How BaaS Transforms The Roles Of Banks & Fintechs

Ncontracts has the experience and expertise to help you ensure your fintech is prepared to partner with financial institutions for a safe, sound, and successful future. An example would be an airline that uses one-click financing to provide smooth digital experiences, guarantee travel plans won’t be disrupted and spread the cost of a booking over time. Blockchain can provide a contract execution platform that allows high transparency along with smart contracts. Both parties are aware as well of the distribution of blockchain as there is a “single source of truth.” As a result, contracts are more quickly handled, allowing quick conclusion and payment. Blockchain’s versatility and related technologies lend themselves to many yet to be found applications.

The API-based bank as a service platform serves as the back-end that hosts standalone independent FinTech startups and integrates seamlessly with any existing back-office of traditional banks. This allows non-banks to easily and cost-effectively launch additional financial products and expand into additional markets. BaaS providers are integral for a variety of businesses, from neobanks to marketplaces. When a software platform uses a BaaS provider, this is typically called “embedded finance” because the platform adds the financial services as part of its core software. Many platforms already offer a version of embedded finance today by providing payment processing, ACH access, or wire transfers through a payments provider.

Evolve Bank & Trust’s BaaS environment is highly secure, and is customizable and flexible to fit your business’ use case. Below are the benefits of using BaaS or open banking for businesses. BaaS can be used for a lot of features, and selecting the right provider is very important.

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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. By aligning with the existing regulated infrastructure of licensed banks, third-party providers are also well-positioned to create new products and services in addition to their typical offerings. Some examples include an airline company offering a credit card or a regulated bank partnering with a fintech to offer consumers an e-wallet, prepaid debit card, or small dollar loan. Determining whether a company is a fintech isn’t straightforward anymore. With these tailored financial services, platforms become a one-stop destination, enabling customers to manage all aspects of their business in a single place. The BaaS model begins with a fintech, digital bank, or other third-party provider paying a fee to access the BaaS platform.

A banking license’s capital and compliance requirements ensure this. The best BaaS providers make it as easy as possible for you to get started. While there will be some integration time required, you should be able to access developer-friendly APIs and build on top of ready-to-use financial infrastructure. This way, you can focus on how your core business and embedded finance can work together, rather than building banking infrastructure from scratch, yourself.

How does BaaS work

Consider it a back-end for a variety of Fintech companies and non-bank businesses. To ensure secure functioning across the domain, the BaaS layer requires continual monitoring. Imagine a platform that offers appointment software blockchain-as-a-service (BaaS) definition and payment processing for salons and barbershops (let’s call them The Brush). Convenience, speed, and a wide selection of payment options are only some of the perks that BaaS platforms can add to the consumer experience.

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Financial institutions also experience high market competition and leverage BaaS to gain an advantage. Platforms with a large user base can leverage banking as a business model for various purposes. For example, this is the creation of an electronic wallet through existing banking accounts.

  • Treasury Prime works closely with 10 bank partners and has a growing bank network.
  • The main feature of Backend as a Service is that it makes the application development process significantly easy for the developers.
  • Drawing on Arounda’s extensive FinTech expertise, we’ll also make predictions for the BaaS future.
  • As a result, the audience becomes more loyal, and the customer experience grows.
  • Furthermore, not everyone has the resources necessary to maintain legacy systems and comply with regulatory laws.

A BaaS provider enables platforms to add even more financial services to their product. Since businesses will provide banks with their technologies and ready solutions, financial institutions will be able to significantly reduce their development costs. Also, banks will have a chance to invest in other, more promising areas and projects. Finally, fintech partners will help banks get to know their customers and their preferences better. Based on consumer behavior, banks will be able to create new personalized services and products that will help them outperform competitors and succeed in the market. It all starts with a fintech, or any other third-party organization purchasing the access to the BaaS platform to create their products and features on top of the existing banking infrastructure.

Struggling with legacy architecture, banks point prospective firms to technology vendors that provide APIs for back-end integration to apps & websites. In bridging the bank, technology partner, and others (e.g. payment & card networks, Know Your Customer vendors, card printer, etc.) — a program manager is needed. BaaS vendors and platforms vary in terms of these responsibilities, with some only having a tech-focus and others an all-inclusive platform .

This section discussed how BaaS can aid in the advancement of financial services. They can also design apps for their consumers to keep track of their daily transactions, account balances, and savings. Aside from that, they can provide superior client service by ensuring faster access to funds and no hidden fees. Finally, there are companies that communicate directly with customers. The physical infrastructure, also known as “Infrastructure as a Service” , is provided by the banks. The server and communication devices are examples of basic infrastructure services.

Banking-as-a-Service has become the most innovative way for fintech to quickly bring a customer-focused bank platform to market through digital means. APIs can be thought of as Lego blocks that fit together to construct a banking core framework—a user can be established and transactions can be completed through a sequence of API calls. Then, to set up deposit accounts, debit or credit cards, and loans, more customization is added.

