Banking-as-a-Service: A Game Changer in the Banking Industry : Protium

APIs, or application programming interfaces, are usually used for integration. For example, to provide payment services, the British startup Bankable cooperated with the German Solarisbank and gained access to the banking infrastructure through the API. These APIs are then utilized by companies running digital platforms to build innovative financial solutions. Thus, basic banking products became fully commoditized, and the market structure of the financial services industry turned modular. Now, you are granted access to the financial infrastructure owned by the bank.

They are generally categorized as API banking platforms, and can be considered as the middle men connecting the banks with TPPs like the financial management app. They provide the actual API layer that sits on top of the bank’s system that enables the flow of data between the bank and the TPPs. Prominent examples in the German market include players like finleap connect, Ndigit and Fintecsystems.

Open Technologies and BaaS Platforms Are Making Banking Invisible

The cost to acquire and the cost to serve customers has been transformed. But speed isn’t everything, we also ensured frictionless integration with other technology solutions using 10x SmartAdapters. Outsourced banking processes are being used by FinTechs and small business to minimize rising rate risk.

The infrastructure as a service layer provides basic infrastructure services through an IaaS provider. A majority of these services would be available on demand and do not necessarily need to be FinTech services . In real life, there also are many companies that integrate BaaS solutions into their business. Imagine that you are the owner of a popular ecommerce website selling pretty everything, from clothing and books to toys and hardware. As your audience grows daily, you want to find new ways to reach them.

Top banking-as-a-service firms

Providers provide their banking license, and products, operations and/or technology for use by aggregators, other banks, and non-financial companies . Cyber-crime will remain a constant and serious threat in banking. The introduction of added gateways through APIs has increased levels of risk, which require enhanced firewalls and other controls to prevent intrusions.

In April of 2019, Bankable announced a partnership with Visa to accelerate its digital banking solutions. We can help you explore your options for leveraging BaaS platforms and embedded finance solutions. We’ve even partnered with Productfy to deliver embedded finance solutions into your next big idea.

Finastra offers a many-to-many gateway POS lending solution for distributors and providers. Finastra offers a many-to-many gateway SMB lending solution for distributors and providers. The potential to create entirely new retail and wholesale offerings as a service is vast, restricted only by imagination and the ability to move fast. Owning the customer context gives embedded finance participants the greatest influence on product positioning and revenue share, and moving quickly will bring first-mover advantages. 8 out of 10 banking executives see BaaS as a route to growth, speed-to-market and operational improvements. Find your place and commercialize it quickly with our accelerators and partnerships.

What Is Open Banking? Our Professional Overview

Providers-Aggregators act like Providers, but also couple their own capabilities with other vendors to compose a complete “out-of-the- box” solution. Interactive projections with 10k+ metrics on market trends, & consumer behavior. In-depth analysis, benchmarks and shorter spotlights on digital trends. Money deposited into a bank’s checking or savings account through BaaS is protected by the bank’s Federal Insurance Deposit Corporation’s $250,000 insurance. Russian banks are actively introducing BaaS, for example, the largest private bank Alfa Bank.

It also means a step change in personalisation, as partners bring innovative, truly personalised user experiences into the mix because of their deep understanding of the customers they serve. As previously mentioned, the licensed bank grants access to its infrastructure to a service provider. A fintech company chooses the necessary financial instruments and integrates them into its business processes using modern technologies, such as distributed ledger technologies and smart contracts.

banking-as-a-service companies and SPECIALTIES

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. White label banking can be an answer to the challenge platform providers face in attaining customers. It can be used to offer banking services in environments where a large group of users already exist, including chains of grocery stores, hypermarkets or existing online portals. McKinsey https://globalcloudteam.com/ believes that the potential of Open Banking is only 10% realized so far, and it is too early to speak about the future adoption. It’s clear that BaaS and Open Banking have firmly penetrated into the industry and opened up new opportunities for fintech companies and banks. Such cooperation helps them gain access to new sources of income, points of sale, and a wide pool of customers, as well as contributes to the development of innovative technologies in the banking sector.

