Thanks to modern technology, we get a huge number of different opportunities. They are especially relevant for entrepreneurs, for example, the Banking as a Service technology. If you are interested in learning more about this topic, then continue reading this article.
In our blog, we want to explain to you the concept of banking as a service, which is revolutionizing the way companies provide and receive financial products. This is important to understand because this change affects how businesses work with banks and how they receive financial support.
What is banking as a service?
With technological advances, the way financial services are consumed has changed dramatically and one of the most popular concepts is Banking as a Service.
Banking as a service is about paying for banking apps and services based on how you use them. In other words, it is digital banking on demand. This is very convenient since not all companies require all banking services during the year.
With this technology, companies can choose the services they really need during a certain period and request other types of services in the future. Thus, it offers banking functions through an API (Application Programming Interface). Now, banking services that were inaccessible to small and medium-sized businesses are no longer such, as the requirements for them are much lower than in traditional banking.
If you have been wanting to apply this technology in your banking business for a long time, then you will need to find good specialists. This is not as easy as it might seem at first glance. To make this easier, check out our list of Banking-as-a-Service Platform Development Companies.
When should these technologies be used?
Banking as a Service occurs when a fintech, external provider, or third-party provider buys the right to use a BaaS platform. Subsequently, companies will be able to access the new business opportunities that this platform offers.
Through it, banking services that you already know become available to third parties for subsequent distribution to customers. This is how large companies or startups can issue their own credit or payroll cards.
With Bank as a Service platform, organizations can take advantage of services through a monthly subscription or contract service. Best of all, these applications can be easily integrated with others, such as collection services.
What is an API?
API is a concept widely associated with banking as a service, so we will explain it to you below. BaaS requires an API to work.
API stands for Application Programming Interface and is a set of templates that allow you to create platforms. The API allows data to be exchanged between different types of software to facilitate the automation of procedures.
APIs have been implemented in the banking system to link the bank's database with other applications and programs. The benefits of APIs in Banking as a Service are related to cost reduction, service optimization, and the ability to access practical solutions.
Some BaaS examples:
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Offer payment platforms, identification, and card services;
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Electronic money management;
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Provision of money storage services;
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Bank as a service model.
Banking as a Service is based on 3 pillars: license, bank office, and API. This model was born in 2010 and has various characteristics. For example, banking as a service is a B2B (business to business) solution for banking and payment services. BaaS accelerates the digitization of banks and develops fintech ecosystems.
The main advantages of Banking as a Service are:
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Improving Operational Efficiency: Banking as a Service aims to improve the business opportunities, profitability, and performance of any company through the development of technological infrastructure;
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Digital Transformation: Access to BaaS infrastructure drives the growth and innovation of digital services;
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Greater customer acquisition: Companies can offer customized solutions and attract new customers;
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You will reduce the number of intermediaries: when you gain access to your own financial solutions, you will be able to reduce the number of intermediaries and improve relationships with your clients;
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Take advantage: cashback and loyalty programs will help you retain customers and personalize your decisions;
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UX improvement: Having all banking options in one interface, such as loans, financing, electronic payments and transfers, and intuitive access to them is a point in favor of the user experience when using banking services as a service.
As such, Banking as a Service aims to democratize financial services by helping companies and start-ups overcome restrictions on access to banking products
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