Banking as a Service (BaaS) and the Power of Fintechs
What does “banking as a service” really mean? We hear it often and yet it is applied differently in different scenarios. (Spoiler: it is. And that’s exactly why it can get confusing.)
What is Banking as a Service (BaaS)?
Banking as a service (or “BaaS” for short) is best described as a model that allows banks to lease their infrastructure to any financial institution in an effective and timely manner – prioritizing speed and efficiency while meeting the increasing demand of digital banking. The BaaS platform, via APIs, delivers a range of digital banking services, like a virtual toolbox, that grant new streams of revenue and offer novel ways to engage with customers.
The BaaS model gives banks the ability to use an innovative, modular method of creating and distributing financial products. When a bank partners with a BaaS platform, they can layer a variety of features on top of any financial service. Digital banks “…can build banking offerings on top of the providers’ regulating infrastructure, as well as unlock the open banking opportunity reshaping the global financial services landscape.”
What are some of the features available in a BaaS model?
Besides APIs, which support functionality and processing systems, the list of possible features and functions is endless. Structural flexibility (i.e., the ability to create and distribute new financial products in real time) — an essential component for any successful financial institution — can be optimized through a BaaS platform. The ability to deliver seamless, multichannel customer experiences requires fintechs to deploy a BaaS platform that can integrate with legacy applications, provide omni-channel payment capabilities, and provides flexible workflows. Through this, banks can operate smoothly on seamless connectivity and help customers make healthy financial choices. A few other features include account flexibility, real-time payment options (RTP) and artificial intelligence (AI).
Why do BaaS models matter?
Simply put, banks operating on legacy systems can now open new revenue streams that were not available to them before. For example, Cyberbank, the next-gen digital banking platform from Technisys helps banks to generate incremental revenue streams by providing tailored products through any point of interaction of the customer’s choice such as…
- A bank’s digital channel where variations of the same product offering can be successfully delivered through targeting and data analytics.
- A BaaS offering to other fintechs.
- Embedded into other brands’ financial supply chain or, into a customer’s buying process.
- Any other point of need external to the bank (e.g., e-retailer, Shopify marketplace).
Cyberbank, the Next-Gen Digital Banking Platform
Next-gen digital banking platforms, like Cyberbank, support BaaS models by not only adding a delightful experience layer to existing bank systems, but also by supporting the entire product lifecycle. Banks are empowered to dynamically create new financial products, distribute products via multiple interaction points (e.g., your banking portal, online partner portal, or through an app in an e-marketplace), deliver financial products with high accuracy so you consistently reach the right audience at the right time, and package your products to deliver the best self-service experience possible online.
There are endless possibilities for innovative ways of embedding financial services that a BaaS platform offers. Not only can a BaaS model elevate the client experience, but also it can contribute to the financial ecosystem on a wider scale. Next-gen digital banking platforms like Cyberbank offer an excellent opportunity for financial institutions to reach the underserved market. For example, low-income households, small businesses (which have been disproportionally affected during the pandemic), and specifically the immigrant community — where credit can be hard to come by and show a clear need for credit services that are accessible and affordable.
Our next-gen digital banking platform, Cyberbank, empowers financial institutions to create and deliver new financial products and services that can dramatically decrease a bank’s time-to-market and expand market reach across micro-segments, down to the segment of one. Giving banks ultimate flexibility to reach existing and new target markets, with the ability to deliver exceptional customer experiences that go far beyond the traditional branch network. Through the dynamic power of a BaaS model, Technisys powers up banks to accelerate growth, adapt to changing customer behaviors, and move with agility in an increasingly competitive market.