But fintech businesses have the expertise to automate these services with the help of advanced technologies, such as artificial intelligence and machine learning. This makes financial services faster, cheaper, more interesting, and more entertaining. And the analysis of consumer behavior allows startups to understand what services will satisfy demand and bring new customers. As digital banking evolves to push banks towards more innovative tech solutions, Banking as a Service is providing the opportunity to take user experience to a whole new level. BaaS is frequently confused with open banking as the latter also uses API to connect banks with non-banks.

This prevents the scenario where fintech companies become banks themselves and increases the need for BaaS solutions. Starling Payment Services unites our banking licence, payments expertise and tech with our customers’ financial products. Using our APIs, customers are able to quickly integrate into UK and European payment schemes to access Faster Payments, direct access to Bacs and SEPA. Customer engagement is driven by relevant, contextual banking services, delivered at the point of need. With our open platform, access capabilities from Temenos, and the innovation in customer experience delivered by our growing fintech ecosystem on Temenos Exchange. Interestingly, a lot of companies offer cashback offers on their credit and debit cards.

Growth of Banking-as-a-Service

Nowadays, financial institutions use platform banking to retain clients and to allow them to fully immerse themselves in the fintech industry. All this led to the development of a new model, known as BaaS , which involves the cooperation of tech companies with financial institutions. With this technology, based on the BaaS-platform, it is possible to create FinTech banks, which could improve banking processes and provide increased convenience for banking clients. In such a constellation, FinTech banks are enabled to compete directly with banks by offering core-banking services without having to build all the products that would be needed.

• A growing number of FinTechs and non-banking companies are now joining the legacy banks in providing various financial services through Banking as a Service .
• Keeping these points in mind, the future of BaaS shows an immense shift in player responsibilities.
• Non-bank entities, businesses, and fintech companies that provide BaaS have the most responsible role in this game.
• Integrating with non-banks enables banks to tap into new streams of revenue in the form of fees from third parties.
• The new propositions from BaaS models have been disaggregating many profitable elements of the traditional banking value chain.

One trend I’ve not mentioned is the increase in bank and BaaS collaborations. The reason for this is that this isn’t a future trend, it is a current scenario. In the next sections, we’ll get into some of the biggest brands offering BaaS solutions. For example, an airline might provide consumers with one-click loans. They can offer this solution to guarantee that their travel plans are not disrupted.

The “bank for banks” provides no services to consumers — instead enabling financial service providers, FCA-regulated businesses, and fintechs to build their own solutions and services. Envestnet | Yodlee is deeply experienced in banking as a service and embedded finance models. Regional banks and credit unions banking-as-a-service struggle to maintain primary deposit relationships and provide new services due to product silos, decades-old infrastructure, and traditional business models. Partnering with fintechs became a viable option to leverage the most innovative tech solutions and a way to stay relevant within the industry.

We understand the complexity of balancing BaaS with your everyday priorities, and how to make it work for you.

Thanks to the BaaS core banking platform, Westpac’s speed and agility is supercharged. The bank has already secured a number of partnerships, including the recently launched transactions and savings accounts with digital lender SocietyOne. HR partner Flare will be next to offer customers Westpac’s next-generation banking technology at speed across shared customer bases.

Not to fail their idea, they need to build a workable risk management strategy. Keep your bank relevant amongst the evolving financial services industry. As other industries such as retail, travel and healthcare go through digital revolutions; customer experiences and expectations will continue to adapt. Financial wellbeing and empowerment of your customers will remain constant, so explore new technologies and strategies to deliver what your customers need. The BaaS model is beneficial to everyone – non-banking organizations, banks, and consumers. Banks will share their large client bases, resources, capital, rich risk management experience and knowledge of the law with fintech.

BaaS Challenges

The bank appears as any other bank with a digital presence, delivering banking services seamlessly integrated from a single user interface. 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. However, special arrangements can be made based on the type of service or group of services the business wants to utilize from the bank and incorporate into its existing platform. There are compliance and regulatory requirements for getting and maintaining banking licenses.

Finances that are stored on these cards and all operations are managed by the bank that provides banking infrastructure. Each time your clients pay with their debit card, they get loyalty points that can be used for the purchase at your e-store. The two models often get confused, as open banking also involves banks connecting to non-banks via API.

They can also periodically rebalance the portfolio to match the customer’s investing strategy. BaaS solutions offer investment management services that make investing far more accessible. Non-bank and fintech businesses can also leverage the BaaS concept.