Understanding Banking-as-a-Service (Baas)
When you hear “Banking-as-a-Service” (BaaS), what comes to mind? If you’re like most people, you’re probably not too sure what it actually means. In fact, about 67% of financial institutions don’t fully understand it either. You’ve likely seen it popping up in the news and all over social media, but it still feels like a mystery.
In this post, I’ll break it down in the simplest terms, so even a 3rd grader could understand.
What is Banking-as-a-Service?
Banking as a Service is a way for companies to offer banking-like services to their customers, without actually being a bank. It’s kind of like when you go to the store and they have a little bank counter inside, where you can do things like deposit money or cash a check.
How Does it Work?
Imagine you have a favorite app on your phone that you use to buy things or send money to your friends. That app might be using Banking as a Service to help make those transactions happen. The app company partners with a real bank, and the bank provides the technology and services that the app needs to handle money safely and securely.
Why is it Useful?
Banking as a Service is useful because it allows companies to offer banking-like features to their customers, without having to build all the complicated systems and get all the special licenses that a real bank needs. It’s kind of like renting a room in a big building, instead of having to build your own whole building from scratch.
This makes it easier for companies to add cool banking features to their apps and websites, and it also helps people like you and me access banking services in new and convenient ways.
I hope this simple explanation gives you a clear understanding of what BaaS is all about. If you haven’t yet subscribed to my newsletter, you’re missing out on daily insights into Banking-as-a-Service and other important topics.
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