FinTech Focus: What is Banking-as-a-Service (BaaS)?

Layers in Banking-as-a-Service (Credit: Forbes)

SUMMARY:

• Banking-as-a-Service (or BaaS) is a sector in FinTech that is disrupting the delivery of bank products;
• BaaS providers are an intermediary between banks and fintech that offer financial services to end users;
• Banking-as-a-Service is an ecosystem with multiple components and industry leaders, which varies globally due to regulatory frameworks for data access;

2019 was a banner year for Banking-as-a-Service (BaaS). The growing sector within FinTech has helped create the neobank movement (e.g. Chime, Monzo, N26). It has also influenced big tech giants (e.g. Apple, Google) into offering their own branded financial services such as Google Checking and the Apple Card. BaaS is about digital-based banking structures that create and deliver financial services through data sharing, optimized process management systems, and specialized innovation.

Helping propel Banking-as-a-Service even further is the rising consumer sentiment favoring FinTech’s disruptive impact in the last decade. Capgemini’s World Retail Banking Report 2019 shows the public’s acceptance of FinTech and big tech companies over traditional banks:

• 75% of tech-savvy consumers use at least one financial product from a big tech company;