bank partnering with an e-wallet company. The e-wallet company has a license to issue an e-wallet, which means that they have done key components of the KYC for this customer. So the bank doesn't need that part of our solution. What it does is to create a user journey which is integrating with the solution that this e-commerce partner already has. And that is something again that, because we have this holistic view of the complexity of banking and the service and the fact that people are still discovering how to do it right, we've built a product in a way which is essentially compatible and it gets deployed in the context of that use case. But yeah, it's something which is evolving and you cannot have a one-size-fit-all approach, especially in this market where people are still kind of discovering different components.
Rachel Morrissey:So when you are looking at being a white label and you're feeling like that gives you a lot of flexibility in the solutions that you're able to offer, what do you think that your origin from starting to charge banking as a service proposition? How does that influence the importance of embracing those emergent technologies Like, what was it about that experience that allowed for that?
Sachin Sharma:It's a very, very important point, because when you are essentially looking to enable a completely new business model, you have to have a fresh view on everything, including a very important component, which is your technology. So we really did not benchmark ourselves with other banks. We benchmark ourselves with Facebook or Meta or with Apple, with the technologies that these companies use, and our stack essentially uses a lot of key components which are either created by some of these big digital brands or are used by these digital banks. For instance, we use a database capability called Cassandra. It's not very popular with banks. Banks are still using Postgres SQL. Cassandra was created by Meta, by Facebook, and now it's an open source technology which we have utilized in our stack, and it's really fit for purpose. It's able to process millions of transactions at a much faster turnaround time, which is what is required for this scaled business model, and banks were not using those technology.
Sachin Sharma:So I think that's one of the things you've got to keep your mind open. You've got to benchmark correctly. You cannot be benchmarking to old tech. You need to be benchmarking to what the future is going to be. Another choice that we've made is that we are cloud agnostic and cloud compatible, because that is something which is again inevitable In terms of infrastructure. Cloud is going to be the infrastructure of choice going forward and therefore we work with partners like AWS, like GCP, to deploy the capability, and that makes a world of difference in terms of being able to go to market faster, maintain your infrastructure and capability and also scale when you need to scale. Otherwise, you're struggling with procuring multi-million dollar servers which might not be getting used at all. So I think that is the approach Keep your mind open, benchmark correctly.
Rachel Morrissey:What's interesting to me about what you just said was you didn't take your inspiration at all from the bank. Not really.
Sachin Sharma:Not, really, not at all.
Rachel Morrissey:And you were really looking to the other side. So when you were looking to the side like Meta or Facebook, whatever you want to call it, I'm still like Twitter and Facebook. I'm so old now it's not Twitter anymore.
Sheryl Chen:I know.
Sachin Sharma:It's not Twitter.
Rachel Morrissey:It's not Facebook. It's not.
Sachin Sharma:It's very difficult to say I X'd you. It doesn't sound right, it doesn not Facebook, it's not. It's very difficult to say X, I X'd you. It doesn't sound right.
Rachel Morrissey:It doesn't sound right. I mean I'm like, oh, I don't get it Anyway. But so when you were looking for that, you were looking forward to these kinds of things and you were really looking to be more on the tech side of things, which makes sense. But what do you say to some of these banks that you work with about being forward like that and how do you work with their technology? What was it about your experience at Standard Chartered Banking that sort of gave you the chance to be this middleman.
Sachin Sharma:Yeah, so what you have to appreciate is banking is a heavily regulated industry. Yeah, so what you have to appreciate is banking is a heavily regulated industry. Yeah, what that means is that there is this certain natural resistance for introducing too much change at one time. There is also for good reason. For very good reason I've been a banker for 20 years. I understand the complexity that bankers have to deal with. Very good reason I've been a banker for 20 years. I understand the complexity that bankers have to deal with. Um, for good reason, over time, components in the technology stack have been added.
Sachin Sharma:So you, if I'm a cio, I'm looking at a stack which has been built, let's say, over the last 30, 40 years. Nobody really completely understands that. And now, if you ask me that you know change a big portion of it. It's a big thing, right, it's a's a big, it's expensive, it's complex, it can impact your customer experience. So our strategic approach is not to upfront go and tell banks that, hey, you know, your stack should be replaced wholesale.
