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Banking as a Service: a Revolution for Financial Institutions

Published by Fintech Americas on Sep 28, 2022

With an estimated market opportunity of 7 trillion dollars, Banking as a Service (BaaS) is a new reality that cannot be ignored.

Juan Restrepo (Global Cash Management, BBVA), Carolina Giraldo Giraldo (Head of Banking as a Service, Bancolombia, Colombia), Bernardo Diaz (Digital Banking Leader), and Dino Besomi (Director Advisory LATAM, Mambu) took part in the latest episode of Inside Access and shared valuable insights into the Banking as a Service revolution.

Banking as a Service: the Beginning of an Unprecedented Era

The scale and depth of the digital disruption we are witnessing has marked the beginning of an unprecedented era for traditional banks, fintechs, and neobanks.

As new players emerge with innovative, customer-centric solutions, they face the challenge of gaining access to regulated financial services markets — a process that can be expensive and time-consuming.

These needs converge with those of banks and financial institutions seeking new business opportunities for both growth and differentiation, leveraging their regulated infrastructure to unlock new possibilities.

What is Banking as a Service?

Banking as a Service (BaaS) is an integrated model that allows fintechs, neobanks, and third parties to connect directly to a bank’s platform through APIs.

This enables them to offer their own financial products and services using the regulated infrastructure of the banking provider, while also creating new revenue streams and growth opportunities for the bank itself.

Carolina Giraldo Giraldo (Head of Banking as a Service, Bancolombia, Colombia) describes BaaS as a model with enormous potential that allows companies traditionally outside the banking sector — without a banking license, financial expertise, or proprietary systems — to begin offering financial products seamlessly embedded into their user experiences.

All of this is made possible by financial institutions exposing their services as a platform, while third parties remain owners of the end-user experience.

“To operate in many regulated markets, fintechs need to rely on a regulated platform. Banks provide that infrastructure so fintechs can transact securely using the bank’s regulated environment.”

From Apple Card and Amazon Pay to Walmart MoneyCard and Uber, BaaS use cases are already reshaping the market.

If banks want to play a meaningful role in this ecosystem and generate new revenue opportunities, they must be willing to share customer data, rethink their infrastructure, and develop API strategies aligned with this evolving landscape.

BaaS is Changing the Game

With an estimated market opportunity of 7 trillion dollars, BaaS is a reality that cannot be ignored.

It has become a top strategic priority for executives across industries, and it is expected to grow by more than 25% annually over the next three to five years.

Players across the entire BaaS value chain are racing to monetize this opportunity, and how banks and financial institutions respond will be critical to their long-term viability.

Benefits (and Challenges) of Building a BaaS Strategy

BaaS is not a new concept, but it does require a new mindset from banks that traditionally relied on clearly defined channels such as branches, websites, and ATMs.

Now, those channels are expanding to reach new customers, segments, and generations through third parties leveraging banking services.

According to Juan Restrepo (Global Cash Management, BBVA), younger generations seek attributes such as:

  • Digital experiences;
  • Immediacy;
  • Zero-cost services;
  • Exceptional post-sale support.

These expectations are shaped by experiences offered by companies such as Amazon and Netflix.

“For banks, this is a major challenge. BaaS is forcing us to adapt our way of thinking and discover how this new technology can help us meet those expectations.”

Key Questions About Banking as a Service

What are the three main technological challenges of BaaS?

How are BaaS and Open Banking connected?

What lessons can be learned from institutions that have successfully competed in this space?

Find the answers to these and other questions in the following video.

If you want to learn more about the technological challenges facing the banking industry, how to overcome them, and discover inspiring success stories from institutions that achieved it, we recommend the following event:

➜ Thursday, Oct 6 — 09:30 AM (EST)

UNDER THE MICROSCOPE: HSBC