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June 28, 2024
What is Banking as a Service?
Banking as a service or BaaS allows non-banks to offer core financial services to their customers by integrating with banks via APIs. Non-banks (like fintech and even non-fintech businesses) build products on top of the traditional banking infrastructure.
The banking as a Service model has been revolutionary for the financial sector. In fact, it leads to tremendous growth for banks and non-banks alikeHow does Banking as a Service work?
Banking as a Service allows third party organisations to draw off of the existing banking services through APIs that communicate between banks and third parties. These APIs allow the use of these banking services by fintech companies, programmers and developers, and other non-financial companies.
This allows them to build their own features as a layer on top of the existing banking services. In simple words,- Fintech company/individual pays to use BaaS
- Bank/financial institution which is a BaaS platform opens its APIs
- Fintech company/individual builds innovative financial services using these APIs
How do businesses benefit from BaaS?
- BaaS helps creates new sources of revenue for businesses by enabling cross-selling capabilities because of API driven facilities
- With BaaS, businesses can compartmentalize business logic and data, and reduce time to build and ship apps
- Businesses innovate much more by means of capitalizing on APIs of their own, along with third parties
- Building products and services using API ecosystems can drastically increase Customer base
Reasons For Rise of Banking as a Service
Here are reason four reasons why BaaS has seen exponential growth in the reason years.
- Customer Demand
- Growth of Fintech Industry
- Regulatory Requirements
- Banking Revenue
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