Banking as a Service Explained: BaaS, Whats, Benefits, Examples

Ago 13, 2021 | Software development

They can also design apps for their consumers to keep track of their daily transactions, account balances, and savings. Aside from that, they can provide superior client service by ensuring faster access to funds and no hidden fees. The physical infrastructure, also https://globalcloudteam.com/ known as “Infrastructure as a Service” , is provided by the banks. The server and communication devices are examples of basic infrastructure services. This can be a big issue in implementing the BaaS model as it would cause hindrance for third-party integrations.

The airline could work directly with the licensed bank providing the BaaS platform in exchange for using the bank’s services through the API. Then, the airline could build or develop a new product suitable for the target customers. Our partner BaaS platform brings both traditional and mobile backend as a service under one roof. Its functionality is extensive enough to speed up web MVP development and app prototyping. It also eliminates vendor lock-in issues, which are common with some BaaS companies, by making sure you can swiftly switch to your own backend anytime. For BaaS projects, we call on our experience with other BaaS providers (Parse, Firebase, etc.), headless CMS platforms, and AWS solutions.

BaaS Examples and Advantages

So, reducing the size of the development team will reduce the complexity of the hiring process and facilitate team management. Non-financial institutions that work with banks expand their reach. Bank customers get access to advanced budget management features. The model seems similar to BaaP, but in open banking, banks have control over data accessed by third parties. Are the APIs and solutions on offer authored by the company or owned by third parties? Carefully review the services offered by a particular provider to ensure your business needs are covered.

Starling Bank is one of the most successful challenger banks in the UK. It was founded by former AIB COO Anne Boden in January 2014 and received its banking license in 2016. Still, it is one of the crucial tools powering the digital banking revolution. So, the conclusion is that yes, every large, medium, or small company should have an external provider responsible for safeguarding their data efficiently and effectively.

Contact Acropolium for BaaS Services!

These arguments demonstrate that both banks and non-banks stand to benefit greatly from using the BaaS model. A classic bank, for example, might be Goldman Sachs or ICICI Bank. Banking as a Service has exploded in popularity as a result of the push for open banking . The main goal while creating an API strategy should be ease of integration.

BaaS Examples and Advantages

Even in identity verification which even now involves a form of documentation. With API development and integration, companies can connect with a traditional bank and simply download and process information. The whole case for open banking is to give people choice, control, and empower them to control and use their money in a whole different way. Ensure the house or a bike with a penny on a dollar, compared to traditional banking. Manage finances and even invest from the comfort of their own favorite armchair. It’s making old and sometimes inefficient services simple and affordable.

API

Even if a server fails, the application will operate normally with a fully redundant architecture because multiple servers are running simultaneously. The infrastructure setup will vary from provider to provider, and it’s essential to clarify this aspect before committing to a plan. It will reduce the risk of losing data and streamline the backup recovery process.

It’s a tech company with a full banking license in Germany which means it can offer banking services EU-wide. They add significant value to their bank partners by facilitating new account openings, and as a result, they have negotiating power in their contracts. Even so, they’ll have to haggle hard with banks to get what they banking-as-a-platform want out of the partnership. They must also be careful not to misrepresent themselves as banks, as regulators are increasingly calling for fintechs to be regulated more strictly. In my perspective, the function of BaaS companies in connecting fintechs to multiple banks and compliance providers will only rise in 2022.

BaaS Examples and Advantages

It’s an enterprise-focused backend as a service, and Progress Software acquired Kinvey in 2017. Want to know more about the differences between Parse and Back4app? GDPR privacy requirements are pretty complicated, and the implementation will demand a lot of engineering effort. The requirements will range from implementing HTTPS for transit data to encrypt server-side data in rest . I will assume outsourcing development to an offshore company, which will cost $25/hour. The time to perform this process can range from a few hours to more than a day for large environments.

Azure Cloud Functions

Open banking and the usage of APIs across the banking infrastructure are being promoted by organisations such as PSD2 and the Open Banking Working Group. In many countries, banks are required to make their APIs public in order to comply with the new legislation. Businesses can use that trust to grow their customer base by collaborating with banks. It’s no surprise that 77 percent of banks want to invest in open banking efforts for their corporate clients. For example, JP Morgan Chase partnered with On deck, a fintech firm, to expedite the processing of small business loans.

Essentially, it’s a strategy for banks, FinTech firms and other brands to go hand in hand and provide an integrated banking experience to customers. APIs and applications are key factors in facilitating these changes and need to be developed in a responsible way to provide long-term efficiency and scalability. Relevant has been doing this for over seven years, and our dedicated software development teams excel at it. Consider the option of outsourcing in Ukraine to get quality banking IT services. Scalability is a decisive factor when it comes to web applications and can impact costs majorly.

