Banking-as-a-service empowers finance companies to meet growing customer needs, says GlobalData

With embedded finance set to become a quintessential component of many industries, smaller businesses and individuals can now have greater access to financial services than ever before owing to banking-as-a-service (BaaS). With the right partners and systems in place, BaaS empowers embedded finance players to meet customers’ increasing needs while tapping this burgeoning opportunity, says GlobalData, a leading data and analytics company.

Kiran Raj, Practice Head of Disruptive Tech at GlobalData, comments: “The banking sector is evolving where macro trends like open banking and BaaS are transforming how digital businesses offer financial products and services to their clients.”

Abhishek Paul Choudhury, Senior Disruptive Tech Analyst at GlobalData, comments: “To fulfill the growing demand for embedded finance, financial institutions have begun providing BaaS as bundled offerings, frequently white-labeled or cobranded, that nonbanks can leverage to serve their customers.”

GlobalData’s latest Innovation radar report, “Commerce tomorrow: how embedded finance is disrupting the modern economy,” highlights recent developments on how BaaS can catalyze the transformation of embedded financial services.

Embedded card payments

First National Bank of Omaha (FNBO) introduced a new credit card-as-a-service (CaaS) solution called ‘Bend by FNBO’ in collaboration with the Californian IT service management firm Marqeta. The partnership enables businesses to rapidly launch branded credit card schemes by integrating the credit card experience into their applications utilizing Marqeta’s open APIs.

Embedded lending

London-based fintech company Finastra launched an embedded lending solution with traditional regulated lending options for consumers at the point of sale (POS). It supports financial institutions to process POS loan applications which include processes like decision-making, performing identity verification, enabling e-sign, creating a new account, and funding with the bank’s core banking system.

Embedded banking

American retail banking company KeyBank has launched a full suite of embedded banking tools and services that leverages APIs and supports business expansion through payments, treasury, risk, and lending. The suite helps clients to streamline compliance and develop new platforms to offer enhanced digital experience.

Choudhury concludes: “BaaS is a full-fledged gold rush, with future growth expected to be exponential. But many banks worry that distributing their products through partners can jeopardize their client relationships. However, if end users begin to adopt embedded finance in substantial proportions, banks may be obligated to launch BaaS business lines. The good news is that allowing partners to distribute banking products can be a high-volume, low-margin business for banks. Also, it has the potential to improve customer satisfaction and loyalty.”