Geek Culture
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Geek Culture

What is Banking-as-a-Service (BaaS) and how is it transforming financial services

  • Banking-as-a-Service (BaaS) is one of the fastest-growing FinTech sectors and is changing the way banks operate.
  • BaaS providers act as intermediaries between banks and FinTech. By offering financial services to users, BaaS providers help empower end-users to take control of their finances by offering them more flexible banking options.
  • Banking-as-a-Service is an ecosystem with multiple components and industry leaders, each with different regulatory requirements. While each of these players should have access to banking data, privacy and security are paramount to keeping these consumers happy.
  • Uber and the State bank of India partnered to provide vehicle finance to drivers.
  • Razorpay and RBL Bank have collaborated to simplify digital merchant onboarding and payment solutions.
  • E-commerce giants like Snapdeal and Freecharge providing “instant refunds” by partnering with Yes Bank

What is BaaS?

How Banking-as-a-Service works

  1. The bottom level is a traditional, nationally licensed financial institution (bank) that collaborates with the BaaS provider, commonly known as the “Infrastructure-as-a-Service (IaaS) layer.”
  2. The “Banking-as-a-Service layer” in the middle depicts banking services that have been tailored as an environment for FinTech startups and other businesses to deliver products to end consumers. This stack element acts as a mediator between the bank and FinTech, sending data back and forth through the BaaS provider.
  3. The topmost layer is the FinTech company that receives data from customers about their transactions. It then shares that information with third-party BaaS providers. The BaaS providers, in turn, pass along the information to the FinTech layer received from the banks.

Banking-as-a-Service players

  1. FinTechs who give BaaS functionality to other companies in order for them to quickly grow their product portfolios — also known as Pure BaaS providers.
  2. Traditional banks that saw the upcoming trend and used APIs to offer up their banking services to other FinTech businesses. Banking-as-a-Service capabilities help these banks develop a hedge against tech competition and grow deposit share in broader market segments.

Banking-as-a-Service use cases

Is BaaS a fad?

How BaaS is transforming Indian financial services

  • Uber and the State bank of India partnered to provide vehicle finance to drives.
  • Razorpay and RBL Bank have collaborated to simplify digital merchant onboarding and payment solutions.
  • E-commerce giants like Snapdeal and Freecharge providing “instant refunds” by partnering with Yes Bank.

BaaS revolutionizing customer intimacy

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