Open banking is happening — it’s just not coming from the big name brand banks. Banking as a service firms are opening up the banking technology stack so that any finance, retail, or travel app can offer financial services without the headache of becoming a bank.
Oracle’s ERP, NetSuite is also a major player here. As a leading cloud system of record for midmarket and growth businesses, NetSuite has its own banking as a service offering which enables banks to deliver financial services where their customers reside — in the ERP. Major financial institutions like JPMorgan, Visa, and the Marco Polo Network are connected to NetSuite’s BaaS offering.
Scott Derksen is the senior director of business development and SuiteCloud evangelist at Oracle’s NetSuite. We talk about how finance is everywhere and why banks and their customers are choosing to collaborate on top of NetSuite. NetSuite launched its BaaS solution just a few months ago and Scott shares some of the early work and use cases of the platform.
NetSuite, Oracle, and the cloud
NetSuite is today the largest cloud ERP in the midmarket. It has always been cloud since its beginning. The focus was always to bring the general ledger, and everything needed to run a business, into the cloud. One of its differentiators is SuiteCloud, which enables some of the programs I work on. It’s been a big growth story. Oracle acquired NetSuite in 2016 for $9.3 billion and the reinvestment happening right now is amazing. I think we’re at the pointy-end of the spear for Oracle’s cloud strategy.
NetSuite’s move into banking as a service
It’s a convergence of a bunch of things. Everybody loves to have a moment in time where you have an unfair strategic advantage based on things you did in the past. There’s this movement in the industry where the banks are focusing on open banking initiatives. In the upper market — it all works out perfectly. You hire Accenture and they make your system of record communicate with bank systems.
The challenge is in the growth or mid markets where there aren’t big IT budgets. Banks run into the wall because customers aren’t there to bear the cost of the initiative. What we have with our banking as a service platform, it allows a bank to extend the APIs at the edge of the bank to where the customers are. They create brand experiences right inside of NetSuite. It’s great for a bank because they’ve invested heavily in APIs and it’s a small incremental investment to get to a super large audience that’s growing like crazy.
Working with banks and bank APIs
I remember one of the genesis meetings. I’m sitting with about 100 banking professionals and a bank executive bravely stands up and says that in the NetSuite ecosystem, there already are quite a few fintechs. When our banking customers join NetSuite, digital payments go here. Merchant services go there. Until all we’re left holding is a savings account. We really want to have a more meaningful relationship with our customers than that.
Then we brought in customers and asked them what they’d like their relationship with their banks to look like if their banks could leverage technology. The answer was across the board that they value their relationships with their banks but if they never had to log in to multiple systems again, they’d be really happy. Out came the idea that we don’t need to have a line drawn between banking and the ERP world. They should feel like the same system.
The evolving technology-enabled relationship with banks
We discussed head-on with banks their concerns about whether the ERP becomes a sales channel for them. Most of our customers have a dedicated banker working on their account. That relationship doesn’t change — it just becomes easier to operate. As a customer, I have a variety of processes that touch the bank, like order to cash processes. When those transactions flow automatically to and from my bank through my invoicing system, reconciliation becomes super simple and the relationship with my banker transparent.
Bank challenges to adopting banking as a service adoption
For big global organization, different business units want to drive the roadmap for these applications. You take a very big international bank and their foreign exchange team is all over this because their clients want to be able to guarantee a rate at the shopping cart and make transfer of international funds easier. On the other hand, the Marco Polo Group is focused on getting working capital into the hands of their customers. Others want to be able to provide better analytics on their future cashflows.