Companies that embed financial products start with user bases that already require them, which is what makes embedded finance so popular . As a result, in order to assure client happiness, banks must adopt the BaaS model. Integrating with fintech companies and non-banks also allows businesses to gain access to cutting-edge technology to meet client demands.

The Backend service providers manage all the services, features, and servers needed to be set up for the application’s proper functionality. Banking-as-a-Service deals with the problem by offering an integrated product to future financial service providers. It has been built, tested, licensed, and designed for a fast and easy start. This corporate financial service does not require huge research, design, and marketing and can be launched using a BaaS provider within a few weeks.

How to build your Banking as a Service platform?

Remember the old days when you had to go to the bank, talk to an actual person to withdraw cash, and then use it to pay at a store? Today, most stores are online, banks are on our phones, and customers can access a variety of banking services without leaving home. Thanks to Banking as a Service , merchants can integrate features like payment processing and financing directly into the customer journey. The upside can be massive in establishing a new revenue channel and staying ahead of the market in terms of products and services. Going through an implementation process early with a product launch will reduce time-to-market in adding new features and programs. A clear example comes from from companies providing a wallet can quickly add card issuance for their users.

As a result, users can make transfers directly on the marketplace without going to their bank’s application or website. It won’t work with open banking, as this model does not provide a full banking license. But you can own a wealth management app and connect it to open banking data. This way, your users will get benefits like up-to-date information about all their transactions within your application.

How does BaaS work

The financial institution opens its APIs to the TPP, thereby granting access to the systems and information necessary to build new banking products or offer white label banking services. You might be questioning yourself about the intentions of traditional banks and other financial institutions to lend their entire client base to other financial institutions, agents or non-banking businesses. And if you are still convinced that their piece of a big pie seems to be the smallest, you should dig deeper. By granting licenses, infrastructure and technology to FinTechs, the BaaS providers win over a significant revenue stream. Furthermore, lending enterprises, accounting companies equally have a head start. Banking as a Service is an end-to-end process implying that fintech startups and other companies connect to a bank’s system using APIs.


Banking as a Service providers are set up for success due to profits from the transaction fees they collect. Not to mention the fact that the innovative solutions that TPPs create propel the entire industry forward. Financial institutions easily see the revenue opportunity in working with fintech partners and their end-users. Expanding deposit and transaction volume outside of their physical footprint without opening new retail branches is a tremendous value driver. For regional banks and credit unions looking for growth opportunities, a Banking-as-a-Service playbook or division keeps them relevant and can help get them to the next level.

How does BaaS work

Banks can now utilise this additional information to generate tailored offers for their consumers. After all, individualised offers are more likely to be accepted by 80 percent of customers. They can also use a more targeted multi-channel marketing approach. This may assist companies in reducing their reliance on above-the-line spending. Furthermore, companies can provide customers with Buy Now, Pay Later choices. The customer has the option of choosing their payment schedule in advance.

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Several applications requiring safe, non-central data storage may benefit from the blockchain storage of data. The risk of data loss is lower with the data stored in a distributed blockchain because blockchains are only scalable. The safe and unchangeable properties of the processing of information on the blockchain support highly regulated industries. The applications developed using BaaS do not provide a lot of control to the owner as of the server management. For the Backend of the applications, MBaaS provides different features like the business logic features and the data processing features. There are a lot of features for the developers that are provided by the MBaaS providers.

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The two main monetization strategies for BaaS include charging clients a monthly fee for access to the BaaS platform or charging a la carte for each service used. Tech-savvy legacy firms can fend off the encroaching threat of fintechs by moving into the BaaS space to share their data and infrastructure. In a matter of years, access to this level of information will become table stakes for digitally native customers — so banks that begin now will be ahead of the curve, and likely rewarded with high demand. It can be a way to ‘catch-up’ for banks that have delayed digital transformation within their organization. For non-banks, BaaS is way to build a deeper, ‘stickier’ relationship with customers that goes beyond payments. Both sides benefit from deposit, card spend, and transaction activity conducted on online/mobile devices without the need for physical stores or branches.

BaaS providers like Treasury Prime build software to integrate financial products into third party apps. Some have only one bank partner for you to choose from, others have multiple. Some integrate more deeply with their bank partners than others; and some BaaS providers facilitate direct relationships between businesses and banks, while others act as the main point of contact.

How To Start Planning Your Organizations Transition To A BaaS Platform

Particular promotion was given to the OpenX standard, where BaaS providers are an integral core component. OPEN, a financial services company, uses ICICI Bank APIs to give entrepreneurs credit choices for managing vendor payments, billing, and accounting. Using BaaS, you can carry on with your business, providing the financial services your customers require, without reverting to the banking business. Leaving a BaaS provider and becoming a payment or electronic money institution is by no means an easy thing.

However, when dealing with traditional banks, 70% of small and medium businesses are unable to meet their financial needs. For non-fintech platforms, embedded banking and finance is pushing forward their decision process. Companies with high volumes of users and payment activity via digital channels stand to make considerable gains in switching to Banking-as-a-Service. Existing customers that are loyal to these companies with monthly payment/purchase activity would be more likely to create new accounts and use branded cards. 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.