Banking-as-a-Service, Banking-as-a-Platform and Open Banking: How They

BaaS will also spare businesses from having to obtain a banking license and open access to new customers. According to Statista, 157 banking-as-a-platform million people will use banking services in 2020. As a rule, banks collect and process tons of information about their customers.

Hence, it can help customers build innovative and customized services for solving specific issues. For instance, automatic reconciliation for small and medium business transactions. Now, banks can use this newfound knowledge to create customized offers for their customers. After all, 80% of customers are more likely to respond to personalized offers. Moreover, they can pursue a more targeted approach to multi-channel marketing.

How is BaaS different from open banking?

They will be able to provide digital banking services to their consumers as a result of this. White label banking is when a Software as a Service provider puts their label on a BaaS provider and operates a front end to the customer. For example, a grocery store will be able to embed financial services in their ecosystem by white-labelling a BaaS platform’s services. Keeping these points in mind, the future of BaaS shows an immense shift in player responsibilities. Banks may shift from the role of “manufacturer” to “assemblers.” This means they won’t just be focusing on their core banking services.

Incumbent banks realize it’s time to digitalize their tech to stay competitive. The simple solution is to implement a banking-as-a-platform model. Numerous banks and fintech companies are considering implementing modern digital banking models.

This third-party service is the set of tailor-made backend features, providing the basis for fully functioning applications that need only frontend maintenance. This way, the execution model saves time for your team for numerous other tasks rather than testing and deployment. Acquiring, digital wallets, virtual and physical card products—nothing’s off the menu. The global digital banking platform market is expected to reach $8.67 billion by 2027.

BaaS Examples and Advantages

Keep reading to know more about the differences between the BaaS model and custom building a backend. A backend as a service will automate the backend development and allow users to concentrate engineering resources on the frontend. The cat’s out of the bag and fintech companies and BaaS are transforming the banking and financial landscape in almost every country on earth. Incumbent banks and other financial institutions need to be wise about how to enter this lucrative and rapidly expanding business, so they don’t shoot themselves in the foot. The Treezor platform processes all SEPA payments in euros according to the French banking calendar and the cut-off times defined by the Lead Bank.

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Now, these points are enough proof that banks and non-banks have a lot to gain by implementing the BaaS model. In the future, the car itself will be the ‘account holder’ and autonomously pay for fuel, tolls, and other expenditures. In case your enterprise is under attack, you can quickly restore the backed-up data in the BaaS server. The data is stored in multiple layers and at independent locations. The more layer you have, the easier it will be to restore because each of the multiple copies will be available to compensate for the loss of your data as quickly as possible. When your data is stored in a BaaS server, it is safe and beyond the reach of hackers and cyber-criminals.

BaaS Examples and Advantages

In an interconnected environment, everyone will reap their respective benefits, provided they promptly adjust strategies. This one is a biggie when considering the benefits of using a BaaS platform for an enterprise’s financial health. If you outsource backend development, you can roll out and maintain your apps with existing talents. You don’t need to hire full-stack specialists or expand your team with more staff to troubleshoot your applications as you leverage a BaaS vendor’s expertise. What makes BaaS even a more cost-efficient low-code solution is that it also brings cloud technology benefits to the table.

An example is a partnership between Abu Dhabi Islamic Bank and Fidor Bank. APIs trigger tasks like reporting, data entry, Know-Your-Customer checks, and invoice processing without human involvement. BaaS development solutions from Acropolium will help you save up to 75% on the costs and accelerate the time to market twice! This solution is suitable for 95% of apps and comes at uncompromised security and high scalability. BaaS deals with backend functionality as a whole, but FaaS addresses microservices in applications only, responding to the events that occur. In other words, backend functionality is a constant thing, but microservices are certain events that appear from time to time and need a quick reaction.

In this article, we take a closer look at one such area – Backend as a Service. Feel free to raise your BaaS expectations because we will exceed them anyway. Acropolium has made its mark with a partner BaaS platform by contributing to its development for the last ten years. This platform has proved its worth for many projects, including event planning systems, exhibition management apps, booking solutions, and more. Is there anything else your developers need for a smoother backend?

Fintechs

When considering a BaaS provider, it is essential to know if they have their disaster recovery plan that guarantees the continuity of your business. Usually, a company providing these services has pricing plans according to the needs of the company. The most significant benefit of a BaaS solution is that it allows to make a copy of all the information and upload it to the cloud quickly. Also, store it securely and download it at high speed when it needs to be restored due to a loss. A financial offering will, of course, play a significant role in this ecosystem.

As a result, banks and private financial institutions must work together to provide relevant services to this group. Customers’ individual pain areas are the focus of third-party players. For example, a fintech company may solely specialise on business payouts. A neobank, on the other hand, might concentrate https://globalcloudteam.com/ on making the process of lending money to customers as simple as possible. It allows fintech companies and individuals to sidestep banking licencing rules by interacting directly with a bank. Financial startups may get off the ground much faster without having to deal with a bank’s IT infrastructure.

