This is because the cost of creating a platform from scratch is high, and such a project could mean taking on significant technical debt. Fast-moving banks are doing just that, turning to platform or marketplace models by partnering with agile startups, updating legacy systems and building their own platforms. For instance, DBS is ramping up its digital efforts for corporate banking customers by relying on APIs. Last year, they reported a net profit increase of 28 percent to USD 4.17 billion. Banking-as-a-Platform enables third-party developers to build products and services for bank customers. Developers can extend platform functionality using APIs, while the platform itself manages data exchange and oversees authentication, as well as ensuring compliance.

The bank has transformed itself by using technological transformations to their advantage. The integration with Plaid was rolled out within eight weeks, and it helped the Live Oak Bank to compete with national banks as well as the big multinational banks. This blog provides top 7 Banking as a Platform real life examples in detail. Capital Loans are issued by Celtic Bank, a Utah-Chartered Industrial Bank, Member FDIC. All loans subject to credit approval. Stripe Treasury is provided by Stripe Payments Company, licensed money transmitter, with funds held at Evolve Bank & Trust and Goldman Sachs Bank USA, Members FDIC.

Key Fintech Statistics 2021/2022: Market Share & Data Analysis – by Astrid Eria on FinanceOnline.com

This same pattern has been repeated several times since; it’s hardly an isolated incident. Based on the business model, product and service roadmap, and technological readiness, banks can begin their platform banking journey in stages with short-term and long-term objectives. Like other “as a Service” models, BaaS uses mainly application programming interfaces to provide connectivity with its users. Since the providing bank has all of the regulatory permissions to offer banking services, BaaS users can integrate them without having to go through burdensome regulations themselves. If you’re looking for a way to provide better customer service, you’ll probably want to focus more on Banking as a Service providers.

This gives them easier access to financial products and greater control over their finances. Digital challenger banks are now running at a fraction of the cost of incumbents. Some technology companies have obtained banking licenses, enabling them to offer their BaaS platforms to distributors that want to provide financial products to their customers. The second layer represents the “Bank-as-a-Service layer” that maps out banking services customized as an ecosystem for fintech companies to deliver products to end users. This part of the stack sends data back and forth between the bank and fintech, through the BaaS provider as an intermediary.

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In its place is a patchwork of subscription-based ‘as a service’ models that allow us to pick and choose how we use software, consume entertainment, and now benefit from banking as a platform services. End users just want speed and simplicity, whatever way they’re packaged, and will migrate to those services that provide these best. With reliability as one of our 5 core values, it’s important to ensure that we can give each new customer a fast and predictable go-live date.

Only a year ago, few of us could have predicted the significant impact COVID-19 would have on the global economy and the disruption it would wreak on our daily lives. Now that there is light at the end of the tunnel, it’s important that we focus not solely on the pandemic’s negatives but rather examine the opportunities that it’s afforded banks to add new and real value for banking customers. Videos – Watch our videos to know how our products and solutions are helping organizations adopt a customer-first strategy. Banking-as-a-Service – Deliver lifecycle experiences through the ecosystem and not with mere products and services. Insurance – Identify and mitigate revenue leakages, rationalize products, connect with external partner ecosystems and present contextual offers. Ecosystem Management and Monetization – Embrace the open economy – adopt new business models and increase revenue sources.

The importance of choosing the right approach

Before delving more into how platform banking might revolutionize banking business models, it is critical to distinguish between open banking and platform banking. Here, we discuss our view on microservices-based banking architecture and how institutions should open up to explore prospects presented by the platform banking phenomena by taking a purposeful approach. Bank customers receive more innovative services from their bank, developed by the fintech companies.

Angus Ross and Paolo Sironi discuss how BaaS and embedded finance are redefining banking as we know it and where to realize the biggest gains. Angus Ross and Hannah Wallace explore the current state of BaaS and the innovations financial institutions are using to expand revenue opportunities. Financial concerns have suddenly risen to the top of the agenda across a wide range of businesses, including fintech, banking, eCommerce, and more.

What is Banking as a Service?

Platform banking requires a financial services infrastructure, typically software with open API connections, to operate. WIth Sila, you can build an app structure like this upon which to build your business. And by partnering with the right service provider, like Sila, you are well on your way to developing your app today and expanding upon it tomorrow. Their banking platform provides the customers, a unique experience with the comprehensive package of financial products and services. Legence could afford to provide the customers the platform services like CSI CRM, mobile banking platforms, and connected baking platform at cheaper costs than many of their competitors with the help of CSI’s tech experience. Accessing your payments service, financial accounts, and cards through one provider could easily allow you to pay solopreneurs or contractors on your platform, using the money your customers earn from sales.

Platform banking is not restricted to retail financial services—it does apply in the institutional context as well, whether for corporate customers or buy-side firms. FXall, an electronic, foreign exchange trading platform, offers access to over 180 liquidity providers.4 While FXall is a third-party platform, it illustrates the potential of platforms in the institutional markets as well. A fintech company can easily develop an app for financial services and then partner with a bank to expand its financial services. Or, they can partner with Sila to tap into select platform banking features like virtual accounts and the ability to send Automated Clearing House payments. Platform banking is a model that banks are well positioned for, but non-bank entities can use platform banking services to position their business as a viable technology. They can easily integrate with a core banking operational model to offer banking services for consumers.

