Banking-as-a-Service provides a different solution to traditional banking software and tailors to the needs of companies wishing to offer banking services. By leveraging three pillars – a licence, a back office, and an API – BaaS companies can therefore provide banking services under a white label instead of through traditional banks and their legacy infrastructure.
What is Banking-as-a-Service?
Banking-as-a-Service – generally abbreviated as BaaS – follows the same logic as Software-as-a-Service, Mobility-as-a-Service, and Blockchain-as-a-Service: a subscription-based model which can be adapted to the services used by the customer.
The value of the BaaS model
The value of Banking-as-a-Service is manifold. Since its emergence in the early 2010s, it has helped bring about a completely new type of company: fintechs. BaaS addresses several issues, while facilitating the creation of new business models.
The first problem – encountered by companies like Treezor and other start-ups that began before the emergence of BaaS – was, fundamentally, the lack of a simple, centralized, and white-label solution to provide banking and payment services.
Banking institutions did not let you connect to their infrastructures, software to deploy banking solutions was extremely expensive, and at any rate, you needed many different partners: a partner for the licence (or rather to get their own licence), a partner for the payment infrastructure (or banking services software), and a partner for issuing payment cards. Then there was the question of KYC where the absence of a digitalised solution and a suitable regulatory framework threatened the emerging fintech model.
The pioneering Banking-as-a-Service institutions, such as Treezor, have come up with an answer to this problem. Companies and fintechs looking to launch their own services now have solutions that integrate all the components, which are highly flexible being based on APIs, are low cost and have very high scalability thanks to cloud services. As a result, numerous business models and highly specialised niches have emerged while the quality of banking services has improved substantially.
The future of BaaS
The Banking-as-a-Service model is starting to become well established. In Europe – particularly in France, Germany, and the UK – BaaS is behind the launch of most challenger banks and fintech companies that offer digital wallets and payment cards. Going one step further, BaaS is increasingly concentrating on embedded finance, which is the logical continuation of APIs in banking services. This is reflected in the emergence of marketplaces and middleware to connect APIs from different providers within a regulated and controlled ecosystem, which is what Treezor is offering with Treezor Connect.
- Banking-as-a-Service is a B2B solution for companies that want to provide banking and payment services.
- Banking-as-a-Service enables the digitalisation of banks and financial services, as well as the emergence of new business models, stimulating the fintech and tech ecosystem.
- Banking-as-a-Service is regulated by the same regulations as those for banks and insurance in France.
- Banking-as-a-Service platforms are behind most successful fintech companies offering banking and payment services.
Would you like to know more about the different BaaS services?
Find all our Banking-as-a-Service articles right here on the Treezor blog.