The importance of BaaS in the modern financial sector is quite high. The essence is that banks rent out their infrastructure. This allows companies to offer innovative services in doing business. Thus, banks as service companies bring many benefits.
Development of banking as a service
Nine years ago, the BaaS market was small. However, a real revolution in the financial services industry has been taking place during this time. Today, this business is estimated to be worth billions of dollars. Its value is expected to continue to grow.
Opportunities for BaaS have arisen with the development of modern technologies. These platforms differ significantly from traditional banks, although they perform the same functions. Banking as service companies changed the world of finance forever. They allow customers to access banking services through the website or app of a company that acts as an intermediary between the bank and the user.
An important element of the BaaS landscape is that the services are provided under the company’s brand, significantly increasing customer loyalty and business presence in the market. Services have their API. This allows them to be easily integrated into any application.
Technologies behind leading BaaS platforms
BaaS has become a fairly common solution due to the versatility of many backend functions. This includes, for example, user authentication or database management. The technology actively uses cloud computing. It exists based on APIs or software development kits (SDKs). BaaS can also be used on a smartphone. This is possible because mobile and web applications require similar server facilities.
Main features and functions of BaaS platforms
Leading BaaS platforms offer users many features. Among them, the main one is the ability to conduct payment transactions within their infrastructure. The package of services provided for rent includes the following items:
- License;
- Card issuance;
- Payment processing;
- Compliance;
- Limit management system;
- Information security tools;
- Management of collection intervals;
- System for assigning payments and master accounts;
- Real-time cash flow analysis.
The key capabilities of these technologies are security, scalability, and strict compliance with user requirements. With the help of BaaS, companies have access to the following functions:
- Transparent pricing;
- Withdrawals of money anywhere in the world;
- 3D secure;
- Contactless payments;
- Virtual cards for online purchases.
Factors shaping the BaaS industry
Various factors currently influence the introduction and development of BaaS platforms. The main ones are regulatory changes, as they have a significant
In the EU, BaaS is regulated by the Payment Services Directive (PSD, 2007/64/EC) and its 2nd Amendment (PSD2). At the same time, the eIDAS regulation sets requirements for electronic identification and authentication. Additional supervision of insurance and financial transactions is also provided by Directive 2004/39/EC and Directive 2016/97/EU.
Successful BaaS implementations
Organizations that actively use BaaS platforms include the most influential players in the market. These technologies enable them to innovate and expand the range of services. SolarisBank successfully implemented the BaaS platform back in 2016. Other well-known service providers include ClearBank, RailsBank, and Starling Bank.
BaaS customers are mainly represented by the following companies:
- Vertically integrated holdings;
- Large retailers;
- Infrastructure companies;
- Fintech startups;
- Asset management companies.
It is worth noting that this list is far from complete. Among the most famous clients that are examples of successful BaaS implementation are Uber, Samsung, Apple, Kraken, Monzo, Qonto, Current, Revolut, and others.
Predictions for the future of BaaS platforms
The role of BaaS in the development of financial services will continue to grow. At the same time, technologies such as blockchain and artificial intelligence will have a significant
Therefore, BaaS platforms are an effective solution for business, and their influence will only continue to grow, as will the quality of services. The prospects for these technologies are promising, as they make it possible to adapt financial services to the needs of the user’s company. The general trend is that more and more banks are developing BaaS. In this way, they can take advantage of open banking opportunities by creating new revenue streams through monetization of their platforms.
The transformational potential of BaaS is changing the financial services industry, as businesses can now be not only a bank’s client but also its competitor. In this way, non-banking organizations improve customer interaction and increase their presence in the info space.
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