The solopreneur or contractor would have access to those funds in seconds via a financial account and card, while you wouldn’t incur any additional working capital needs. Now, with the rise of banking-as-a-service solutions, platforms are beginning to evolve yet again to "SaaS 3.0"—offering additional embedded finance features to customers beyond payments. To fight back, some incumbent financial institutions are spending billions of dollars to digitize their existing business models. But it might be more effective for them to start up new models – that is, BaaS – by embedding their products in other platforms. This can provide crucial insights into customer patterns and help fintech companies better personalize their financial products and offerings.

• First and foremost, selecting the right marketplace, customers, and partners is the most important consideration.
• Reach out to see how Lumin Digital can help personalize a platform that keeps your bank competitive.
• This leads to reduced development time, cost, and a unified view of the customer by leveraging a common platform across most products and services.
• Now, with the rise of banking-as-a-service solutions, platforms are beginning to evolve yet again to "SaaS 3.0"—offering additional embedded finance features to customers beyond payments.
• The card is tied to their financial account and can access all of their funds in one place.

With all financial activity in one place on The Brush’s platform, the owners can always access up-to-date financial reports without bouncing between different tools and systems. They also don’t have to worry about forgetting a transfer or missing a payment on a loan. Legacy banks need to find their place in the finance ecosystem, which has been upended by innovative fintech startups during the last years. Strength is no longer found in a singular value-added product banking-as-a-service , but rather in the value indirectly captured by the relationship between the service provider and service consumer. As the image below shows, BaaS can have multiple layers of services, and the client can choose to adopt a couple of layers, or a single layer into their business. A successful strategy for overcoming this situation is to break the monolithic services into distributed and decentralized microservices, where Banking is provided as a service in the cloud.

Platform Banking: A Powerful Way to Grow, Digitalize, and Differentiate in 2022

Organizationally, banks will need to create multidisciplinary teams, redesign customer experiences and reshape business architecture. Banks increasingly have to compete with big technology companies and a crop of fintechs who are coming up with innovative and customer-centric solutions. In order to survive and thrive in this era, banks will need to adopt new models.

Per one recent study from Accenture, banks that embrace Open Banking trends could profit from a potential revenue uplift of 20 percent, whereas those failing to do so risk losing 30 percent to disruption by the end of 2020. For example, different banking-as-a-service providers offer different sets of services. 70 percent of the IT budget in European banks is aimed to keep bank operations running and only 30 percent to introduce new services or improve processes. It may look like a staggering amount of money but once you take into account historic circumstances and the complexity of banking software, it starts to make sense. Across industries, digital transformation is democratizing data to enable greater transparency and better customer experiences. New technologies are opening up legacy systems to emerging startups and third parties and, in some cases, putting data directly in the hands of consumers.

BaaP Part 1 – Exploring Banking as a Platform (BaaP) Model

In the first installment of this two-part series, in collaboration with Axway, we look at how banks can leverage APIs to create new revenue streams, build partnerships and reach new customers. We know for sure that all banks, at least to some extent, are becoming banking platforms. Open banking initiative forces banks to give up their monopoly and open their systems to third parties. First, it contributes to a better user experience as they do not have to make a bank transfer each time they make a transaction on the platform as the funds are securely stored there. Second, for the platform, it is easier to convince customers to re-invest, which greatly increases customer retention. BaaS and BaaP aim to provide services offered by next components using the platforms available in the cloud.

Verified Payments brand belongs to Verified Payments UAB company which is a payment service provider in Eurosystem. Company is a licensed e-money institution which has the right to execute activities related to issuance of e-money and provision of payment services around the European Union. Verified Payments UAB is supervised by Bank of Lithuania under the Electronic Money Regulations (Licence No. 27). Take one established, medium-large global bank with between $300 billion and $400 billion in assets in Asia.

How the banking-as-a-service industry works and BaaS market outlook for 2023

Also, according to Future Market Insights, the worldwide BaaS platform market is increasing at a CAGR of 15.7% and is predicted to reach $12.2 billion by 2031. Eliminating international barriers by making it easier and less expensive to accept payments from abroad. Banking-as-a-Service is very helpful to small and medium-sized enterprises in many ways.

Cutting-edge technology

In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the "Deloitte" name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. FinTechs in Africa have provided an original financing solution in a previously unserved and untapped banking market. Because it is primarily mobile-based, Africa FinTech is subject to national jurisdiction in regards to regulating financial markets and mobile telecommunications. Banks with a forward-thinking product strategy, mature application design, and scalable technological infrastructure may move quickly toward the long-term aim of establishing a microservices-based architecture. The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless.

The use of API based banking platforms has enhanced the tech-savvy reputation of DBS furthermore. Banking as a Platform opens up an opportunity for innovations that can help the banks to improve their customer experience, ease the banking operations, and ultimately become tech-savvy like their customers. Services offered through BaaS providers are part of a regulated industry, resulting in a long list of compliance and regulatory requirements you must manage and maintain.