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HomeBlogsBlogBanking as a Service (BaaS): What You Need To Know In 2024

Banking as a Service (BaaS): What You Need To Know In 2024

Banking As A Service (baas) What You Need To Know In 2024

Banking as a Service or BaaS has become a crucial part of the digital economy. It allows non-bank businesses to offer banking services to their customers without needing to become a bank. They provide financial transparency to account holders by opening their application programming interfaces (APIs) for third parties.

BaaS services and software are set to bring a lot of changes in the banking and financial services industry. But how does that affect you and your business? That is exactly what we will delve into in this blog. We will go over what is Banking as a Service, how it works and the benefits it provides to non-banker businesses.

1] What Is BaaS And How Does It Work?

The BaaS business model allows non-banker organisations to access the banking architecture and services through API and offer those services or create new services for their audience. This makes the financial process more streamlined and transparent. Nonbank companies can create and offer several banking and financial services to their customers without requiring them to invest in expensive banking infrastructure.

By allowing BaaS platforms to access regulated financial infrastructure, they can cater specialised banking products and services to a unique audience base. This leads to the creation of customer-centric financial solutions, enhancing the financial sector. 

Financial institutions and banking services providers that can adapt early and offer their services to non-banking organisations can be rewarded by the high demand. While non-banking companies that spec in banking as a service can capitalise on this growing trend.

2] How does Banking as a Service work?

The third-party provider (the non-banking entity) pays a fee to the banks or the financial institution to access the BaaS platform. This gives the TPPs access to the financial institutions’ APIs, systems and information necessary to build new banking products.

Legacy institutions can open up their own BaaS platforms, monetizing their existing platform and brand value, and giving themselves a new revenue stream. Newer fintech companies can provide several banking features and services to their customers, without going through the hassle of getting a banking licence.

3] Benefits Of Banking as a Service For Non-Banking Companies

3.1] Improves Customer Experience

The BaaS framework allows non-banking apps and software like budget trackers, online cab services, and food delivery apps to offer banking services to their customers. They can even create bespoke banking and FinTech solutions to cater for the unique needs of their customer base. Tech-savvy customers would appreciate the personalisation of their financial services.

This can streamline a lot of transactions, between the end-user the the non-banking business. This greatly enhances the customer’s experience using FinTech solutions. The real-time transactions performed by BaaS platforms without requiring the customer to redirect to external banking platforms also play a crucial role in enhancing the customer experience.

3.2] Ability To Offer Financial Services

When non-banking platforms invest in BaaS solutions and get APIs, they get the ability to offer a vast array of financial services to their customers, without the hassle of getting a banking licence. Partnering with an established baking institution allows different businesses to access their expertise and banking infrastructure. 

Businesses get the ability to receive and process payments, transfers, and investment accounts. Such services are essential to stay ahead of the competition in this digital banking era, especially for businesses operating in the fintech sector. Rather than sticking to old net backing and physical banking practices, customers can access important and time-saving financial services directly from the business.

3.3] Cost Savings and Operational Efficiency

One of the major reasons why businesses are focusing on BaaS software solutions is the cost-saving and operational efficiency it brings with it. Getting a banking license is one of the most difficult, expensive, and time-consuming things for a business. With BaaS you do not have to get a banking license yourself and still be able to provide the same services to your customers, for a relatively low fee to the bank.

BaaS also eliminates the need to develop and maintain banking infrastructure and lets non-banking organisations focus on their core business. By bypassing banking regulation maintenance, they can also launch new products in a fraction of the time required by legacy institutions. This eliminates several needless expenses for the organisations and can even improve their revenue. 

3.4] Quick And Easy Deploy

Speaking of quick and easy financial product launches, non-banking companies can leverage their APIs and BaaS platform to accelerate their banking software development process. As most of these companies already have a pre-existing app, software, or idea for their core business, they can seamlessly integrate financial products and services with them.

Hence, unlike banks, they do not need to build their products from scratch. This significantly reduces the time it takes to conceptualise, design, develop, and deploy financial products. 

3.5] Regulatory Compliance and Risk Management

Partnering with a reputed banking institution and accessing its API can allow a company to access strong compliance frameworks and risk management systems. This allows the non-banking companies to focus their time and resources on developing products, rather than learning and managing various compliances.

The non-banking companies can depend on their API partners to look after their intricate regulatory requirements. As these banks have years or even decades of experience in this field, non-banking companies can rest assured that all the compliances and risks are managed by experts. This reduces the risk of penalties and reputational harm.

3.6] Grants Scalability And Flexibility

Banking as a Service business model allows nonbank companies to scale rapidly and efficiently and adapt to the changing customer needs and demands. Companies do not need to invest their time and resources in building infrastructure, using the flexibility of cloud-based Banking as a service solution. The platform is also flexible enough to adapt to shrinks in demand.

In this highly economic world, the demand for products and services is always increasing. Companies with an expanding customer base must adopt BaaS to handle increased transaction volumes and support expansion into new markets. 

4] Emerging Trends In BaaS

Several large banking institutions have already begun introducing rules and regulations regarding BaaS platforms. This is a subtle nod that BaaS is been taken seriously and the industry is moving towards an era where BaaS becomes an expected service. Banks also gain a significant profit from getting into an infrastructure-sharing arrangement. 

While some banks may see it as a threat to their audience, other banks can increase their revenue streams with BaaS. The nonbank companies that adopt early can scale their business before their competitors. There has also been significant growth in the API sector, encouraging banking software development and leveraging the BaaS model. 

The Banking as a Service technology allows nonbank companies to cater to a larger audience base and create personalised products and services. This improved the revenue for the nonbank companies as well as the banks. As the demands and customer expectations grow, we are expected to see several improvements and innovations in technology.

To stay ahead of the competition, you need to partner with a BaaS platform development company such as Siddhatech. To discuss your requirements and expectations, you can contact our team today! Our expert developers are always ready to help you.


What is the difference between BaaS and embedded finance?

Reading blogs and articles about web development such as this one can help you stay updated on the latest development trends in the market.

What are examples of Banking as a Service (BaaS)?

Banking as a Service examples include offering loans, debit and credit cards, investments, and online banking among other banking products and services via API. Companies from different sectors have begun implementing BaaS with their current model, These companies include names like Uber, SoFi, Shopify, and Cash App.

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