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What the embedded-finance and banking-as-a-service trends mean for financial services

In recent years, global banks have opted for the BaaP model since they “own” the customer relationship while providing better services. Some examples of banks that have already implemented this model include Legence Bank, Live Oak Bank, Wells Fargo, and others. It will reduce the risk of losing data and streamline the backup recovery process.

  • Banking as a Service is the next leap forward in financial tech, making it easier than ever before for companies to provide more value.
  • If BaaS is one of the backend choices for your upcoming project, this article will help you make an informed decision.
  • A BaaS or mBaaS will reduce the DevOps team size, allow the organization to work with fewer developers, and focus on delivering exceptional user experiences to the end-users.
  • As of October, HSBC has taken this step, which could signal the start of a trend.
  • The development team initially went with the Parse platform but soon realized that its open-source implementation wasn’t ideal for their case.

However, banking as a service model is being implemented across industries. Especially for businesses that do not pursue banking operations or work with banks. Banking as a Service is a frequently-used term in the finance industry. Have a look at this guide to understand BaaS meaning, examples, growth, benefits and growth.

We know that integrations with banks are indispensable for fintech players. This move is to ensure healthy competition in the banking industry. However, with open API comes competition for existing traditional banks. This will lead to a better customer experience and increase loyalty. Most importantly, it will create an ecosystem where your customer will not have to seek another product to fulfil their financial needs.

Why should you care about BaaS?

Front-end developers can also set up a functional server in just a few steps. Software as a Service or SaaS is already a common fixture in cloud computing. It describes software that can be used via an Internet connection without the need for a local version.

BaaS Examples and Advantages

It’s true that Backend-as-a-Service solutions are meant to automate repeatable tasks and free your business from hardware-related headaches. However, even the best packages can’t possibly encompass every feature you might need for a particular customer BaaS use case. This was an actual project developed by the team at Acropolium.

Furthermore, you can analyze consumer purchasing habits and tailor offers to them in order to enhance customer loyalty. Across industries, digital transformation is democratizing data to enable greater transparency and better customer experiences. New technologies are opening up legacy systems to emerging startups and third parties and, in some cases, putting data directly in the hands of consumers. Get business insights on the latest tech innovations, market trends, and your competitors with data-driven research.

Benefits of Backup as a Service

Furthermore, the financial companies who offer BaaS services, can benefit from accessing a user base through their clients, who they typically would not be able to reach. By issuing debit cards, businesses receive access to their customer’s financial spending data. As we know, “data is the new gold” — and can be invaluable to any business that wants to understand the spending habits of its customers. Firms that use Banking as a Service have a distinct advantage since they can gather all of their customers’ financial data from banks and other financial institutions in one place. That helps them see how customers manage their money, when they shop, spend, and save — giving them a leg up on competitors.

Furthermore, a lot of companies use white-labelling while offering product offerings. This can be a big issue in implementing the BaaS model as it would cause hindrance for third-party integrations. The BaaS model becomes the only way for fintech players to debut in the market.

They present the customer’s account information and payments intuitively. Additionally, firms might entice clients by providing reduced interest rates. Fintech-based BaaS, such as Solaris Bank, specializes in offering BaaS platforms. Banks can use a fintech’s digital platform to sell more products effectively.

What is Backend as a Service (BaaS)?

You can use it to buy any goods or services in stores, online, or apps for client convenience. 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.

BaaS Examples and Advantages

The most common BaaS features are scalable databases, APIs, cloud code functions, notifications, and authentication. The leading players of the market include Back4App, Parse, and Firebase. Pricing wise, the open-source framework is available to download at no cost, and there are three technical support offerings. The Starter at €500, the Business at €1,000, and the Premium under quotation. The company started in 2020 and is an open-source alternative to Firebase.

What exactly is Banking as a Service (BaaS)?

That’s what BaaS is all about — giving your project a starting point, with most bases already covered. If BaaS is one of the backend choices for your upcoming project, this article will help you make an informed decision. We’ll cover the typical reasons to opt for this serverless option and support them with several BaaS case studies. BaaS is automated — once it’s set up, information is saved automatically as it streams in. You don’t have to proactively save, label, and track information. Rather, the convenience of BaaS allows you to concentrate on your work without worrying about data loss.

The BaaS layer requires constant monitoring to enable secure operation across the domain. The banks provide the physical infrastructure aka the “Infrastructure as a Service” layer. These are the basic infrastructure services like the server and communication banking-as-a-service hardware. Customers will have a better experience and be more loyal as a result of this. Most significantly, it will build an ecosystem in which your customers will not need to look for another solution to meet their financial requirements.

Information security

Enjoy faster rollouts Developing an app with BaaS unburdens your team of server-side manipulations that need to be handled to roll out an MVP or new features. That’s how BaaS enables you to deliver your application once your frontend is 100% ready. No need to wait for months until your developers bring the backend to perfection on their own.

However, dealing with data retention policies in SaaS solutions such as Office 365 is somewhat complex due to the difficulty to manage and the frequent changes in policies. This way, we can solve most of our customers’ technical problems on the first call. 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.

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The customer’s account details and payments are displayed in a user-friendly manner. 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.

Accordingly, these businesses can speed up operations, accelerate speed to approach the market, and innovate products without spending huge costs or resources to maintain legacy systems. The result is competition and an enhanced position in the market. Non-banks and fintechs adopt the BaaS model to help customers save and invest assets. In this way, the client’s savings and investment could be balanced and personalized at low-cost index funds.

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While the list of criteria can be endless, here are some broad pointers to consider when selecting a BaaS partner. Nonetheless, as elsewhere in the IT world, security is not an inherent characteristic. The distributed ledger technology uses public key encryption, hashing, digital signatures, and several other mechanisms to secure data and transactions. However, most of these become vulnerable when not administered correctly.

Non-bank and fintech businesses can also leverage the BaaS concept. Using BaaS, you can assist customers to automate their finances and investments. Additionally, they can help create a customized investment plan using low-cost index funds. 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.

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