According to Statista forecasts, by 2024, the number of online banking users worldwide is expected to surpass 2.6 billion. In other words, every third person will use online banking services regularly. It is an excellent chance for the banking institutions…
Banking as a Service: Defenition, Benefits & Examples
BaaS services are growing increasingly popular in many industries. The BaaS market size is expected to expand at a CAGR of 25.99% in 2023-2027. Banking-as-a-service reconsiders the whole banking system and offers multiple new opportunities for growth.
This approach also helps facilitate various types of payment-related transactions, enhance the banking security system, and smoothly swift from a conventional type of banking operations to an online paradigm.
Are you looking for similar opportunities and want to implement banking as service systems (e.g., P2P payments or e-wallets) in your business and enhance your product? You should contact a professional BaaS service provider. However, it may take a while to find a reliable partner.
So, if you want to improve your knowledge on the topic, understand how to implement the system in your business operations, and find a suitable BaaS partner, this article is right for you. As an industry expert, Devox Software will provide in-depth industry insight, unveil some key pros and cons of implementing BaaS banking systems into your business operations, and provide professional tips on finding a reliable partner who can help you out.
What is BaaS (Banking as a Service)?
BaaS stands for banking-as-a-service. It is a framework that enables non-banking businesses to implement financial features or services into their products and services. This helps companies not certified as banking institutions offer loan processing services or integrate digital banking into their operations. You can either reach out to the bank that already offers digitalized services or hire a third-party BaaS service provider to grasp its benefits.
Examples of BaaS products include digital wallets or cards, online banking or money transfer solutions, remittance software, and many others. Some famous examples of such brands include PayPal, Revolut, Finastra, solarisBank, and others.
Implementing banking as a service solution into the company’s system is a great way to facilitate multiple processes, minimize face-to-face interaction between parties, and significantly improve customers’ experience with a product or service. Below, we will share some industry insights and tips on picking a reliable BaaS service provider if you’re currently looking for one.
Core BaaS Services
Now that you know what is a BaaS, we can discuss the core services of this framework for businesses and customers. Banking-as-a-service provides multiple opportunities and features outside of the traditional bank scope. Let’s look through some of them.
Core banking services
The first thing that comes to mind is the basic banking services you can now perform online and way faster. This includes deposits, international payments, loans, and other services.
Digital cards, wallets, and money transfers
BaaS enables businesses and users to enjoy secure online transactions you can’t always get while working with a conventional bank: digital wallets and cards, fast P2P transfers (both local and international), and others. This is now possible thanks to implementing APIs into the banking software.
Plug & Play APIs
Thanks to BaaS, you can implement these special modules within any platform and enjoy services like trading, fraud monitoring, white-label banking, and more.
Thanks to the API implementation, businesses can now enjoy POS and online terminal acquiring together with mobile or NFC payments.
Pros and cons of Banking as a Service
BaaS can be innovative and helpful for businesses and their customers. Yet, it has particular pitfalls you need to consider before implementing this framework into your operations and services. Let’s look at the top pros and cons of banking as a service model.
Let’s first look at the major benefits customers and businesses may get from using BaaS solutions.
Cost efficiency for businesses
Digitalization is among the best ways of optimizing expenses if you’re a business owner. By implementing more online banking opportunities, you mainly spend money on technology and testing rather than premises, rent, appliances, etc.
Secure bank accounts
Data safety is crucial for users and businesses, and blockchain-based online banking services are a perfect solution. Such service providers use data encryption, meaning your and customers’ personal data is untraceable. This is much more convenient than paper documentation or Google Drive files.
Greater user experience
One of the greatest perks BaaS can provide your clients with is speed. With the digitalization of most services, it’s now much easier and faster to process a payment, make a loan, pay for utilities, and perform any other financial transaction. Your customers can skip traveling and seeing a company representative to get things done.
There are, however, some disadvantages people can stumble upon while using BaaS products. Let’s take a look at some of the widespread ones.
