Banking as a service, also known as BaaS, is a business model that allows businesses that are not banks to offer banking services. How does Banking as a Service work for your non-bank business? A licensed bank will integrate the specific bank services that your financial technology company requires into your software. Your Fintech business wants to provide digitally-minded customers with services that generally require a banking license to provide. A bank wants to expand its services to a non-traditional clientele. BaaS is made for this situation.
Benefits of BaaS
The world is becoming increasingly digital-savvy. More and more business is transacted via mobile devices or home computers. Traditional banks are missing out on much of the business offered by this move online. Businesses that are experts at working in the digital world do not have the licenses needed to offer banking services nor are they interested in subjecting themselves to the regulations needed for traditional banking. The primary benefit of banking as a service is that it provides access to banking products and services for non-bank companies and helps banks access a wider range of clients who would never physically walk through their doors.
What Services Can BaaS Offer Your Business?
Payment services, loans, debit cards, and mobile bank accounts are all services that a Fintech company can provide its customers by using banking as a service from a licensed bank. Think of BaaS as a start to finish setup that lets a digital bank or company wanting to provide banking services connect directly into the system of a regulated bank. This is done by APIs (application programming interfaces) that directly connect the necessary software in each institution so that a non-bank can provide banking products like debit cards and loans as well as “white label” banking services.
Using BaaS for a White Label Debit Card Payment System
A simple example of a use of the Baas approach would be a company that has employees spread all over the globe. They need to be paid no matter if they are currently in Chicago, London, Jakarta, or Mumbai. Using banking as a service approach, a company can issue debit cards to their employees who can simply take their payments from a cash machine in the nation or jurisdiction in which they are currently working.
Does Using BaaS Make Your Company a Bank?
Banking as a service allows a company with no banking licenses to offer services traditionally offered only by banks. This happens by connecting to the software of a regulated bank. They are the bank and deal with the regulation and licensing. Your business simply integrates banking services like debit cards, mobile bank accounts, loans, and payment services into your business and under your name.
How to Begin Using Banking as a Service
If you and your company are interested in banking as a service you do not need to “reinvent the wheel” by building the necessary features from the ground up. Baas is a growing business niche and there are institutions like European Merchant Bank ready to help you develop banking as a service, choose the services that will be most profitable for you and assist in developing the necessary software connections to get your BaaS system up and creating profits.
