Banking-as-a-Service – the ‘killer app’ finance has been waiting for?

28th January 2020

Once upon a time, in a distant past devoid of digital, it was a given that as long as a product sold, no one was really too bothered about the customer. In 2020, we’ve found ourselves living in what’s known as the ‘experience economy’ – a place where we, as consumers, above all else, desire a great experience with those we choose to spend our money with. Restaurant, airline, supermarket, internet provider, bank; online or offline, the nimble enterprise wherever they’re doing business, and whatever they’re selling, knows this, has it at the heart of their business strategy, intentionally creating and promoting products and services whose sole aim is to delight. And in creating that delight? Happy, loyal customers – at least for the foreseeable future. For the burgeoning banking and financial services sector, this experience economy continues to drive disruption and change, urging banks to act quickly so they too can meet our demands for a friction-free, valuable two-way relationship that provides us with everything we need, and stops our eyes wandering to other players who’ll gladly fulfil our increasing demands. Giving the big banks the means to merge their traditional financial products with original new services from the progressive innovators entering the finance space is crucial if they’re to succeed. As the world around us rapidly changes, and our expectations as consumers become more elevated, we’re demanding ever-more streamlined, holistic, hyper-personalised interactions with whoever we do business with. And slowly … slowly, banks are beginning to respond. Today we’re exploring Banking-as-a-Service – the ‘killer app’ finance has been waiting for?

The future of banking and financial services

Fintechs and big banks. They kind of like each other, do well when they’re together, but are still trying to figure out how to navigate their new, ripe-with-potential relationship. Over the last decade, investment in FinTech has overtaken the $350 billion mark, and with that backing, bringing new life into a sector that has been notoriously slow in catching up with the new digital world … but catching up it is, and at an impressive pace. As it does, fintech innovators continue to turn finance on its head, making it faster, more flexible, more … effortless – and far, far more fun than it used to be, even just 5 years ago. The result is a booming, growing sector that’s been blown wide open, and in the process, compelled to find new ways of doing business to survive. It’s opportunity knocks – with the knock at the door this time is Banking-as-a-Service. The smart ones? They’ll open the door and run with it …

So what exactly is banking-as-a-service?

To stay relevant in our new experience ecosystem, banks who embrace open banking to drive a bigger, better, faster more efficient product portfolio will be the banks that give themselves the best chance of success, gaining more customers and becoming – and remaining – more competitive. Forrester’s 2018 banking technology predictions, told us that over 50% of banks “will fail to exploit open banking, starting down the slow, painful path to becoming an unintentional utility.” No bank wants to be that bank.

At first glance, banking-as-a-service looks very similar to open banking because both offer access to the financial institution’s platform. But while open banking throws its doors open to third parties wanting access to the data of existing bank customers, banking-as-a-service gives access to a bank’s functionality, so that companies – usually non-banks – can connect their users to the institution’s banking services. For example, open banking allows for businesses like Yolt to access their customer’s banking data and use it in ways the bank doesn’t – such as enabling users to see all of their accounts in one place, providing budgeting and bill tracking tools and insights, making provider cost comparisons etc etc. banking-as-a-service, on the other hand, gives a provider such as Treezor the access to a bank’s functionality so that it can build its own-brand products and services for its customers – supported by the provider bank’s existing infrastructure and capabilities. Smart, right?!

Okay – so how does Banking-as-a-Service work?

Let’s cut to the chase. There are two main types of players in the Banking-as-a-Service space:

  • The fintechs providing Banking-as-a-Service functionality to other companies and thus enabling them to rapidly expand their product portfolios – they’re known as the “pure Banking-as-a-Service providers”
  • And retail banks with Banking-as-a-Service offerings – or banks that have opened up their banking functionality to external fintechs through their APIs.

In short, Banking-as-a-Service enables third parties to access existing banking systems through APIs which open up communication between a bank’s software and that of the third party. These third parties range from the fintechs we mentioned earlier, to a pretty inexhaustible range of players – from hotels to retailers, leisure operators to restaurants, and airlines to Airbnb. What BaaS does is enables these third parties to add new, value-add services to their own portfolio of offerings: so think mobile payments and credit services for example. But it’s not all about third parties – banks can also tap into the expertise of the fintechs to offer new products and services of their own, reducing spend, and creating new revenue streams.

Yet whichever side of the fence you’re doing business on, Banking-as-a-Service is only just out of the gates, meaning that few companies are involved with it in right now in any valuable or meaningful ways. But this will change, and when Banking-as-a-Service catches on it’s likely to spin out some pretty exciting innovations: ones that are ripe for reinventing the customer experience across a vast cornucopia of not just banking, but a whole range of industry verticals.

