# BaaS: What you need to know about the rise of Banking as a Service
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2021-10-28
Category: BANKING
Category URL: https://financedigest.com/category/banking
Meta Title: The Impact of Banking-as-a-Service on the Financial Sector
Meta Description: Discover how Banking-as-a-Service providers bridge the gap between large banks and fintech startups, offering customisable financial solutions for businesses
URL: https://financedigest.com/baas-what-you-need-to-know-about-the-rise-of-banking-as-a-servicehtml

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_![Paddy Vishani, Strategic Partnerships Manager at Yobota](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/6-1736837505881-compressed.jpg)_

_By **Paddy Vishani,** Strategic Partnerships Manager at_ Yobota

The banking sector has been progressing at pace over recent years, with two main factors driving the rate of change: exponential advances in technology and the manifold ramifications of the global pandemic. What banks and financial service providers are capable of doing has changed, as has what people expect from them.

With changing demand comes the arrival of new players to the market – the emergence of numerous fintechs, as well as the rise of neo-banks like Starling and Revolut, has changed the landscape of commercially available financial products. While these startups’ stars are rising fast, it will be some time yet before they are able to take the place of Tier 1 banks, whose status within the high street and [financial services sector](https://www.financedigest.com/boom-or-bust-how-the-financial-services-sector-is-coping.html " Boom or Bust: how the financial services sector is coping") is too well established to be quickly displaced.

Their size, of course, can be a detriment when it comes to the creation of new products and services designed to [meet evolving demands](https://www.financedigest.com/meeting-both-operational-and-customer-demands-how-insurance-can-adapt-in-a-disrupted-world.html "Meeting both operational and customer demands – how insurance can adapt in a disrupted world"). This, in turn, [presents an opportunity](https://www.financedigest.com/the-rise-of-finfluencers-presents-unique-opportunities-but-brands-must-proceed-with-caution.html "The rise of “Finfluencers” presents unique opportunities but brands must proceed with caution") for smaller companies to forge their own space within the market.

There are many barriers, however, on both sides: for the new suppliers, regulatory roadblocks, the difficulty of acquiring a banking license and the complexity of the products themselves could slow their growth; while for the [big banks](https://www.financedigest.com/big-banks-can-be-challengers-too.html "Big banks can be challengers too") the range and variety within the demand for new products poses a serious problem given their typically slow-moving, risk-averse nature.

**An equitable solution**

Between the two [groups lies a solution](https://www.financedigest.com/james-trainor-top-fbi-cyber-expert-joins-aons-cyber-solutions-group.html "James Trainor, top FBI cyber expert, joins Aon’s Cyber Solutions Group") that allows both parties to provide the best products possible while serving their own interests. Banking-as-a-Service (BaaS) providers connect companies, both financial and non-financial, that would like to incorporate a banking product (like a [credit card](https://www.financedigest.com/uk-credit-card-borrowing-rises-by-most-since-2005-boe.html "UK credit card borrowing rises by most since 2005 – BoE"), a mortgage or a Buy Now, Pay Later \[BNPL\] product) into their platform with [trusted banks](https://www.financedigest.com/how-can-banks-overcome-the-tech-trust-gap.html "How can banks overcome the tech trust gap?") that have the credentials, infrastructure and licensing to underpin said product.

BaaS providers are positioned to supply scalable, customisable [products to their users](https://www.financedigest.com/host-analytics-up-ends-the-enterprise-performance-management-market-with-the-first-product-designed-specifically-for-business-users.html "Host Analytics Up-Ends the Enterprise Performance Management Market with the First Product Designed Specifically for Business Users"), no matter what business they are in. These solutions are white label, meaning they can be adapted to suit the branding and specific requirements of the business in question, or based on the [licence bank’s](https://www.financedigest.com/dutch-online-bank-bunq-applies-for-u-s-banking-licence.html "Dutch online bank Bunq applies for U.S. banking licence") existing products.

For example, [say an eCommerce retailer wanted to incorporate BNPL credit](https://www.financedigest.com/credit-squeeze-biggest-threat-to-economic-outlook-fidelity-international-says.html "Credit squeeze ‘biggest threat’ to economic outlook, Fidelity International says") into its checkout; the cost of building such a product from the ground up, as well as the regulatory and licensing concerns that come with it, would make this untenable in terms of both cost and time for most businesses. But BaaS providers can do the heavy lifting for their clients, supplying them with a financial [product that is ready](https://www.financedigest.com/exclusive-volvo-readies-ev-blitz-in-biggest-product-revamp-under-geely.html "Exclusive: Volvo readies EV blitz in biggest product revamp under Geely") to use and in line with any and all compliance protocols – but is not emblazoned with another company’s logo and does not require redirection to another site.

