The report, titled ‘Banking as a Service: at the Heart of the Bank of Tomorrow’ outlines the many signs that BaaS is being adopted by small and midsize banks operating at subscale and, as more do, this segment of the market will grow at a compound annual growth rate (CAGR) of approximately 25%. That would mean that, by 2026, revenues in the region from BaaS could stand at $5 billion or approximately 4% of the total banking income in the Middle East.

“Banking as a service enables banks and non-banks to offer a host of completely new financial products to their end-customers. Without having to commit the time and resources to developing all offerings in-house, BaaS-using banks can cut time-to-market of new products by as much as ten times. So, BaaS has a crucial role to play in enabling traditional banks held back by legacy IT to reinvent themselves with a more competitive offering,” said Philippe de Backer, Managing Partner and Global Financial Services Lead at Arthur D. Little

The BaaS potential

Following this expansion, a secondary growth spurt is likely driven by the arrival of larger incumbent banks that have concluded that to remain competitive they, too, need to use BaaS solutions. BaaS revenues should reach $28 billion by 2031, which would amount to about 17% of total banking income in the Middle East. Developed alongside a bank’s core business, BaaS becomes a solid platform from which it can start to rebuild lackluster market valuations, pleasing investors as a result. At the center of the initial growth will be payments and accounts since these products can be most easily embedded. This will likely be followed by movement into consumer lending, as products such as “buy now, pay later” gain more traction.

Implementing BaaS

With the premise that BaaS will determine the future of banking, the uniqueness of incumbent banks means that each must carefully evaluate whether it would benefit from BaaS — either as a user or a provider — and identify any potential obstacles that might affect implementation.

Some incumbent banks may be hesitant about using BaaS because of concerns about the service robustness of a third-party provider or a loss of independence. For instance, it might be contractually difficult to add new features to a product or to discontinue it. They may also be required to share fees with a technology provider. However, such concerns are often overstated and are far outweighed by the benefits that come from being able to focus on core capabilities — front office and the management of balance sheet and risk management — because responsibility for non-core areas has been passed to the most competent provider.

“In terms of market positioning, there are two routes to BaaS success. The first is for a bank to become a global specialist that focuses on high-quality delivery of a narrow range of products and services. The second route is for a bank to turn into a full-scale regional provider with a banking license, able to offer a full spectrum of BaaS products across a restricted geography. We see the latter already gaining rapid traction in the Middle East especially,” said Nael Amin, Senior Manager, Financial Services Practice, Arthur D. Little Middle East.

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What solutions does Veeam present to its enterprise customers in the region? Tell us also about your experience at GITEX.

Veeam offers modern data protection solutions to customers across the enterprise portfolio. Another one is cloud solutions include Backup-as-a-Service (BaaS) with very reliable and simple recovery standards.

At GITEX, we held a live demonstration of these latest innovations. Besides, we showcased the ransomware protection solutions we offer as it is one of the hot topics in the post-pandemic era. We offer robust and solid solutions for ransomware protection to help our customers from data loss and financial risks. Our demonstrations also included: the hybrid cloud acceleration to help our customers protect their workloads when moving to the cloud, which is critical as cloud adoption is rapidly growing in the region. Moreover, on our stand, we demonstrated Kasten (acquired by Veeam back in 2020) which is a data protection solution that is purpose-built for Kubernetes environments.

Kinda Baydoun, Manager of Channels & Distribution – ME at Veeam

Elaborate about the data management solutions Veeam offers

At Veeam, we ease customer challenges by offering seamless and comprehensive data management and mobility solutions, across the public and private cloud with 100 percent data portability. Wherever this data is kept, we ensure it is protected even while it moves from one environment to another.

We presented VMware Orchestrator, with which our customers can automate disaster recovery planning as well as help them meet the objectives of DRI for business continuity and compliance. Similarly, we had recently acquired Kasten, which facilitates easy-to-use data backup and recovery.

Excellent, thank you for giving us comprehensive input on your solutions. What is your regional strategy and which are the industries you focus on?

We wish to focus on all industry verticals and our solutions are also made to fit most industries. We are getting requests from all verticals as data is becoming very precious and needs to be protected. It is important for all businesses including telecom, banks, oil and gas, hospitality, etc.

We have a very solid SMB customer base and they raise high demands for stable and solid solutions.

Being the Manager of Channel and Distribution in the Middle East, what are your priorities?

I have been in this role for the past six months and my priority is to evaluate our current channel ecosystem and segment this into four categories, which takes into account the size of the channel partner from a VEEAM revenue perspective vs. their level of commitment. The channel ecosystem consists of our partners, distributors, and service providers who provide growth and reach for Veeam products. As I come from a channel background, I have deep knowledge about the market. So, my focus also is to onboard some new names in the market, especially in the Cloud Service Provider (CSP) space.

Tell us how did the COVID-19 Pandemic impact Veeam’s business?

The pandemic had created an unpleasant situation for all of us. At Veeam, we had orchestrated a shift in our approach from centralization to decentralization because most of our customers mandated their employees to work from home or work remotely. We had quickly responded to our customers’ needs. Thus, it didn’t take a toll on our business operations.

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