Banking as a Service BAAS Banking as a Platform BAAP

The only platforms in the financial services industry, that is Visa or MasterCard and their eco-systems, warrant cybersecurity, fraud and data breaches daily. Wells-Fargo utilized the technology platforms to its advantage by streamlining its customer experiences by minimizing the acquisition costs by a notable margin. By utilizing APIs to enhance their authentication processes and online security, this bank also implemented an open banking platform. Therefore, other banks can also take the help of third-party technical platforms and enhance their banking processes.

BaaP Examples and Advantages

We know for sure that all banks, at least to some extent, are becoming banking platforms. Open banking initiative forces banks to give up their monopoly and open their systems to third parties. 70 percent of the IT budget in European banks is aimed to keep bank operations running and only 30 percent to introduce new services or improve processes. It may look like a staggering amount of money but once you take into account historic circumstances and the complexity of banking software, it starts to make sense. Feel free to deploy our API solutions, and build on your own product, offering unique customer experience to your users.

Benefits of banking as a service and banking as a platform

Value was produced upstream by the banks and consumed downstream by the customers. BaaS or Banking-as-a-Service provider can be defined as the financial model that provides banking processes to non-bank businesses-as-a-service using the existing licensed bank infrastructure with modern API platforms. As traditional banks and credit unions are moving towards financial technology, they are now embracing all financial novelties like banking as a service and embedded finances that will allow them to create a white label banking platform. Did you know that a financial institution can sell its software, license, and/or services? A business that purchases these services becomes, in a sense, a financial institution. Digital banking refers to the digitisation of banking services, thus eliminating the need for consumers to physically visit a bank branch.

To the end-customer, the bank would appear like any other online bank, where services are seamlessly integrated and presented in one homogeneous user interface. During the 2010s, many financial services emerged which can be grouped as “Fintech”. An evolution like the Telecommunication sector during the 1990s and 2000s is likely to follow, with a fragmented, more dynamic, more competitive and more value-adding financial market. Their banking platform provides the customers, a unique experience with the comprehensive package of financial products and services.

BaaP Examples and Advantages

FIDOR Bank was launched back in 2010, with the motto of “banking mit freunden” which translates as “banking with friends”. The bank has transformed itself by using technological transformations to their advantage. The integration with Plaid was rolled out within eight weeks, and it helped the Live Oak Bank to compete with national banks as well as the big multinational banks. Explore the possibility to hire a dedicated R&D team that helps your company to scale product development. Developers fluent in the Go programming language are in great demand because of the breadth of experience and expertise they offer to project. needs to review the security of your connection before proceeding.

What are Fintechs and what is Banking-as-a-Service?

One example of Banking-as-a-platform can be seen in Wells-Fargo, a big banking giant based in San Francisco, famous for its use of technology in all its banking procedures. It was one of the first ones to adopt the banking-as-a-platform in its module and all local banks followed its example. If you’re in the financial or banking industry and wish to be at the same pace as the digitalizing world, then you should know that Banking-as-a-service Market is predicted to reach $11.34 Billion by 2030.

  • They built a digital platform with a single API, which acted as an integration point for other APIs to eliminate the challenge of connecting endless points and complicating the process.
  • In that case it needs to provide a front-end user interface to the end-customers, including all the necessary features like user interface, user authentication etc.
  • While the need to keep customers happy is obvious, banking in an ecosystem creates a new array of stakeholders, each of whom plays a vital role in delivering seamless customer journeys.
  • The result is that traditional banking services can now be virtualized and dispatched via composite application services.
  • The regulatory mandate to open APIs is both a threat and an opportunity for financial institutions.
  • I hope we can differentiate between services offered by Bank as primary partner and 3rd party dragging banking services on their risk and support out of banks.
  • Defining any of IaaS, PaaS or SaaS or talking about wither advantages and disadvantage is out of scope here as focus is on BaaP and Baas.

How will differences of opinion be reconciled, how will conflict be resolved? This will depend in part on the incumbent internal DNA as well as the types of partners chosen, i.e. collaborate or competitive ones. 3) How are you going to rethink your architecture to support this new direction? – The technology architecture needed to support a platform strategy is radically different than the current ones implemented into most banking organizations. Although open banking has many similarities to BaaS , the purpose is different. BaaS enables firms to offer banking products, while open banking gives access to data.

We have prepared an article explaining how banking-as-a-service vs banking-as-a-platform vs open banking differ. Hopefully, you can learn more about each model and decide which one perfectly suits your business. Legacy banks need to find their place in the finance ecosystem, which has been upended by innovative fintech startups during the last years. Moving to a Banking as a Platform model represents a major shift in mindset for incumbent banks, many of which have designed, built and/or managed their own technology for decades.