The benefits of taking control of the [branding and keeping the product entirely within their customer journey are hard to measure](https://www.financedigest.com/brand-metrics-bolsters-client-services-team-as-brand-lift-measurement-booms.html "Brand Metrics bolsters client services team as brand lift measurement booms"). But be sure that in such a fierce industry as eCommerce, [customer experience](https://www.financedigest.com/how-will-open-banking-impact-the-customer-experience.html "How will Open Banking impact the customer experience?") and engagement can dictate which brands sink or swim – having ownership of this experience from start to finish is a significant advantage.

**The demand is there**

The phenomenal rise of BNPL products has shown that there is a real demand for innovative [banking and credit products today](https://www.financedigest.com/stress-testing-why-did-my-bank-go-bust-today.html "STRESS-TESTING – WHY DID MY BANK GO BUST TODAY? "). The BNPL sector has been growing at [a rate of 39% a year](https://www.finder.com/uk/buy-now-pay-later-statistics), with almost [10 million online consumers in the UK alone](https://www.finder.com/uk/buy-now-pay-later-statistics) stating that they avoid retailers that do not offer split payment solutions as part of their payment journey.

BaaS providers can offer solutions not just to retailers, but to any [financial or non-financial business that wants to put its brand](https://www.financedigest.com/how-music-sound-can-help-financial-brands-differentiate-in-a-competitive-world.html "How Music & Sound Can Help Financial Brands Differentiate in a Competitive World") on a white label product that suits its users – anything from mortgages to credit cards, with every product customised to its demographic’s unique requirements. There is an undeniable [opportunity at hand for white label BaaS providers](https://www.financedigest.com/can-covid-19-provide-opportunities-to-change-stakeholder-relationships-for-good.html "Can Covid-19 provide opportunities to change stakeholder relationships for good?"), and it is up to them to make the connections required to best capitalise on it.

**Working together**

The nature of BaaS means that it is powered by partnerships – connecting the two sides of this equation allows both parties to benefit from the status and size of the other. At Yobota, we are uniquely positioned to understand and encourage this style of partnership, as our core team is made up of both [tech experts and former](https://www.financedigest.com/duecourse-attracts-former-apple-tech-talent.html "DueCourse Attracts Former Apple Tech Talent") bankers who understand not only the challenges at hand, but also the benefits that the BaaS opportunity has to offer.

This opportunity is not just to the benefit of BaaS providers, of course – having the right partner to generate unique products and services can open smaller businesses and retailers up to new and increased engagement from their users, as [innovative lines of credit can improve productivity in everything from eCommerce to property](https://www.financedigest.com/taylor-fay-homes-recruit-cordant-projects-for-innovative-property-initiative.html "Taylor Fay homes recruit Cordant Projects for innovative property initiative") sales.

The Tier-1 banks are also able to benefit from new avenues, as they leverage their size and capacity to [power countless new successful](https://www.financedigest.com/ceo-riggs-eckelberry-of-originclear-discusses-the-power-of-intuition-in-running-a-successful-business.html "CEO Riggs Eckelberry of OriginClear Discusses the Power of Intuition in Running a Successful Business ") ventures. At its core, these partnerships mean that every party involved stands to benefit.

**Stronger together**

Having a [financial services](https://www.financedigest.com/data-fake-will-be-the-new-real-in-financial-services-in-2023.html "Data: Fake will be the new real in financial services in 2023") market populated by more numerous, varied players will not lead to a homogenisation of the marketplace – this proliferation of new products that are tailored to each supplier’s own demographic will mean that the entire ecosystem benefits from the innovation and progress of its new and existing constituents.

To fuel the greatest change possible, BaaS providers need to embrace the power of partnerships within this window of opportunity, and ensure they provide only the best, most [flexible offerings](https://www.financedigest.com/britain-urges-banks-to-offer-mortgage-flexibility-in-cost-of-living-crisis.html "Britain urges banks to offer mortgage flexibility in cost-of-living crisis") that empower their users to succeed. Now is the time for BaaS to shine, and if the service providers, fintechs, [retailers and banks](https://www.financedigest.com/uk-retail-banks-is-irrelevance-curtailing-opportunity.html "UK Retail Banks: Is Irrelevance Curtailing Opportunity?") can work together productively, there is no telling just how far it could go.

Paddy Vishani is the Strategic Partnerships Manager at Yobota – a core banking technology platform utilised by [challenger banks](https://www.financedigest.com/the-rise-of-challenger-banks.html "challenger banks") and emerging finance firms. He has experience in [financial and technology](https://www.financedigest.com/shakedown-on-horizon-for-financial-technology-world.html "Shakedown on horizon for financial technology world") consulting, specialising in change management and service implementation. He has worked in several areas within financial [services including retail banking](https://www.financedigest.com/how-to-enhance-banking-services-with-digital-performance-intelligence.html "HOW TO ENHANCE BANKING SERVICES WITH DIGITAL PERFORMANCE INTELLIGENCE"), capital markets and the treasury.


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