No face-to-face interaction
This is an advantage for some people. Still, others may need in-person communication to feel more secure and make sure the company offers tangible services.
Growing market competition
With the increasing popularity of BaaS service providers and the digitalization of money, traditional banks may lose their significance. Hence, they feel the push to implement more innovative solutions to compete with 100% online solutions.
Banking as a Service Providers — the Top List
If you want to implement BaaS features into your products or services, you should find a trustworthy, experienced partner to help you out. We have gathered some of the best BaaS service providers currently available.
Devox Software provides full-cycle BaaS development services to clients worldwide. The process of BaaS implementation includes concept development, UI/UX design, software engineering, QA testing, product launch, and post-release support. With extensive experience in the niche, the team can implement a paperless documentation system, e-wallets and multiple payment methods, mobile banking apps, process digitalization, and product sales via digital channels.
Apart from BaaS software development, Devox Software can take care of BI implementation, DevOps consulting, and other related services.
Working with the team, you’ll get full transparency at every project’s stage, feedback sessions to discuss the status updates, and fair pricing for every service you opt for. Moreover, you can choose the most convenient cooperation model:
- a fix-bid if you know exactly what you need,
- a time and material-based mode that gives you the freedom to change the scope of work and adjust the team,
- a dedicated scalable team you’ll manage.
Q Agency is among the world’s top development agencies. The team will help you with everything from ideation to bringing your project to life. The agency is experienced with online banking services and offers innovative custom solutions to every client. The key values Q Agency promotes are transparency, in-depth cooperation, and research.
The company provides a broad scope of services related to BaaS: process digitalization, paperless solutions, mobile banking, AI and Big Data integrations, and many others. Altkom Software provides custom solutions in developing, designing, and integrating services into the company’s operations.
The company will help your business facilitate online transactions and ensure proper documentation processing through the latest technology and approaches.
Magnise is a top BaaS banking as a service provider and software development company with over 15 years in the market. The company uses the latest tech stacks to deliver custom BaaS solutions and offers professional help at any implementation stage. Magnise works in fintech, trading, and blockchain niches.
Its projects include online banking services, loan processing platforms, crypto trading software, and many others. The company operates worldwide within multiple time zones, so you’ll always get timely updates and reports from the team.
The difference between banking as a service and open banking
BaaS is basically part of open banking:
- This technology framework allows banks, businesses, and fintech companies to cooperate to ensure integrated banking services to customers
- Thanks to BaaS, people access a more complex infrastructure and get more opportunities (e.g., faster peer-to-peer payments, loan processing, convenient and secure trading operations, etc.)
- BaaS uses APIs to access particular features through the existing infrastructure of a bank of a fintech company
Speaking of open banking:
- It enables BaaS to companies and banking institutions.
- This framework regulates how third parties receive and process financial stats and data from customers.
- Open banking uses APIs to access and transfer data between two parties
Here’s a quick comparison table to help you better understand the key differences between BaaS and open banking:
Current BaaS Trends in the World
The BaaS technology is constantly evolving. No wonder it changes many aspects of life, especially traditional banking and business operations. We have gathered the list of the most significant BaaS banking trends and what they’re about to change shortly. Have a look at some of them.
Introducing new technologies and implementing a digitalized environment for the business is one of the biggest trends in the industry. This helps increase efficiency, deliver outstanding customer experience, and enable multiple new opportunities for users. 30% of global customers plan to switch banks since they lack custom solutions and want to enjoy more convenient online options.
That said, now you can see more self-service features companies implement everywhere, from online marketplaces to banking and crypto trading apps. It’s now possible to fully manage online transactions without contacting the bank or using third parties to complete a particular action.
Re-shaping the concept of money
The development of blockchain-based services couldn’t pass by the banking industry, bringing change to some of the conventional processes like digital transactions, trading settlements, or peer-to-peer transactions. Blockchain technology enables cheaper, secure, and more inclusive transactions for customers.
