Banking-as-a-service BaaS for software platforms

Equally important, the more users need your platform for crucial business processes, the less likely they are to churn. As you retain more users, you also drive value for your business by increasing customer lifetime value and lowering customer acquisition costs. Platforms can meet the financial needs of small and medium-sized businesses through What is BaaS banking as a service (BaaS). Discover what BaaS is and how it can help you drive revenue and loyalty. Create an account and start accepting payments—no contracts or banking details required. Get in touch with our team to learn more about how your platform can use Stripe to originate loans, issue cards, or create financial accounts.

It has even been shown that banks focused on offering BaaS services 2x the return on average assets (ROAA), highlighting the potential of this field. Skinner suggested a 3-layer representation of the BaaS stack.[3] In this stack, the underlying infrastructure-as-a-service is provided by a traditional, licensed and regulated bank. Above this bank would be the centralized Middleware layer that Skinner refers to as “bank as a service”. Added on to the bank as a service is a group of decomposed banking services consisting of an ecosystem of FinTech startups and service providers.

What Is BaaS (Backend as a Service)? Definition and Usage

More and more companies are capitalizing on this new technology; Analysts expect the embedded finance market to expand three-fold to $138 billion by 2026. The Lending Club Tailored Checking Account allows small businesses to open accounts online within 10 minutes. In addition to cashback, it also offers mobile wallets, debit cards, bill pay, business checks, ACH origination and more. Much of the Lending Club’s capabilities are enabled by fintech partners, including Treasury Prime and Marqeta which offers access to banking services and card issuing through the Treasury Prime API. Brands that have adopted embedded finance on their platforms are winning the loyalty of their customers and earning additional profits from these integrated financial products.

Suppose a fintech firm wishes to launch a neobank targeting the age demographic via a mobile app. The fintech firm utilizes BaaS to offer an account with a debit card to its users. In this case, the fintech firm relies on a bank to provide regulated banking services, focusing its efforts on app development. The fintech doesn’t directly manage customer accounts or funds—the partner bank does.

What is Banking as a Service (BaaS): Exploring BaaS Trends in 2023

Essentially, BaaS allows for the offering of banking products and services through third-party distributors – which are often NOT typical banking businesses. Thanks to providers’ commission fees and the added revenue streams they can tap into with this innovative strategy. Also, the positive effects of innovation can help overcome legacy issues and secure a better position in today’s competitive market. And third, the two-way flow of user data in the system allows financial institutions to gain new insights into their customers’ buying and investing habits.

When you work with a BaaS provider, you leverage their API to open accounts with a partner bank. It’s accomplished through partnerships with a bank or financial institution that already possesses a Credit, Electronic Money, or Payment Institution license. This collaboration enables the non-banking firm to provide white-label financial services such as debit cards, loans, and payment services. BaaS, also known as mobile backend as a service (MBaaS), is a way of connecting mobile apps to cloud-based services.

With over 80,000 downloads and hundreds of clients, they distribute their app via the Software as a Service (SaaS) model. Having to manage cloud infrastructure takes up precious time that could be used for developing features and bug fixes. By outsourcing a portion of the cloud infrastructure to a third party, businesses can focus on what matters most – creating value. A staggering 60% of companies that lose critical data shut down within 6 months of the loss.

The free plan is ideal for development purposes, while paid plans start at $25/month and are suitable for production applications. Two4Tea is a French mobile game development company that’s passionate about creating engaging games. Their most successful game, called Fight List, is a trivia game that’s been downloaded over 55 million times across the globe. With thousands of concurrent users playing Fight List in seven different languages, it’s safe to say that the game is a big hit. A BaaS eliminates the need to set up a redundant stack and server architecture.

They are also saving big on the infrastructure necessary to accommodate legacy banking services. Many banks, sensing the current digital trends, started offering their own BaaS platforms that enable direct access for fintechs and other businesses through APIs. Such an approach creates a competitive advantage for these more traditional financial institutions in a market where novel fintech startups emerge constantly. Embedded finance is becoming attainable for more platform businesses thanks to aggregators.

• This is because banks tend to take a one-size-fits-all approach that’s not well suited for companies with smaller margins, leaving SMBs underserved.
• After all, they provide comparable services – both contribute to cloud-based infrastructure for app creation.
• They free up time, allowing developers to focus on writing and maintaining the pieces users see and touch.
• A BaaS provides a standardized coding environment, which ensures consistency in the development process.

Instead of using mobile middleware, BaaS creates a unified application programming interface (API) and software developer kit (SDK) to connect mobile apps to back-end services like cloud storage platforms. This includes key features like push notifications, social networking integration, location services and user management. The BaaS model begins with a fintech, digital bank, or other third-party provider (TPP) paying a fee to access the BaaS platform.