Banking as a Service
What is Banking-as-a-Service?
Banking-as-a-Service (BaaS) is a banking model that enables digital banks and other third parties to connect directly with banks’ systems via APIs. It allows banking institutions to build offerings on top of the providers’ regulated infrastructure while unlocking the open banking opportunity and reshaping the global financial services landscape.
Tech-savvy legacy enterprises may stave off the danger of fintech by entering into the BaaS industry to share their data and infrastructure. Access to this kind of information will become standard for digitally native consumers in a few years, so banks that start now will be ahead of the curve and likely rewarded with solid demand.
What are the business benefits of Banking-as-a-Service?
Interoperability
BaaS provides scalability to banking operations with flexible advanced banking solutions.
Fostering Ecosystem
Tech-savvy banking institutions can prevent the encroaching threat of fintech by moving into the Banking-as-a-Service (BaaS) space to share their data and infrastructure.
Persistent’s approach:
Banking-as-a-Service
As traditional institutions and fintechs alike strive for growth and to improve margins, reducing complexity and optimizing operations is imperative to deliver differentiated experiences. We help our clients to achieve this through the implementation of a digital mosaic of disruptive technologies – empowering them to deliver hyper-personalized financial services that are valued by their customers.
More on Banking-as-a-Service
Banking-as-a-Service (BaaS) works by allowing third-party providers, such as fintechs or digital banks, to connect directly with traditional banks’ systems via APIs. This connection enables these third parties to build and offer financial products using the banks’ regulated infrastructure.
An example of BaaS is a fintech company offering its own branded credit cards or payment services by integrating with a bank’s backend systems via APIs. The bank handles the regulatory and compliance aspects, while the fintech focuses on user experience and customer engagement.
The key enabling technologies for BaaS include Application Programming Interfaces (APIs), cloud computing, and data analytics. These technologies facilitate seamless integration, scalability, and real-time processing, allowing third parties to leverage banks’ infrastructure effectively.
BaaS and Open Banking both involve API integrations, but they differ in scope. BaaS allows third parties to build and offer financial products using a bank’s infrastructure, while Open Banking specifically involves sharing customer financial data (with consent) between banks and third parties to create new services and products.
Banks should adopt BaaS to tap into new revenue streams, enhance their digital offerings, and stay competitive in a rapidly evolving financial landscape. BaaS enables banks to partner with fintechs and other third parties, expanding their reach and improving customer experiences
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