Increase in Demand for Commercial Services to drive the Growth of the Banking As-a-Service (BaaS) Industry

Banking As-a-Service (BaaS) is a market wherein non-banking entities offer banking services through application programming interfaces (APIs). This enables those entities to offer monetary products and services to their clients while not having to build their very own banking systems. In the last few years, banking-as-a-service (BaaS) has gained considerable attention because of its potential to overcome the traditional banking business model. BaaS allows the fintech industry, online retail stores, and other third-party entities to provide banking services like payments, loans, and account administration to their clients. 

The main advantage of BaaS lies in its ability to deliver a continuing and unified banking experience across the platforms of these third-party entities. This approach that clients to access banking services without the need to exchange among applications or systems. According to a recent report published by Allied Market Research, the global banking-as-a-service market is anticipated to grow at a notable CAGR during the forecast period.  

 

The rise in demand for financial services impelled the growth of the market-   

The growing endorsement of BaaS in the banking services industry is a key factor driving the growth of the global banking-as-a-service market. Digital transactions (digital payments of invoices) in banking are becoming familiar in quite a few financial services, along with asset management, banking, equity, professional counseling, insurance, treasury, tax and audit advice, capital restructuring, and portfolio management.  

  

Moreover, the digital revolution has been propelled through the rapid growth of Internet services in recent years, which has had a positive influence on banking-as-a-service (BaaS) among mobile-oriented users and business owners who are embracing virtual platforms in banking industries, along with banking software program, auditing software, and offerings. Approximately 5,000 organizations around the world offer APIs and BaaS services, consisting of account beginning, mortgage origination, cost management, and more.  

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On the other hand, the growth of the market is attributed to the presence of technological companies in the North American region, including Green Dot Bank (Green Dot Bank), PayPal Holdings Inc. (PayPal), and others to establish the global banking-as-a-service market. For instance, In April 2022, United Kingdom-based Finastra declared a BaaS partnership with Microsoft to provide alternative lending solutions to SME owners. This partnership allows SME owners to access relevant and beneficial business financing with ease and convenience.   

Comparably, the Asia-Pacific region is anticipated to be the fastest-developing region due to a rise in awareness about BaaS in countries like India, Japan, and China. It is expected that several global BaaS tasks in the Asia Pacific will contribute to the boom of the zone. For instance, in July 2022, Finastra announced that it would be providing FX services from HSBC to mid-tier banks in the APAC region using Finastra’s FusionFabric.cloud platform under a Business as a Service (BaaS) experience.    

Key developments by leading players-   

Some leading players are taking strategic actions to enhance their products and services. This includes forming alliances, engaging in mergers and acquisitions, launching new offerings, and expansions. For example, in November 2021, BM Technologies Inc., a United States-based banking as a service (BaaS) fintech company, declared the acquisition of community business bank First Sound Bank. The merged entity, to be named BMTX financial institution, could be a financial organization based totally on fintech principles, with a center of attention on virtual customer support across the country, supported by its center community banking section. It is anticipated that the commercial enterprise will continue to operate within the greater Seattle location.  

Another key development for example, in April 2022 German company Mondu teamed up with BaaS provider Raisin Bank to offer Buy Now, Pay Later (BNPL) services to online B2B marketplaces and merchants. Mondu's BNPL product now promotes reasonable payment methods through direct contact with online retailers' checkout processes. Mondu is responsible for the handling of payments and associated services when a business customer makes use of one of the approved payment methods.   

To conclude, the market for banking-as-a-provider (BaaS) is probable to experience an increase in the coming years, as a developing variety of non-banking entities understand the significance of imparting banking services for their clients. This market offers a platform for collaboration among traditional banks and non-financial institution entities and for BaaS technology vendors.