2022 Banking-as-a-Service Market Report: Featuring ClearBank, Column, Credi2 and Fidor Bank Among Others

While the COVID pandemic has dramatically impacted banking as we know it, it has also helped digital banking to gain rapid acceptance. Rapidly growing FinTechs in India are thriving and offering financial products that meet most consumers’ needs. An integration of different services into a single platform is an excellent way for companies to improve their customer service abilities. By offering BaaS solutions, banks can grow their customer bases by integrating their delivery services to various companies from different industries. In today’s digital economy, non-financial companies are leveraging banking-as-a-service to provide payment functionality to their platforms or apps.

BaaS will also spare businesses from having to obtain a banking license and open access to new customers. According to Statista, 157 million people will use banking services in 2020. As a rule, banks collect and process tons of information about their customers.

This necessitates the provision of a front-end user interface to the end-customers including user authentication and other features. The bank would appear as any other online bank where all banking services are presented and seamlessly integrated in a single user interface. Another option is that the bank will operate as a white https://globalcloudteam.com/ label bank, which will then have a software as a service provider on top of the BaaP operating as the front-end to the end-customer. Banking as a service works when a third-party provider such as a fintech company, digital bank, or other non-bank business pays a licensed bank a fee to access the bank’s systems and tools.

Under the BaaS concept, businesses provide faster and more convenient opportunities and services to the end user. They create hybrid and highly flexible banking propositions, including those of mobile banking. At Sunrise Banks, we continuously look for opportunities to create banking-as-a-platform new partnerships and enhance current partnerships with fintechs. Through these collaborations, we are able provide effective fintech banking solutions that reflect our mission of empowering financial wellness and inclusivity, as well as combatting financial inequality.

Banking-as-a-Service is one of the fastest-growing FinTech sectors and is changing the way banks operate. Banking as a Service is reconfiguring the banking value chain, opening the door to disintermediation and enabling new sources of growth. Our latest report, “Banking as a Service, Explained,” can help you understand what BaaS is, why it’s important, and how to play. Russian banks are actively introducing BaaS, for example, the largest private bank Alfa Bank. In the United States, banks are highly regulated at both the state and federal levels. The Securities and Exchange Commission is responsible for much of this regulation.

How can you evolve from goods provider to an integral part of consumer routine? To summarize, BaaS has the potential to benefit banks, even after accounting for all the cons. So, banks will need to find ways to capitalize on the BaaS trend to stay competitive.

In the driver’s seat: how embedded finance is re-shaping mobility pt. 1

The best known BaaS’ fintechs providers in Brazil are Matera, Zoop, Dock, and S3 Bank. Banking as a service is the provision of banking products to non-bank third parties through APIs. Or what about if you could offer your customers an online loan for their flight tickets directly on your website? This way, your customers could finance their holiday without ever having to interrupt their customer journey.

There are compliance and regulatory requirements for getting and maintaining banking licenses. This prevents the scenario where fintech companies become banks themselves and increases the need for BaaS solutions. Not all of these solutions need to come from inside the bank; as Jim Marous, a leading fintech analyst, says, banks can work with BaaS providers to create and enable the services customers want the most.

Pros and Cons of Banking as a Service

BaaS can help financial services players provide better customer experience, innovative products and services, faster time to market, and lower costs. This leads to higher revenue per customer, new revenue options, increased customer satisfaction, and loyalty and reduced cost to deploy innovative solutions. As fintech firms became known for lower friction and an enhanced customer experience, financial institutions and companies from other industries began exploring how to offer financial services virtually.

The two models often get confused, as open banking also involves banks connecting to non-banks via API. In BaaS models, non-bank businesses integrate complete banking services into their own products. In open banking models on the other hand, non-bank businesses merely use the bank’s data for their products. In the industry, these non-bank businesses are called third party service providers . The BaaS model begins with a fintech, digital bank, or other third-party provider paying a fee to access the BaaS platform.

