Banking as a Service (BaaS): How It Works, Benefits, & Examples (2024)

FAQs

Banking as a Service (BaaS): How It Works, Benefits, & Examples? ›

BaaS enables non-bank companies to offer banking products and services through partnerships with regulated financial institutions. These partnerships are facilitated through application programming interfaces (APIs) that allow third-party distributors to integrate banking functions seamlessly into their platforms.

The Banking as a Service model enables banks to focus on their strengths while outsourcing non-core activities, resulting in the following benefits: 1. Increased efficiency: Banks can focus on their strengths and outsource non-core activities to BaaS providers. This enables them to increase efficiency and reduce costs.

Examples of BaaS include initiating transfers between banks, depositing checks from a smartphone, and online shopping with a debit or credit card. Financial institutions act as the facilitator between third party providers and the end consumer.

The operational model of BaaS

Here's how BaaS operates on a basic level. A licensed, e.g., electronic money, institution provides the underlying infrastructure, including regulatory compliance and core banking systems to businesses, which go on to offer a variety of financial services to end customers.

Treasury Prime is an example of a Banking as a Service software company. That is, it enables new financial solutions by allowing the products and services of licensed banks to be leveraged by non-bank companies that need them.

Backend as a service (BaaS) products handle the basic, repetitive tasks you need for smooth web or mobile applications. They free up time, allowing developers to focus on writing and maintaining the pieces users see and touch.

BaaS is an end-to-end model that allows digital banks and other third parties to connect with banks' systems directly via APIs so they can build banking offerings on top of the providers' regulated infrastructure, as well as unlock the open banking opportunity reshaping the global financial services landscape.

Banking as a Service (BaaS) is an emerging business model, within which licensed banks and fintech companies provide banking infrastructure, products, and services to other businesses; those offerings then reach end users through the banks' and fintechs' own applications and under their own brand.

They are commercial banks, thrifts (which include savings and loan associations and savings banks) and credit unions. These three types of institutions have become more like each other in recent decades, and their unique identities have become less distinct.

BaaS providers normally work directly with banks to provide the underlying service, and platforms can then use BaaS APIs to enable customers to hold funds, pay bills, manage cash flow, and access funding by working directly with the platform they've come to know and trust.

Why use a BaaS? ›

BaaS platforms offer a suite of features that typically include database management, user authentication, cloud storage, push notifications, server-side logic, and more, without the need for developers to manage or maintain the underlying server infrastructure.

The BaaS (Banking-as-a-Service) business model refers to a scenario in which banks that possess the necessary licenses for banking operations integrate their digital services into products developed by non-banking companies.

Banking-as-a-Service is revolutionizing the way businesses offer financial services, providing numerous benefits such as enhanced customer experience, cost efficiency, and new revenue streams.

BaaS can help connect with a variety of APIs to allow third parties access to data in order to enhance services within various products. This enables customers greater control over their financial data, while also allowing financial institutions access to new areas of revenue.

BaaS provides ready-made backend infrastructure and services. This lets developers work on their front-end development. SaaS delivers complete software solutions. You can access these solutions over the internet.

BaaS means a traditional bank offering a digital banking service as white label to a non-bank. Platform banking means a fintech business offering services to a bank. So in BaaS, banks are the sellers, and in platform banking, they're the buyers.

Skills-based routing leads to more personalized customer service, connecting callers with the most qualified service representative. This increases important KPIs like customer satisfaction score and first call resolution rate. It also leads to more calls handled overall, lowering queue wait times.

Since the 19th century, many economists have argued that bank-based systems are better at mobilizing savings, identifying good investments, and exerting sound corporate control, particularly during the early stages of economic development and in weak institutional environments.