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Banking-as-a-Service (BaaS) will become a $3.6 trillion industry by 2030, according to market analysts. BaaS allows businesses without a banking license to provide digital banking services, including loans, payments or deposit accounts through application programming interfaces (APIs) from licensed financial institutions.

The BaaS model requires fintech banks and traditional banking institutions to collaborate. Financial institutions offer banking services and grant access to their system via an API, allowing fintech banks to build new banking products or offer white label banking services.

BaaS has introduced a new revenue model for traditional banks and an opportunity for nonfinancial institutions to provide their consumers with financial services. The relationship between finance and technology continues to evolve and makes the most of the transparent and consumer focused standard of open banking.

Banking-as-a-Service (BaaS) empowers brands

Banking-as-a-Service (BaaS) essentially empowers any brand or business to offer financial services. SMBs now have a significant opportunity to streamline their operations and improve customer experience by providing banking services, like payments or loans, directly to their consumers.

The Apple card is an example of a successful partnership between a brand, in this case, Apple and a traditional financial institution like Goldman Sachs. The same model can be applied both to B2C relationships and B2B relationships, as well as businesses of all sizes.

Banking-as-a-Service (BaaS) for SMBs

An example of how SMBs can benefit by offering banking services is the rapidly growing B2B eCommerce sector. B2B eCommerce is expected to exceed $20 trillion by 2027. In a recent survey, 70% of business buyers stated they expect their corporate purchasing to be “Amazonlike.”

The BaaS model provides businesses of all sizes the speed, flexibility and convenience in both consumer payments and B2B payments. BaaS makes it easier to develop the tools for sending and receiving B2B payments and managing financial data through APIs, artificial intelligence (AI) and cloud-based technologies. This allows businesses to implement payment and banking solutions such as a digital invoicing system.

Technology can help to level the playing field in financial services between large corporations and SMBs. Digital transformation is increasingly democratizing data to enable greater transparency and better customer experiences. SMBs can level their B2B and B2C customer relationships and take advantage of new models like BaaS to provide their consumers with an experience that rivals the big entities.

Vendors, intermediaries, suppliers and consumers increasingly rely on digital interactions, eCommerce, digital payments and remote banking. They look for instant financial services digitally or through open interfaces. Transaction data can be analyzed to provide organizations with greater financial transparency and control as well as improved user experiences.

Building the commercial and financial platforms of the future

Flexibility and business agility are the defining characteristics of the Banking-as-a-Service model. B2B and B2C organisations can level the BaaS model to innovate their customer-facing and back-office services and tailor technological innovation to their business needs.

BaaS lays the groundwork for businesses to compete with large platforms by building platforms and systems of their own, tailored not only to their organisations but especially to the customers and businesses they serve.

Authored by Benedict Xavier, GPS Delivery Director

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