This also helps minimize the need to use third parties for completing particular operations, thus accelerating the online banking process in general. Finally, thanks to blockchain, most financial institutions can enjoy significant cost savings as almost every operation can now be done online. As a professional banking as a service BaaS provider, we implement the latest blockchain technologies into projects we work with, bringing innovation to clients worldwide.
Closer cooperation between fintech companies and traditional banks
Cooperation between fintech companies and traditional banking institutions is a significant step towards bringing the necessary change to the industry. Fintech service providers can share the required expertise and knowledge to help banks smoothly implement new elements and services into their operations.
According to the latest research, over 30% of large global banks will implement BaaS frameworks into their operations by 2024. Moreover, fintech companies can soon become new “traditional banks” as they already bring immense change to how the latter work.
How to Choose a Right BaaS Provider
Finding a perfect-fit BaaS service provider can get complicated as the number of dedicated companies is increasing daily. Moreover, the search process has to encompass multiple aspects: access to the IT talent pool, cost-effectiveness, high-end data security systems, and many others.
However, we have picked some pro tips to help you accelerate the selection process and find a truly reliable, devoted BaaS team.
Consider the company’s location
It’s essential to always keep in touch with an offshore software development team that’s working on your project. The company’s location and available time zones are among the key aspects to consider when picking the best service provider.
The Devox Software team operates in several countries, including Poland, Azerbaijan, and Georgia, so you can choose among various time zones and enjoy convenient communication and efficient cooperation.
Look at the company’s portfolio
Obviously, the more successful cases, the better. Check the following:
- What projects has the company completed so far?
- Were any of them similar to yours?
- How well did the projects perform over time?
This might be a red flag if a company cannot provide you with a portfolio.
Look through the testimonials from previous clients
Having a portfolio with success cases is great. Yet, it’s also vital to have a partner who can perfectly manage communication, ensure alignment with deadlines, and provide detailed reporting. That’s when client testimonials can be beneficial.
Usually, BaaS banking companies provide reviews from past clients on the website. If you can’t find any, try to get some by contacting the team directly — via email, for example. Another option could be looking at review platforms like Clutch, TrustPilot, or GoodFirms, which usually contain plenty of testimonials and detailed summaries. Devox Software has a Clutch profile where you can read more about the clients’ experience with the company.
Find out what services they offer
If you’ve seen a flawless portfolio and great reviews from past clients, this may be your choice. However, a service provider may lack relevant experience, or their cooperation models don’t fit your business needs. That’s why you should always request a portfolio in advance or arrange a meeting to see if the company is a good fit.
Request an intro consultation
Request an introductory meeting with the team to get to know your potential partner better and see if it’s a good fit. Thus, you’ll get more insights into how the company works, its services, advantages, and approaches to the workflow.
Discuss the price list
To find the most suitable BaaS partner, it’s also essential to consider the pricing for these services. Do small-scale market research and pick the most relevant providers. To be sure the pricing model fits your budget expectations, you should request a project proposal with a detailed price breakdown for every service you need, hourly rates, and team content.
If you’re looking at more affordable options, it’s better to look at BaaS service providers from Eastern or Central European countries. This region has more competitive rates than the US, the UK, or Canada, and the local market is full of professional teams available right away.
BaaS as a service helps implement full-banking features and services to companies in Fintech and other industries — both huge enterprises and small startups. With its help, businesses facilitate and accelerate multiple financial transactions, improve the security system, and enhance the experience users get with your product or service.
Now that you know the answer to the question “what is banking as a service?” you can assume the potential needs this framework can satisfy for you. If you lack relevant experience working with online banking systems, hiring a BaaS company that can develop a solution for your business is the perfect way out.
Our team at Devox Software provides a dedicated development team, flexible cooperation terms, and specialists in BaaS software development, testing, support, and design. With over five years on the market, we create efficient solutions for non-banking companies, help enhance user experience, and save costs. We offer custom solutions and pick teams according to your business needs. We work mainly with middle and senior experts to ensure the top quality of every project.
If you need help with any of these features, feel free to contact us. We’ll schedule a consultation with you and discuss possible cooperation opportunities.