API-based stack

These platforms can’t be backed by the Federal Deposit Insurance Corporation FDIC (which insures deposits, provides protection for investments, etc.), if the platform is not in compliance with SEC requirements for security. In specific, a European bank would not be able to use an Infrastructure-as-a-Service provider from USA like AWS. The bank has also implemented an open banking platform with APIs to improve their online security and improve the authentication process. They partnered with CSI to utilize banking platform opportunities to provide their customers with a 360-degree view of banking experience. These services ensure a secure yet fast process approval which helps the banks to focus on customer personalization and improving overall banking experience. The regulatory mandate to open APIs is both a threat and an opportunity for financial institutions.

BaaP Examples and Advantages

BaaS is seen as a convenient option for new entrants to the financial services sector. This way they can quickly enter the market without having to acquire their own licence – often a lengthy process. Banking as a Service, Banking as a Platform, and Open Banking are terms that have become frequently prevalent in the financial lexicon. In this article, we will break down the definitions of each of these terms, including some examples and use cases, while also exploring what they mean for the financial services sector as a whole.

Banking Strategy, Digital and Transformation

FinTech services include account, insurance policies and transaction services, compliance and trust solutions, working capital financing, and online loans. Those services not only require a technology solution, but in many instances, a banking or e-money license too so BaaP will take care of this requirement and allow the to carry business and ride on its license. This means that it’s able to offer other fintech businesses numerous services that, in turn, they can provide to their own consumers. There are several ways banks can mitigate the threat of new entrants in the financial services industry.

Highest-level owner means the entity that owns or controls an immediate owner of the offeror, or that owns or controls one or more entities that control an immediate owner of the offeror. Sound level meter means an instrument which includes a microphone, amplifier, RMS detector, integrator or time averager, output meter, and weighting networks used to measure sound pressure levels. Rating Level means, with respect to any rating agency, each rating subcategory or “notch” of such rating agency , giving effect to pluses and minuses . By way of illustration, BBB+, BBB and BBB- are each separate Rating Levels of S&P. Annual summative evaluation rating means an annual evaluation rating that is based on appraisals of educator practice and student performance, and includes all measures captured in a teacher’s evaluation rubric.

BaaP Examples and Advantages

This blog provides top 7 Banking as a Platform real life examples in detail. Banks must ensure they disclose the access to data they are willing to share. Startups benefit greatly from BaaS since they can save money on developing a financial system. Banks need to embrace innovation and transform to a future that will be defined by change. BaaP has come of age and heralds a new era in banking, one that is defined by both collaboration and competition. A secure execution environment that prevents the original developer from accessing live customer data.

Powerful data and analysis on nearly every digital topic

In Brazil, BaaS is regulated by the Brazilian Central Bank within the rules of a Payment Institution. The best known BaaS’ fintechs providers in Brazil are banking-as-a-service Matera, Zoop, Dock, and S3 Bank. FinTechs in Africa have provided an original financing solution in a previously unserved and untapped banking market.

Related to BAAP

But now, you acquire a loan with just a tap and recieve money directly at the point of purchase. Both the programs loan out directly and then split the money back in an equal amount over several months. Russian banks are actively introducing BaaS, for example, the largest private bank Alfa Bank. Fintech wins because they sell their product to an established business for a profit. Overall Open Banking, Microservices architecture is Bringing changes to the Banking world. An important aspect, authentication, will be discussed later in the article.

Banking as Platform is an end-to-end on-demand service, which is provided over the web. The process involves moving the banking services to subscription-based platform services hosted over the web. Incumbent banks realize it’s time to digitalize their tech to stay competitive.

Most famous cloud security solutions for companies

Open banking has seen widespread regulatory support, with PSD2 , CMA , and UPI enabling the release and sharing of data by banks in a secure, standardised form. “Banking as a service” stack based on the cloud stack by Scholten, derived from Lenk et al. Legacy platforms are changing to SAAS model and end customer is the winner. Read more on the services and packaged solutions which VentureSkies offers for FinTechs. Signed code by authenticated FinTech SaaS providers will document the service’s origin and will avoid that code is tampered with. First they need to be able to properly communicate with the Platform’s interfaces.

The bad news is that it may be challenging to choose a model given their similarities. In an age of “mass personalization” customers expect financial services that meet their exact needs. With BaaP, banks can focus on their product and service innovations, while leveraging a technology partner’s expertise, functionality, infrastructure and scale.

Tech-savvy legacy banks that create their own BaaS platforms now will not only get ahead of the open banking opportunity before their competitors, but also unlock a new stream of revenue by monetizing their platforms. Rather than view this as an impediment we believe this might be a great advantage. Financial services industry incumbents with aspirations to become truly digital players already have a strong and long-standing relationship with the regulators as well as a large number of suppliers who could become partners. If we plot these paradigm shifts across these vectors, where the Financial services industry incumbents will have to move the dial from left to right , the decisions for each vector become clear.

About the Author

Leave a Reply