BaaS - the meta-universe of the FinTech industry:- www.deekpay.com

BaaS (Banking as a Service) is another major breakthrough in fintech that allows banks and fintech companies to work hand in hand. The problem, however, is that many of these innovations are often confused with each other. Today, we're going to clear up exactly what Banking as a Service is, and what it's not.

Over the past few years, the banking industry has gone through a huge transformation. This transformation is becoming inevitable as more and more fintech companies enter the market. Financial services are evolving, with new products, channels, partnerships and opportunities emerging. At the centre of this change, banking-as-a-service plays a crucial role.

What is BaaS?

Banking as a Service (BaaS) is an end-to-end strategy that integrates a variety of service providers into a detailed process to fulfil financial services on time and efficiently. Simply put, it allows third-party companies to connect to banking APIs.It enables open banking services while allowing organisations to build new financial services on top of the regulated infrastructure of the banks that provide them.

How does banking-as-a-service differ from traditional banking?

Funds storage, remittance and payment processing are some of the functions of banks. In order to provide these functions, banks must make significant investments and build appropriate infrastructure. These processes, coupled with complex infrastructure, lead to congestion. As a result of these bottlenecks, fintech companies and non-banking organisations have invested a lot of thought and effort into building financial services by partnering with banks, rather than building the entire infrastructure.

How does BaaS work?

Banking-as-a-Service allows third-party organisations to access existing banking services through APIs that connect banks and third-party organisations. Fintech companies, programmers and developers, and other non-financial institutions can use these APIs to access banking services.

They can develop their own functional layers on top of existing financial services. In other words.

1. Fintech companies or individuals pay for the use of BaaS.

2. BaaS platforms, such as banks or financial institutions, publish their APIs.

3. Financial companies/individuals use these APIs to create unique financial services.

Factors affecting BaaS

While fintech is changing the way financial services are delivered, several key factors have fuelled the rise of BaaS.

1. Banks are trying to catch up with fintech startups in terms of speed. Alternatively, banks are partnering with fintechs to develop new financial services. Startups and small businesses are beginning to take advantage of easier and more efficient commercial banking.

2. In recent years, the rise of digital transformation and mobile-first strategies has had a significant impact on BaaS adoption.

3. The commercial architecture of the banking industry is evolving into a more complex system incorporating newer technologies and methodologies.

The banking rules approach to development helps to promote healthy industrialisation.

What are the advantages of BaaS for businesses?

Before integrating any new technology into our business, especially those related to finance, we think about the benefits of this technology.BaaS is a hot topic in the FinTech industry and before we discuss how it can help businesses, let's discuss all the benefits of BaaS.

Organisations can use BaaS to separate business logic from data, reducing the time it takes to design and deploy applications.

Businesses can be more innovative by leveraging their own APIs and those of third parties.

Building products and services using the API ecosystem can significantly expand the number of customers.

Now let's look at some BaaS use cases.

How can BaaS help businesses?

Credit/debit card payments and processing

In today's digital economy, non-financial organisations use Banking as a Service (BaaS) to provide payment functionality to their platforms or applications. As a result, these companies can save on operational costs by not having to build and operate their own payments infrastructure.

raise a loan (from e.g. a bank)

As more and more e-commerce sites compete for customers and online sales continue to grow, the only way to do this is to provide full service and help your customers. Small business loans are a valuable tool that can help small businesses compete in the large e-commerce industry.

Improved customer service

Integrating multiple services into a single platform is an excellent way for organisations to improve their customer service capabilities. Banks are expanding their customer base by offering BaaS solutions that extend their delivery services to a wide range of businesses across multiple industries.

Authentication and app-based online services are some other use cases for BaaS. You can get all these services for your business by visiting this link.

reach a verdict

Traditional banks are losing customers to digital competitors while investing in infrastructure.BaaS' end-to-end strategy of integrating a variety of service providers into a detailed process for completing financial services will undoubtedly see more digital financial offerings in the future, as the government aims to increase support for digital endeavours.

Frequently Asked Questions

What is the difference between Banking as a Service and Open Banking?1. The BaaS model is sometimes mistaken for Open Banking because both models rely on APIs to interact between banks and fintech companies. However, these models serve very different purposes.2. Banking-as-a-Service (BaaS): companies include full banking services in their solutions.3. Open Banking: companies create products based solely on data.

What is the Banking as a Service market? BaaS has become quite popular in the FinTech industry. The emerging FinTech term "Neobanks" (digital banks) has gained popularity in several countries around the world. Digital banks help organisations manage their entire financial operations by providing real-time functionality through increased transparency and choice. In addition, many Neobanks and challenger banks have opened up their APIs to non-financial organisations in search of new revenue streams.BaaS is more than just a source of revenue, it enables traditional banks to build relationships with emerging and established fintechs and helps traditional banks to catch up with what some of the fintechs are doing.

What is the current status of Banking-as-a-Service in India? While COVID has had a significant impact on traditional banks, it has also contributed to the rapid acceptance of digital banking. Meanwhile, Indian fintechs have excelled and are involved in various aspects of the banking sector. State Bank of India has partnered with Uber to provide car financing to Uber drivers, and Snapdeal and Freecharge have partnered with Yes Bank to enable 'instant refunds'. These types of partnerships are made possible because banks allow outside companies to access their technology and data.