Banking-as-a-Service (BaaS) is radically transforming the financial services market.
A BaaS platform enables fintechs to connect with licensed and regulated banking back-ends via Application Programming Interfaces (APIs) so they can build financial services applications. In some cases, the banking back-ends are provided by fintechs that offer a BaaS platform and deliver core banking services at the same time.
Fueled by changing customer behavior, advancements in technology, and fintech creativity, BaaS is creating new opportunities in financial services and compelling benefits for customers.
Yet these benefits will remain out of the reach of fintechs that choose the wrong BaaS partner.
Here are some critical considerations when evaluating BaaS platform providers.
The Application Programming Interfaces (APIs) for best-in-class BaaS platforms make the development of financial applications as easy as possible. Open APIs also eliminate the need for onerous, costly, or hard-to-maintain customization.
Avoiding regulatory and legal hurdles and tedious regulatory administration is a big benefit of BaaS. Achieve peace of mind by partnering with a BaaS platform provider that is regularly examined by regulators because of the number of banks it serves.
Some BaaS providers must integrate multiple systems to provide the functionality that consumer and business customers need. This increases overhead and the possibility of integration and support issues. Fintechs should look for a BaaS platform provider that has all the capabilities they need under one roof, particularly account and card services. No fintech wants to enable accounts and do a separate integration for cards.
It can be uphill battle adapting core banking solutions built for brick-and-mortar business processes for digital applications. Look for a partner that offers open APIs and highly configurable workflows optimized for digital payments solutions.
Digital workflows route funds based on pre-configured business rules. And leading BaaS platforms offer capabilities for business bank accounts, a sub-general ledger system, a pre-paid card solution hidden behind the scenes or an e-wallet account for gaming or other applications.
Technology is not the only critical consideration when choosing a BaaS platform provider. Best-in-class BaaS platform providers differentiate themselves with services for onboarding, fraud management, regulatory and legal compliance.
With the right BaaS partner, fintechs get access to the core banking capabilities they need, while remaining focused on the things they do best.
Financial products and services must continue to evolve and be relevant or customers will not adopt them. That makes it imperative that fintechs partner with a provider that it is committed to ongoing investments in its platform that will help it stand out.