What is Banking as a Service?

Banking as a Service (BaaS) refers to an on-demand function that grants users access to financial products and services over the internet. BaaS is a back-end process, allowing banks to move, store, and lend money so that companies can offer financial products and services.

This type of platform can be considered a win-win-win for licensed banks, third-party financial service providers, and consumers.

How Does BaaS work?

With BaaS, third-party providers, such as financial technology firms (fintechs), digital banks, and other non-banks, pay to access the core systems and functionalities of licensed banks.

This fee is usually paid monthly or yearly, but can also be arranged per-service or group of services. The licensed banks then open their systems via application programming interfaces (APIs), enabling digital delivery of banking products and services.

By aligning with the existing regulated infrastructure of licensed banks, third-party providers are also well-positioned to create new products and services in addition to their typical offerings. Some examples include an airline company offering a credit card or a regulated bank partnering with a fintech to offer consumers an e-wallet, prepaid debit card, or small dollar loan.

Benefits of BaaS

Going back to the win-win-win, let’s explore the benefits of Banking as a Service.

Benefits to banks: The presence of BaaS may very well force traditional banks to reexamine their offerings, but it’s not without several advantages.

BaaS gives licensed banks the capacity to integrate digital banking, lending, account management, and payment services through their own websites and apps. This opportunity helps licensed banks further fulfill their customer needs and satisfaction—ideally leading to customer retention. It also allows banks to partner with like-minded partners to expand their reach.

Overall, the introduction of BaaS helps keep traditional banks relevant and growing in a quickly-paced digital environment.

Benefits to third-party providers: Thanks to these partnerships, fintechs, digital banks, and other non-banks enjoy the best of both worlds. They have the advantage of providing their banking products and services to the public, as well as the security of being backed by a licensed, regulated bank.

BaaS also allows third parties to bypass certain development stages by accessing the banks’ functionality instead of creating their own processes from scratch. Therefore, they can go to market sooner with their offerings, saving time and money. Additionally, third-party providers avoid the difficult and time-consuming process of becoming a licensed bank and the need to fulfill regulatory duties required of banks.

With BaaS, virtually any business can become a banking provider by relying on the complex technology and sophisticated infrastructure of traditional banks.

Benefits for you: As the customer, your end-to-end banking experience can be dramatically improved thanks to BaaS. Similar to the process of arranging for an Uber, ordering food, or booking travel accommodations through platform companies, BaaS allows you to manage your financial affairs in the same manner.

As more banks and companies sign on to BaaS, you will have more choices as to where and how to conduct your financial activities. More competition leads to more money in your pockets. The empowerment achieved through self-service, coupled with improved customer service and increased options, means that you as the customer will enjoy a more satisfying banking experience.

Sunrise Partners with Fintechs to Expand Financial Wellness

While fintechs have raised billions in global investments, created countless startups, and prompted other advancements in the marketplace, they would not be in this remarkable position without the presence of banks.

At Sunrise Banks, we continuously look for opportunities to create new partnerships and enhance current partnerships with fintechs. Through these collaborations, we are able provide effective fintech banking solutions that reflect our mission of empowering financial wellness and inclusivity, as well as combatting financial inequality.