{"id":23816,"date":"2021-08-31T06:52:52","date_gmt":"2021-08-31T06:52:52","guid":{"rendered":"https:\/\/codeandpepper.com\/?p=23816"},"modified":"2023-12-21T09:58:35","modified_gmt":"2023-12-21T09:58:35","slug":"banking-as-a-service-baas","status":"publish","type":"post","link":"https:\/\/codeandpepper.com\/banking-as-a-service-baas\/","title":{"rendered":"Banking as a Service \u2013 What is BaaS? Definition and Examples"},"content":{"rendered":"\n

Over the years, the FinTech industry has proven itself to be one of the most dynamic sectors of the global economy. Once again, it surprises with a pivot that can change customers\u2019 habits and drive new streams of revenue. It\u2019s called \u201cbanking as a service<\/strong>\u201d (BaaS<\/strong>) and it stormtroops<\/em> through the market. What is it? Can you participate in the trend?<\/p>\n\n\n\n\n\n\n\n

\"Banking<\/figure><\/div>\n\n\n\n

What is banking as a service?<\/h2>\n\n\n\n

This Star Wars reference lets you think of it as white-label banking. It\u2019s a situation where you have resources to sell to other companies to use them as their own. If you run a bank or an open banking FinTech company and you have services, licenses, or technology to offer, other companies may buy a portion of this resource pool or all of it. Then, they can offer banking products under their own brand.<\/p>\n\n\n\n

There are two major types of BaaS providers<\/strong>: FinTech companies specialized in BaaS (like Starling Bank<\/a> or Marqeta<\/a> for example) and traditional banking institutions that offer their infrastructure to FinTech firms (like JPMorgan Chase<\/a> or BBVA<\/a>).<\/p>\n\n\n\n

How is BaaS different from open banking?<\/h2>\n\n\n\n

Banking as a service is not like open banking<\/a>.<\/strong> The difference is that BaaS is a financial service model that falls into the open banking category<\/strong>. Essentially, it\u2019s a strategy for banks, FinTech firms and other brands to go hand in hand and provide an integrated banking experience to customers. <\/p>\n\n\n\n

With BaaS, third parties utilize application programming interfaces (APIs) to access at least some functionalities that already exist on the traditional banks\u2019 side. They can tap into it and offer modified (simplified, enhanced, or just different) services.<\/p>\n\n\n\n

Open banking is more like a framework that allows the BaaS model to exist. It gives market guidelines on how third parties can access, process, and use consumer data. The idea behind it is that consumers are ultimate owners of information about themselves. Driven by politically established regulations, open banking encourages the market to be more open (pun intended) and competitive.<\/p>\n\n\n\n

The whole case for open banking (and partially BaaS too) is to give people choice, control, and empower them to control and use their money in a whole different way. Get an easy loan. Ensure the house or a bike with a penny on a dollar, compared to traditional banking. Manage finances and even invest from the comfort of their own favorite armchair. It\u2019s making old and sometimes inefficient services simple and affordable. <\/p>\n\n\n\n

BaaS \u2013 meaning and opportunities<\/h2>\n\n\n\n

Why would any traditional bank want to lend its infrastructure, licenses, and technology to a newcomer that steals its client base? That\u2019s exactly the thing \u2013 it\u2019s not necessarily a steal. It\u2019s a business opportunity that benefits both parties<\/strong>:<\/p>\n\n\n\n