BaaS Examples and Advantages

The BaaS service provider must ensure backups with IT security layers and high availability to be deployed quickly. The writer, straddles marketing, advertising, and content, with a love for crafting brand narratives, agnostic of media or platform. When not working, he shares a glass a bourbon or two, couched on a bean bag playing FPS video games or binging on Better Call Saul with family. It enables third parties to gain access to customer financial information via banks.

As a result, innovation gets a push and customers get access to customer-friendly products. However, to do this, the airline needs to have a banking license or licenses related to the provision of banking services. Typically, the licensing procedure is complicated, particularly businesses that are not in the banking sector. Therefore, BaaS is considered as the solution for the above problem.

Fintech startups get the unique opportunity to implement their financial solutions within tight timelines, on a reasonable budget, and without having to obtain a banking license. The BaaS layer provides the necessary two-way data flow between banks and end customers. Cloud computing offers companies excellent opportunities to outsource resources.

BaaS vs FaaS: Differences Between Two Serverless Architectures

Fintechs can access all SEPA payment methods by linking to the Treezor API according to the options and the risks with the project. What Raisin got from Starling is streamlined account opening and transaction processing API infrastructure. In short, Raisin uses Starling’s APIs to open accounts for customers, collect their deposits and position them at one of its partner banks that partake in its marketplace.

  • It’s clear that BaaS and Open Banking have firmly penetrated into the industry and opened up new opportunities for fintech companies and banks.
  • This way, a complete network or data center can be set up without the need for your own hardware, the size of which can be scaled at any time.
  • Let’s imagine that Sarah wants to make a large purchase and is going to apply for a loan directly in the store.
  • Also, the positive effects of innovation can help overcome legacy issues and secure a better position in today’s competitive market.
  • Boasting $6.2 billion in assets and an annual combined processing volume of $232 billion, The Bancorp started as a branchless bank and is now a leader in digital financial services.

Companies will have to figure out ways to encourage people to interact with their application in a whole new way. It’s not even about tapping here and there for the wanted outcome. Banking as a Service describes a model where customers interact with the service provider’s solution integrated into a merchant’s product. Like when completing an eBay purchase by paying with your PayPal account. This licensed digital bank from Germany provides a BaaS platform that encompasses an array of modular banking APIs. Among other offers on its website, the company advertises a comprehensive solution for creating a fully-fledged neobank.

What the benefits of a BaaS?

If you run a bank or an open banking FinTech company and you have services, licenses, or technology to offer, other companies may buy a portion of this resource pool or all of it. Open banking is a scenario where a non-bank receives the customer’s data from a financial institution via an API, but no banking services are provided. Since BaaS models are predominantly pay-as-you-use, users only pay for the contingents they require. Providers tend to offer different package levels so that users get an overview of costs in advance.

Plus, subscribing to BaaS eliminates the need to buy newer drives, assign physical storing locations, and the transportation cost. With BaaS, you also do not require a dedicated security team to protect the backup data. In simple words, having building blocks and code generation tools for your backend as a whole is always better than simply knowing how to manage micro-events. That’s why the question of choosing backend-as-a-service or function-as-a-service has a straightforward answer. Since BaaS addresses numerous backend frameworks, it contains the necessary pieces of code to build push notifications, geolocation, email verification, and many other functions.

Advantages of Banking as a Service for End-Customer

The BaaS trend will continue to flourish in 2022, requiring retail banks to take steps to accelerate the growth of BaaS. One of them is the move towards “embedded finance”, which allows financial companies to embed services on other platforms using APIs. An example is Stash, a New York-based fintech company engaged in the BaaS model with Green Dot Bank. BaaS allows non-banking businesses to offer credit and debit cards to their customers.

BaaS: What are the benefits?

BaaS can assist fintech and non-fintech businesses in providing online banking services to their clients. They may concentrate on improving their offerings rather than worrying about bank licences and integrations. BaaS can help fintech/non-fintech companies provide online banking services to their customers. Instead of focusing on bank licences and integrations, they can focus on improving their services. So, financial institutions provide partners with access to their infrastructure and account management via an API.

Reasons For Rise of Banking as a Service

In fact, it leads to tremendous growth for banks and non-banks alike. Customers can get real-time updates of all their transactions through an app. The customer’s account details and payments are displayed in a user-friendly manner.

Brands need access to financial functions and can now use technology to tap into a bank’s service offering. Nevertheless, many financial institutions don’t hasten to open their APIs as they are concerned about security issues and data loss. To solve this problem and encourage banks to open their APIs, regulators are taking steps to ensure proper security. They include user authentication, monitoring of all financial transactions, tracking and identifying fraudulent schemes, a thorough assessment of a potential partner, and much more. Must provide backup services that utilize industry-leading data protection & management software.

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