What is banking as a service (BaaS)?

Banking as a Service (BaaS) is reconfiguring the banking value chain by enabling third-party distributors to offer banking products and services. Banks in particular are integrating fintech or other financial service vendor products into the banking journey, while non-financial companies are embedding banking products into their own services.

Will banking as a service and API banking become ubiquitous?

One possibility is that banking as a service and API banking become as ubiquitous as online or mobile banking, a channel that every bank must build and maintain. In that world, achieving long-term differentiation with BaaS will be difficult, so banks will continue to distinguish themselves based on products, rates, reach, and other dimensions.

Why do banks use banking as a service?

Firms that use Banking as a Service have a distinct advantage since they can gather all of their customers’ financial data from banks and other financial institutions in one place. That helps them see how customers manage their money, when they shop, spend, and save — giving them a leg up on competitors.

What is banking as a platform provider (BaaP)?

At the top of the IaaS model would be banking as a platform provider (BaaP). The BaaP would be a bank that is fully licensed or use an external regulated bank's licensed banking services. The decomposed banking services (FinTech SaaS) are in essence, plugged into this layer. Data-security plays a crucial role in the BaaP.