Banking-As-A-Service: Enabling FinTech and Bank Collaborations

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How banking-as-a-service is becoming indispensable for banks to their future growth.

Banking-as-a-Service (BaaS) refers to an end-to-end process allowing fintech firms and other third parties to access financial services capabilities directly through APIs. With this, they can build banking offerings and integrate digital banking and payment services into their own products. With fintech players entering the banking market, the financial services landscape is undergoing an immense transformation. The evolving role of fintech is already changing the way banks create new products, channels, partnerships, and opportunities.

Through banking-as-a-Service, financial institutions can provide third parties with access to core systems and functionality.


Banking-as-a-Service Vs. Traditional Banking

Innovations in the modern financial services come through the boom of technologies such as artificial intelligence, robotic process automation, data analytics, blockchain and others. The surging demands from industry leaders for software-as-a-service (SaaS), infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) have given the rise of industry-specific services and platforms. Recent breakthroughs in the BaaS process have been made possible through cloud-based platforms enabling users to move beyond the limitations of legacy payment system.

Rapid emergence of fintech is significantly disrupting traditional banking worldwide. It has brought enhanced innovative solutions such as omnichannel banking services, digital wallets, peer-to-peer (P2P) lending and others. Moreover, integrating banking-as-a-service enables banks to become assembler of consumer-driven financial management tools. This will help them to enter new markets and meet the needs of digital consumers.


Embracing Banking-as-a-Service

With banking-as-a-service, financial services providers will gain access to accelerate their time to market into new environments and meet the needs and expectations of consumers rapidly. However, shifting to BaaS is not easier, it requires banks to must be willing to unfold their data and application services to partners. As BaaS is becoming a competitive toolkit for financial services, to succeed with it Cognizant identifies three key facets banks need to embrace.

A command of open banking APIs: Banks can leap into digitization using application programming interfaces (API), which enable them to share data with developers and third-party partners, such as fintechs.

A shift to solutions assembly: Banks can act as assemblers of financial management solutions, using componentized capabilities that facilitate plug-and-play operations, with the support of BaaS model.

A focus on innovation and the user experience: Provisioning data to external partners can facilitate innovative customer-oriented products, such as virtual intelligent banking assistants.

Essentially, BaaS helps create new sources of revenue for businesses by enabling cross-selling capabilities as a result of API-driven facilities. It allows organizations to compartmentalize business logic and data, and lessen time to build and ship apps. With BaaS, businesses innovate much more by capitalizing on APIs of their own, along with third parties. Building products and services using API ecosystems can drastically increase customer base.

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