Sachin Sharma:What we implement is new use cases where you're going after a new customer segment or you're implementing a new business model. So I want to launch a digital bank which is happening all around us in this part of the world. Or I want to introduce a banking as a service platform and go after partnerships as a business model. That's where we implement an end-to-end stack which coexists with your existing technology and, over time, it gives you confidence to say hey, you know, everything is working really well on this side of the new stuff that we've done. Now can we start migrating customers and products onto this new stack and getting rid of the cost on some of our old capability? That has been our strategic approach, which has been quite well accepted and, honestly, even if I was still on the bank side, even I would be reluctant to implement some of these major projects while running the ship. I don't want to change the engine while running the ship. I might as well build a speedboat right next to it and see how fast it goes.
Sheryl Chen:So you just now you talked about how your platform allows for open data. Right, I wanted to just pivot a little bit and ask so because Rachel is here. You're seeing the trend of open banking really take off in the US and in Europe.
Rachel Morrissey:Right.
Sheryl Chen:So how are you seeing that trend happen in Asia? How is it playing out here?
Sachin Sharma:Directionally open banking is something that is going to happen in all the markets.
Sachin Sharma:The question is is there going to be a clear regulatory framework in each of these markets or is it going to be market-driven, where the industry players are deciding what the structure is going to look like? Where the industry players are deciding what the structure is going to look like, the good news is that you have PSG2 and GDPR as reference points of regulation and we've built a stack with that regulation in mind. Wherever there is a regulator which actually introduces an open banking platform, like Indonesia has done two years back, their regulation is called SNAP. It's essentially a consent-based API data sharing framework. It is also referencing the best practices of GDPR and PSD2. So, again, from our platform priorities perspective, we have the right benchmarks. So, again from our platform priorities perspective, we have the right benchmarks and we believe we can easily roll this out for markets where there is a regulation which is already published and where there is no regulation published, we can consult with the industry and with the banks and the regulators to show them the way of doing this right.
Rachel Morrissey:And this is going to be interesting because in Europe, like you said, they have the GDPR, they've got these regulations that are all set, and then the other side of it, in the US, it has, until this point and until this year, basically been very market driven and there's been a huge amount of adoption through market-driven. But it isn't universal and there's lots of reasons for that. What markets in Asia are you, when you look at what markets in Asia, do you think would benefit more from a more regulator-forward approach, and which markets would benefit more from a market-driven approach?
Sachin Sharma:benefit more from like a market-driven approach. The honest answer that we think is everywhere the regulator defines the path forward. It's easier Because there can be two outcomes of a market-driven approach. One example is China, where you see, and financial and WeChat essentially run away with innovation and lo and behold, 15% of the population is now using WeChat and Ant Financial, and I'm talking eight years back, 15% of the population was using it. When you come to that point of time, the regulator has very little option but to kind of follow and align to that market, because the growth has been so fast, the adoption has been so fast.
Sachin Sharma:But more often than not, when some of these technologies scale, that's when the regulator steps in and starts asking tough questions, which is what is happening in Europe right now. So you know there are a lot of banking as a service. So open banking is a little different from banking as a service. Yeah, open banking is focused on consent based sharing of customer information and consent based debits in the customer's accounts. Open banking is about creating a financial product. Oh sorry, banking as a service is about creating a financial product in a non-financial entity. So they are two slightly different things.
Sachin Sharma:And on banking as a service. We do see EU regulators now stepping in and asking tough questions to companies which have been operating in this space and have been innovating that. Who has the responsibility around the customer's data, around the KYC, around the reporting? Now, our approach again was to always meet the highest possible regulatory standard from day one and also to engage the regulators up front, because we know, at least in this part of the world, the moment you start scaling, the regulators are going to step in and ask you those tough questions. And when they ask those tough questions, we already have the right answers and the right benchmarks and the right principles of implementation and the right controls around data and transactions to satisfy their requirements. So I think it's always better to have a regulatory-led approach, but I'm a regulator. I have 100 things to deal with.
Sachin Sharma:I deal with it when it scales.
Rachel Morrissey:Which makes sense. That is going to have to be it for today. We have to wrap up. Thank you so much for joining us. We've had a lovely discussion and I just want to say to all of our listeners thank you for tuning into the Money Pot. If you want to be part of Money Pot at the show, email us at podcast at money2020.com and give us your best ideas and please give us a review wherever you listen to us. We want you to know we appreciate you. We love our FinTech nerds.
