A Simple Guide to Banking-As-A-Service (Baas)

A Simple Guide to Banking-As-A-Service (Baas)

by April 11, 2022

BaaS is an innovative model for application development in which banking institutions enable third parties fintech, developers, and non-financial businesses to execute financial services capabilities. The value chain of BaaS technology consists of many players. Financial service providers or digital savvy banks usually cover all aspects of regulations and background banking technology.

Fintech companies, that want to leverage their API and distribute banking and payments services are often called enablers. Enablers are technological companies helping to embed BaaS services into third-party platforms or applications. The role of enablers such as Crassula is to deliver value by adding innovative features and enhancements to a banking product.

Financial institutions grant third parties access to core systems, functionality, and licensing to help them integrate digital banking and payment services into their solutions.


Onespan

This movement promotes the integration of financial products with other digital ecosystems and economic sectors. Now, non-bank players can offer bank or payment accounts, cards, financing products, etc. Enablers are driving this adoption through shortening sales cycles for Financial service providers and giving flexible back-office and application suits for end customers or distributors.

Facilitated by Application Programming Interfaces (APIs), third parties can build banking offerings on top of the providers’ regulated infrastructure with ease and efficiency, saving them time and money while creating new revenue streams for traditional players.

What is driving the development of BaaS?

APIs

API is like a stepping stone to the sustainable transformation of financial services. Facilitated by Application Programming Interfaces (APIs), third parties build banking offerings on top of the providers’ regulated infrastructure with ease and efficiency that, on the one hand, saves time and money and, on the other, creates new revenue streams for traditional players.

Artificial intelligence

Innovative boost in technology fuels an expansion of digital financial services. Traditional banking models are being replaced by digital-only banking because they can’t serve customers with the always-on digital experience. Thanks to the growing scale of AI in the money industry, non-bank organizations can embrace collaboration with third parties and focus on other essential tasks while their partners help them develop a bank solution.

New entrants

Also, the advent of new players born of digital transformation drives BaaS. This factor is the result, first of all, of a change in regulations, then of the galloping digitization of the economy, aided by artificial intelligence. It was extremely daunting and hard to enter the financial services industry some years ago. But, thanks to the BaaS system, third-party providers found a way to circumvent regulation and budget obstacles by gaining access to the technology so that now newcomers can quickly enter this field and access the services and systems they need.

The advantages of BaaS offers

Reduces operational costs

The development of financial products requires a lot of costs associated with maintenance, infrastructure, and servicing. Banking-as-a-Service allows non-banks to cut expenses and eliminate organizational complexity. And despite the lower price, you have the capability to leverage the core banking systems and enhance efficiency.

Keeps you ahead of the competition

You can stand out from the crowd. Indeed, the competition in the finance sector is fierce, but it doesn’t mean the domination in the market is unattainable. With the BaaS model, you can differentiate a range of services in your payments app, thus leaving your competitors out of your brand’s league. The BaaS platforms can build revolutionary new experiences for their customers and boost loyalty by leaps and bounds.

Generates valuable data

Thanks to APIs, a cornerstone of open banking, third parties securely access digital payments, account data, etc. This allows brands to deliver a personalized experience to each individual client through embedded white label banking and payments services and answer their needs with a more detailed view of their financial situation.

Conclusion

In conclusion, the fundamental concepts of banking-as-a-service imply a drastic transformation for both banks and those looking for possibilities to offer financial services to their customers. The BaaS model proposes relevant, and value-creating offers that each side benefits from. And it has the potential to reignite the interest of investors as it is now seen as the heart of successful banks.

Print Friendly, PDF & Email
The most important Fintech News from Switzerland weekly