Banking as a Service is fueling the move to Open Banking. Mainstream banks are being squeezed by consumers wanting new digital services, coupled with the requirement for transformation and increased regulation in the banking industry.
For financial service providers seeking the pathway to launch a financial service, the lengthy and costly requirement for licensing has often ended up with these operators approaching traditional banks to partner.
These banks are typically ill-equipped to deal with requests, lacking the processes, APIs, platforms, and applications to enable these startups to white-label their infrastructure and launch a financial service.
Like telecommunications companies that opened up their networks in the early 2000s spawning mobile virtual network operators and internet service providers, banks are now transforming through banking as a service.
Open banking and banking as a service has launched brands such as Revolut, Monzo, and Chime. The ability for the mainstream banks to work in partnership with Fintechs, implementing platforms, applications and exposing APIs that enable these new banks and financial service providers to white-label their services and launch new and innovative services that keep these mainstream banks relevant
Over the next five years, we will see mainstream adoption of banking as a service. Banks are learning from Fintechs; they adopt new business models and transform traditional banking through a new wave of financial service providers delivering digital banking and innovative financial services that consumers demand.