Banking as a Service (Baas) Is The Key to Innovation for Many Fintechs

Banking as a Service (Baas) Is The Key to Innovation for Many Fintechs

As the financial services industry continues to experience digital transformation, many fintechs are innovating at the forefront of this change. Banking as a Service (Baas) is playing a pivotal role in enabling these companies to provide cutting-edge solutions to their customers.

What is Banking as a Service(Baas)

Baas is a model that allows fintechs to offer banking services to their customers without the need to obtain a full banking license. This means that they can focus on developing their products and services while leaving the regulatory burden to established banks.

According to a recent report released by Finastra, 85% of senior executives are already implementing BaaS solutions, or plan to do so within 12-18 months. The report goes ahead to highlight the role that SMEs have played in revenue collection.

SME lending is projected to grow by 30% by 2024. Fintechs such as Kreditech and LenddoEFL are already providing loans to SMEs in countries like Germany, Poland, and the Philippines. These companies can assess the creditworthiness of borrowers using alternative data sources such as social media activity and phone usage data.

Choosing the right Baas partner

When choosing the right BaaS partner, many fintechs go for partners that provide tools that offer fast and easy integration through APIs, to enhance their competitive position.

Sunwest Bank is among the few banks that fintechs have seen as a qualified BaaS partner. The Bank’s BaaS technology and software solutions enable fintechs and other brands to quickly deploy financial products without having to internally develop solutions and select middleware partners.

How Baas Has influenced Fintechs

FinTechs can use BaaS to quickly and easily create innovative applications

In recent years, there have been many successful fintech utilizing Baas to drive innovation. companies such as Revolut, N26, and TransferWise have all used Baas to power their businesses.

They offer a wide range of features such as real-time spending tracking, and the ability to set up direct debit payments. These products are made possible because these fintechs have access to core banking infrastructure through Baas platforms.

BaaS is empowering FinTechs to be more competitive  

Baas is also helping to level the playing field for fintechs, by allowing them to compete with larger banks and financial institutions. By utilizing the same banking infrastructure, fintechs can offer similar products and services at a fraction of the cost.

Fintechs can bring New Products and Services

By reducing the cost and complexity of deploying new applications, BaaS is making it easier for FinTechs to bring new products and services to market quickly. This is enabling them to win over customers who are looking for value for money.

Looking to the future, it is clear that Baas will continue to be a key driver of innovation for fintechs. Experts project an increased global Baas market by over 18.2% fuelled by increasing demand for digital banking.

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