Non-banks (like fintech and even non-fintech businesses) build products on top of the traditional banking infrastructure. Innovation is fostered by enabling non-banks to provide core banking services to customers, enabling them to access more intelligent and convenient products. Besides, since customers are increasingly knowledgeable and tech-savvy, they expect highly innovative products in technology. Therefore, applying the BaaS model allows businesses to innovate products and bring superior experience to customers. But fintech businesses have the expertise to automate these services with the help of advanced technologies, such as artificial intelligence and machine learning. This makes financial services faster, cheaper, more interesting, and more entertaining.

It makes no sense, and it’s much better to use a pre-built template for this purpose. Frontend, also known as the client-side, is the piece of the code that the end-user sees and interacts with. Examples are an app on a mobile phone or a website on your computer.

BaaP Examples and Advantages

Modern financing apps can partner with e-commerce shops to offer split payments on purchases. A user grants authority for the app to transfer an agreed-upon amount into a specialized savings account, typically the difference between a spent amount and the nearest dollar. ProcessMaker is an easy to use Business Process Automation and workflow software solution. Once you are set up with the BaaS service, you need not do a single extra task t make sure the backup happens. It is automatic, and every change and addition or deletion is updated instantaneously. Acropolium experts are ready to answer all your questions and guide you through the development process.

  • In simple words, having building blocks and code generation tools for your backend as a whole is always better than simply knowing how to manage micro-events.
  • Simply put, non-bank businesses offer banking services without having to launch or acquire their own bank.
  • In that case, it’s not enough to change a server address or redirect incoming requests.
  • In other words, you can avoid dropping money on physical servers and other backend hardware with BaaS.
  • Therefore, they need to backup more frequently to avoid losing recent data.

In fact, in India and China, the incidence might be as high as 50%. As a result, a frictionless and personalised financial solution is created. This solution would be simple to use, appealing, and relevant to today’s increasingly tech-savvy customer base.

Benefits for Banks

The structure provides database, auth, file storage services letting developers concentrate on client-side development. 1001 Dubai is a mobile commerce provider concentrated on creating apps for Supermarkets and Convenience Stores. The company has hundreds of clients in the Middle East region, more than 80K downloads and distributes the app via the SaaS model. The fintech helps businesses and entrepreneurs to quickly and without effort open a business account, as well as to obtain payment cards and accounting services.

In other words, you can avoid dropping money on physical servers and other backend hardware with BaaS. Bancorp was founded in 1999 as a branchless bank and is now a superstar in digital financial services. It’s perhaps best known for its white-label banking and technology solutions to fintech companies and non-banking businesses. BaaS promotes financial services competition by allowing non-banks to provide fundamental banking services.

A real-life example of how to use a backend as a service to build a SaaS app

Instead of opting for a hefty on-premises backup system, enterprises prefer outsourcing backup and recovery, making the backup data accessible remotely. Examples of features that lead to better performance are the implementation of ready-to-use CDNs, multi-region deployments, and new-generation virtual machines. A BaaS implementation will free companies from this hassle, save them costs, and focus on more critical aspects of the business. So, they have to focus their effort on creating business-centric lines of code. Please read the article Saved $350k with a BaaS to know more about this subject.

A bank’s core offering has transformed significantly over the recent decades. Traditional customer lures revolved around convenient branch locations and A-plus teller interactions, but the digital evolution upended traditional models. The same scheme works with corporate clients that use IT infrastructure, including ERP or accounting systems.

Traditional and New Age Banks

And the analysis of consumer behavior allows startups to understand what services will satisfy demand and bring new customers. As previously mentioned, the licensed bank grants access to its infrastructure to a service provider. APIs, or application programming interfaces, are usually used for integration. For example, to provide payment services, the British startup Bankable cooperated with the German Solarisbank and gained access to the banking infrastructure through the API. Many banks, sensing the current digital trends, started offering their own BaaS platforms that enable direct access for fintechs and other businesses through APIs. Such an approach creates a competitive advantage for these more traditional financial institutions in a market where novel fintech startups emerge constantly.

Everything needed is to write frontend code on the existing building blocks and code generation tools. It’s useful for developers to work on the fly or respond to the events and provide microservices. The special set of functions from Firebase includes ready-to-use APIs from text recognition, landmark recognition, and image labeling.

Often, a backend has to be re-implemented when switching providers. On the other hand, a BaaS will deliver ready to use building blocks and code generation tools. The advantages of this approach are a much faster development process and reduced time to market. The cons will be lower flexibility and following a standardized architecture.

Banking as a service, or BaaS, enables non-banks to provide fundamental financial services to their consumers through API integration with banks. Non-banks (such as fintech and even non-fintech companies) create products on top of existing banking infrastructure. Purchasing a BaaS platform will allow the company to customize the interface and communication channels, as well as focus on their work processes. As a result, businesses will be able to release their products faster. Simply put, non-bank businesses offer banking services without having to launch or acquire their own bank. For example, Shopify, one of the top e-commerce software developers, uses a BaaS approach to provide a range of financial services as well.