The advantages of BaaS – why it’s good for banks, fintechs and customers

If banks want to survive and thrive in this rapidly changing sector, positioning themselves as a digital innovator with whom customers can accomplish any financial need, then it’s time to reinvent themselves as the platform, or foundation, on which they can meet these needs. Whilst opening up access to third parties might seem counterintuitive, partnering with incumbents brings a whole host of advantages that could see the financial phoenix rise from the ashes, redefining and reshaping their future and ensuring their longevity. Let’s see how:

New revenue streams

While the financial landscapes shifts and changes with new technologies, banks have found themselves needing to find new ways to diversify and compete. By building a Banking-as-a-Service platform and allowing fee-based third-party access, the savvy bank can remain relevant, creating fresh revenue streams such as set-up fees and recurring revenues.

A growing customer base

Third parties interested in the Banking-as-a-Service provider could have a large, diverse customer base; customers which often won’t be customers of the bank. By providing third party access to its functionality, banks have a new opportunity to reach a brand new customer base without having to do much of the leg-work. A new customer base means new opportunities to digitally diversify and drive new service innovations across their portfolio.

Enhancing the customer experience

For customers, this means banks will be able to merge third party products and services with their own in a way that provides all kinds of benefits to their customer base – new products and services that bring real value to the financial consumer who’s looking for a personalised, meaningful relationship with whoever they choose to do business with.

Who’s playing – movers and shakers in the Banking-as-a-Service space

It’s not only the big guys like Facebook, Amazon and Apple that are tip-toeing into finance (see Apple Card) – brands with an already-established and loyal customer base with a varied portfolio of services now have access to an opportunity that doesn’t come along very often – that is, owning the financial element of a customer’s journey.

The most determined players in the Banking-as-a-Service space are the ones that will be seeking to cast their net as wide as possible, looking for ways in which they can, according to a recent McKinsey report, “be all things to all people”. Or to put it another way, to meet the demands of a new consumer who wants effortless, efficient, fast transactions – whether that’s purchasing an airline ticket, a cab ride, a meal out, or a new home. It’s a very appealing proposition – if they get it right. Being able to provide complimentary financial products and services driven by access to account and transactions data means the ability to meet the customer where they are, with what they need when they need it. It’s a compelling opportunity which Banking-as-a-Service, open banking and good old APIs make possible. Here’s a sample of the ones quick off the starting block:

‘Pure’ Banking-as-a-Service Providers:

Born in 2016, Paris-based startup Treezor is an API-based white label core banking platform operating as a “one-stop-shop payment solution”. Facilitating payments management across a full range of transactions services – think P2P transfers, digital wallets, debit and credit cards, account management etc – for more than 50 fintech customers, this savvy startup is definitely one to watch.

Berlin-based startup SolarisBank provides its customer-base with the ability to “Build your own banking products with our API accessible banking as a service platform”. A banking platform with a full banking license, customers can offer their own financial products to digitally diversify and bolster service offerings. Digital banking, cards, SME and consumer lending, payments and virtual IBANs, the company recently launched their Digital Assets service to drive adoption of crypto and meet the demands of its financially savvy client-base.

Bankable is a London-based pure provider that’s been helping bring innovative payments solutions to a wide range of financial institutions, fintechs, and enterprise, with impressive results. From payments card programs, P2P transfers, and e-wallets to a virtual ledger management and digital banking solutions, Bankable is on a roll, recently partnering with Visa, then Plaid and opening a presence in Dubai to cover the burgeoning Middle-East and African financial sector.

Retail Banks leveraging Banking-as-a-Service

Starling Bank’s Banking-as-a-Service powered business model means customers like Raisin, Xero and and the UK Department of Work and Pensions can spin out their own portfolio of financial products and services, quickly, seamlessly and without the need to negotiate often complex procedures and costly infrastructure required for official banking status.

Challenger bank Fidor´s Banking-as-a-Service connects customers to its open banking platform, enabling them, in turn, to provide financial services to their own customers. Covering banking solutions that range from infrastructure and technology, to compliance and risk management, smart, simple finance solutions are the name of the game with this German financial innovator, currently making its own moves into new markets and carving a recognisable brand name for itself in the process. Expect more from the Fidor team in 2020.

First to launch a similar service stateside, BBVA delivers an ever-widening range of banking capabilities to companies keen to offer their own customer base access to financial products and services without the need to adopt full banking status themselves. Their much-lauded Open Platform initiative has seen them support clients around payments, identify and business verification, account origination and card issuance, all through intuitive, easy-to-use APIs. It’s frictionless banking at its best.


Banking-as-a-Service might only just be getting started, but it’s already banging the drum for a bright financial future. As more and more businesses join the movement, this burgeoning ecosystem of both pure BaaS and retail banks providing BaaS services means that we’re no longer needing to rely on the traditional roster of big banks to ‘do’ our finance. For those with the vision to imagine an open financial landscape where business operations and financial management tools can work seamlessly with each other to drive ever-more efficient, personalised, relevant financial services, for every business type and every customer persona, BaaS might just be the ‘killer app’ finance has been waiting for. Watch this space and contact us today if you’d like to understand how Banking-as-a-Service can drive commercial change within your organisation.

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