Open Banking and BaaS

FinTech software, such as banking applications and financial institutions, is more critical than ever. Traditional banks seeing the trend and opening their banking capabilities to other fintech players through APIs. For these Banks with BaaS, the banking-as-a-service capabilities create a hedge against competition and expands their deposit share to new market segments. As BaaS continues to expand bank offerings, the playing field widens for all industries to deliver banking services seamlessly.

It offers the opportunity to set up finance management accounts and run all operations in one place. Users get a customized debit card for their cash management and can access savings tools via their accounts. Thanks to Bancorp, SoFi can pre-integrate banking management functions into its solution. Now, you are granted access to the financial infrastructure owned by the bank. Finances that are stored on these cards and all operations are managed by the bank that provides banking infrastructure.

“Banking as a service” stack based on the cloud stack by Scholten, derived from Lenk et al.

Benefits for a Client

The provider communicates with the bank’s infrastructure via APIs and delivers financial solutions for fintechs to use. Banking as a Service, or BaaS, is the provision of core banking services and infrastructure to third-party service providers. This can be a product of the bank itself or service provided by non-banks based on the bank’s open API. A BaaS platform offers customers the opportunity to choose the required financial products and services and use them according to their needs.

The new propositions from BaaS models have been disaggregating many profitable elements of the traditional banking value chain. But they have also accorded banks a low-margin, and high-volume business opportunity for product distribution. This is especially useful as banks are currently struggling with their cost structures, due to legacy technology infrastructure.

Infrastructure as a service (IaaS)

Banking as a service providers offer a range of solutions that can be integrated by either financial and non-financial organizations into their platforms. Using BaaS platforms, businesses and institutions avoid the need to get a banking license, which may take more than a year. Furthermore, acquiring a license generally requires significant capital investment. Additionally, companies have to ensure compliance with regulations on data security, legitimization of income, and deposit protection. By providing BaaS solutions, it is possible to increase revenues and improve customer engagement.

• Thanks to BaaS, organizations can create new systems faster and digitize existing processes, which is especially important during disruptions such as the COVID-19 crisis.
• That’s why BaaS is also often referred to as white-label banking, since the banking services are delivered through the branded product of the non-bank.
• These financial apps aggregate all of your financial data from your different accounts in one place, making it easier to manage your money.
• In addition to financial services, fintech businesses develop infrastructure to verify the identity of the customer and assess the risks.
• BaaS is commonly used by fintech companies and others looking to provide financial services to their customers.

Embracing the new developments in financial technology and services, the Banking-as-a-Service stack can be redefined in analogy to the Cloud stack. We hope we could shed some light into the potpourri of technical terminology and business models in the evolving banking and fintech world. The banking landscape is in continuous flux with new innovators constantly stepping on the scene.

SECTOR SPOTLIGHT: What is Banking-as-a-Service (BaaS)?

Some open networks existed, but they offered access to bank data or bank-branded products. Thus, with BaaS, pretty much any business can become a banking provider with nothing but a few lines of code. That’s why BaaS is also often referred to as white-label banking, since the banking services are delivered through the branded product of the non-bank. Next to solarisBank, other providers in Europe’s growing BaaS landscape include ClearBank, RailsBank and Starling Bank. Across the pond, established banking giants are also launching BaaS projects next to their existing offering, such as BBVA in the US. Around the world, the access and benefits of Banking-as-a-Service fueled the Open Banking.

These are the cards issued under the cooperation between a bank and a large distributor or merchant. Private-labeled cards are intended for use only at distributor-owned locations. By inventing such cards, retailers could offer more advantageous terms for their audience.

Banking as a Service is important because it improves the end customer experience by providing comprehensive BaaS solutions as partnered ecosystems. BaaS provides traditional banks with new customers and enhanced revenue streams. FinTech companies and other providers of the BaaS experience launch small businesses with substantial growth potential, new products, and business models.