Financial Services Provided by Banks Empower Non-Banking Firms for Wider Financial Access
In the rapidly evolving financial landscape, Banking-as-a-Service (BaaS) is emerging as a game-changer, offering third-party companies access to a financial institution's core banking infrastructure and services through APIs. This model is not only revolutionising the industry but also promoting financial inclusion across the globe.
Grab, a prominent ride-hailing and delivery platform in Southeast Asia, has recently expanded its services to include GrabPay, a mobile wallet that offers financial services to its users. Similarly, Chime, a US neobank, has utilised the BaaS solution model to provide banking services to underserved individuals. Freo, a full-stack Indian neobank, focuses on digital banking services without physical branches, demonstrating the versatility of BaaS.
Revolut, a UK-based fintech company, and Alipay, a well-known mobile payment platform in China, are other notable examples leveraging BaaS to offer multiple financial services to their customers. M-Pesa, a successful BaaS model in Kenya, has empowered financial inclusion by offering mobile banking services to unbanked individuals through partnerships with local banks.
The BaaS market is projected to witness significant growth in the coming years. According to various reports, the market is expected to reach between $24.58 billion and $842.44 billion by 2029, growing at a CAGR of 16.2% to 21.4%. The Asia-Pacific region is expected to lead this growth due to financial inclusion mandates and cross-border payment demands.
However, a report from the Financial Conduct Authority reveals that 56.2% of unbanked Americans express no interest in having a bank account. This underscores the need for innovative solutions to address the unique needs of the unbanked population.
Developing a BaaS software solution requires proficiency in banking operations, software development, security, and compliance. Synectra, a California-based BaaS company, has recently raised $15 million in funding to expand its Banking as a Service platform, catering to new FinTech use cases and international markets. Appinventiv, a dedicated banking software development company, can help nonbank companies create a cutting-edge BaaS platform that seamlessly integrates with external APIs, provides secure and scalable architecture, and delivers a personalised user experience.
BaaS is a part of open banking, which means companies make their APIs available for others to create new financial services and provide more transparency. This model is a sustainable and future-proof way to attract and retain clients through a vast financial services and ideas marketplace.
Gartner predicts that BaaS will become mainstream in the next two years, with 30% of banks with assets exceeding $1 billion introducing BaaS as a means to generate additional revenue by the end of 2024. The World Bank, the US, and the EU have made efforts to increase access to traditional bank accounts to promote financial inclusion.
In conclusion, the BaaS market is poised for exponential growth, offering a scalable solution that caters to nonbank companies' changing needs, enabling them to scale their operations without significant infrastructure investments. This model is not just a trend but a transformative force in the financial industry, empowering financial inclusion and digital transformation worldwide.
- In the realm of technology and education-and-self-development, understanding machine learning can provide valuable insights for businesses that aim to improve their BaaS platforms, ensuring secure and efficient operations.
- As the BaaS market expands, personal-finance management tools could be integrated, enabling users to better manage their investments and lifestyle, making it easier to utilize the financial services available through BaaS.
- Businesses interested in leveraging BaaS can collaborate with dedicated companies like Appinventiv, which specialize in banking software development, to create their own BaaS platforms that cater to specific lifestyle and investment needs.
- As BaaS becomes more mainstream, it will not only revolutionize the finance sector but also impact various aspects of our lives, from our personal finances to the way businesses operate, further cementing its importance in the technology landscape.
