What is banking-as-a-service?
BaaS is an end-to-end process that allows Fintechs and other third parties to connect with banks’ systems directly via APIs or Application Programming Interface to allow the building of banking offerings along with providers’ regulated infrastructure. This service also assists in unlocking open banking opportunities which results in the growth of the global financial services landscape.
Technically aware legacy banks can become competitive alongside the approaching threat of Fintechs by moving into a BaaS arena, with which to share their data and infrastructure.
New digital native Generation Z and millennial customers will continue to demand and expect the kind of upgrades to services that these technological advances will provide, and banks who are starting to employ these kinds of innovations will be ahead of the game and in return, likely to be rewarded with a high stream of custom.
Top banking-as-a-service companies
According to Businessinsider.com The following are already using BaaS and already benefiting from this platform.
- 11:FS Foundry
Along with additions revenue streams, legacy banks will be able to develop relationships and important partnerships with new emerging Fintechs, digital-only banks, and other retailers. More importantly, the traditional financial institutes will be able to keep ahead of financial trends and other future trends, once BaaS and other open banking trends become more mainstream.
How is banking as a service different than traditional core banking?
For the banks with a license that want to move their platforms into cloud technology, they are able to use third party providers to host much of or the entire banking infrastructure instead of building it themselves.
This is a much more integrated and advanced technology than simply adding ATM to a popular app.
Companies such as Temenos, help to run the infrastructure of digital banking offerings for traditional retail and community banks that want new innovative ways of providing services and added functionality.
Digital banking providers can often supply some or much of the technology for the new and upcoming challenger banks.
Temenos, for example, powers Australia’s Volt Bank and Greece’s Praxia. This new kind of service is sometimes known as ‘banking in a box’
And this is just the beginning
This distributed model of banking is allowing banks to push out their banking services to apps and other pieces of software. Consumers no longer need to go to a bank to complete banking activities. New advancements are making it possible that the nature of a primary banking relationship changes, as customers will be more and more likely to complete banking procedures with companies that actually are not banks, at all.
Consumers will be able to choose the best, most personalized services and will look to be using companies that care about customer service and charge fewer and lower fees.
Banking will no longer be a closed sector with hardly any competition. Banks will need to maximize on this opportunity, which comes through the innovation of new platforms and keeping up with digital trends.
Some experts say: If traditional and legacy banks want to continue to be relevant in this new field of play, payments, money transfers, financial management and the way loans operate, will need to continue to change and develop using new technologies and innovation.
Disclaimer: The author of this text, Robin Trehan, has an Undergraduate degree in economics, Masters in international business and finance and MBA in electronic business. Trehan is Senior VP at Deltec International www.deltecbank.com. The views, thoughts, and opinions expressed in this text are solely the views of the author, and not necessarily reflecting the views of Deltec International Group, its subsidiaries and/or employees.
About Deltec Bank
Headquartered in The Bahamas, Deltec is an independent financial services group that delivers bespoke solutions to meet clients’ unique needs. The Deltec group of companies includes Deltec Bank & Trust Limited, Deltec Fund Services Limited, and Deltec Investment Advisers Limited, Deltec Securities Ltd. and Long Cay Captive Management.