Banking as a Service: Be Your Own Bank

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When a merchant or corporation decides to provide online financial services, such as payment processing, lending or insurance, it used to be an obligation to partner with an external bank.

Now Banking-as-a-Service providers have been offering the perfect solution which equips the businesses with functions which used to be only conducted by banks. Banking as a Service enables businesses to offer loans and insurance, issue cards, and other financial offerings for their customers using their own branding and websites.

This article will cover what Banking as a Service includes, its main benefits, and how to integrate BaaS elements into an existing brand.

What does Banking as a Service offer?

Using a special software called an API, a BaaS provider integrates its infrastructure with a company or merchant. This connection enables the brand to provide online financial services without spending extensive time and money to make them happen on its own.

An example would be a company offering its employees a company prepaid debit card with its own branding. This can be achieved through the use of Banking as a Service. A card as a service provider gets partnered up by the company and facilitates the payment processing, which is beyond the company’s scope.

Benefits of Banking as a Service

Banking as a Service enables companies to provide financial products without burdensome regulations, tiresome licensing process and outdated & unreliable softwares that would make the process much more complex.

BaaS allows businesses to maintain flexibility over their service providers, ensuring that they are not locked into one option. Once a company chooses a provider, they gain access to the banking infrastructure. This includes all possible services the BaaS provider offers, and the company can choose which ones are most relevant for them.

Emerging industries and innovative fintech institutions also rely on BaaS because legacy banks are hesitant to get involved at such early stages. BaaS providers have no such constraints and can help them enter the market in a short time. This also enables them to tailor their services to specific client needs.

Consumers also benefit from BaaS because there is a dramatic shift in consumer behaviour towards convenience. This shift has started to extend beyond the traditional banks and financial service providers. Successful BaaS providers offer the infrastructure for businesses to tap into the market and meet consumer needs quickly.

These benefits of Banking-as-a-Service all have one common feature: they allow a company to be its own bank. This allows them to enter their target market confidently, knowing that the right financial features are already taken care of.

How to Integrate BaaS?

Wherever BaaS has become part of a business, there is a set hierarchy. The customers will access the online portal of a business and then use the BaaS services overlaid with the company branding. It’s often called white-label banking because the services provided have bespoke branding particular to the company that uses it.

The integration is achieved by technical means and involves plenty of detailed computer programming. APIs are the mechanism through which BaaS gets offered. APIs allow a software package to communicate with another software package using a standardised set of protocols. This facilitates the appearance of all relevant prompts and dialogs on-screen when progressing through payment processing on a branded website or app.

To become a BaaS provider, one should comply with a set of regulations and acquire the necessary licences. One company offering banking as a service is European Merchant Bank, enabling FinTech firms to embed banking functions to their operations and increase the range of payment options available to customers.