The platform as a service market, according to marketsandmarkets, is estimated to be worth $164.3b by 2026.
Banking as a Service provides Open APIs and applications that allow companies to embed white label banking and payments services into existing apps and products — enabling a startup or company to offer branded banking solutions directly to customers as a virtual network banking operator:
- enables the incumbent bank to wholesale their core banking and assets to new banks and financial service providers
- new banks and financial service providers have control of their branded end-customer experience — user experience is no longer tied to the way the bank’s core systems operate
- enables the new bank or financial service provider to operate within the bank’s regulatory framework
- open API’s and comprehensive documentation for companies and banks to adopt applications and services
Services may include account opening, digital onboarding, card issuing and management, payment processing, money management (deposits and loans), loyalty and rewards, merchant point of sale offerings and much more.
With the acceleration of banking-as-a-service, or BaaS, there is a significant opportunity for existing banks, financial service providers, and payment service providers to attract new customers by teaming up with fintechs and new entrants to the financial services sector.
Banking as a Service could threaten the incumbent bank’s business, as it opens new opportunities with the financial services market to new challengers. These incumbent banks and financial institutions need to have a strategy to decide how to play in this growing market, including what products to offer and which solution providers to work alongside.