Banks have new revenue opportunities as BaaS demand increases

By Puja Sharma

The banking as a service market is set to grow by $21,806.94 million from 2022 to 2027, progressing at a CAGR of 14.62% during the forecast period. Banking as a service offers consumers a wide range of financial services with benefits such as convenience, speed, and payment options.

These benefits drive market growth during the forecast period. The demand for banking as a service is expected to increase during the forecast period as financial institutions gain access to banking capabilities such as lending, accounting, and corporate finance.

This enables them to offer enhanced services to businesses. Non-banking financial companies (NBFCs) are also adopting banking as a service solution to provide core banking services, delivering a seamless customer experience. The availability of bank accounts, digital wallets, lending, and payments through NBFCs contributes to the growing adoption of banking as a service among various end-users, thereby driving the growth of the global banking as a service (BaaS) market.

Major Trends

Growing partnerships, collaborations, and agreements are an emerging trend shaping market growth.

On February 4, 2020, Bankable, a global provider of banking as a service solution, recently formed a strategic collaboration with Visa in the US. Through this partnership, Bankable intends to grant Visa US clients, including corporate and financial institutions, the opportunity to leverage its real-time and modular banking solutions. This collaboration will empower these clients to implement digital banking and faster payment services.

On November 25, 2021, the New York-based banking as service, partnered with Currencycloud, the experts in simplifying business in a multi-currency world, to deliver their customers an easy, seamless way to satisfy both domestic and international banking requirements.

On Jan-2022: Block.Inc acquired Afterpay, an Australian financial technology company. This acquisition aimed at allowing Block to better deliver compelling financial products as well as services which would expand access to more customers and help drive incremental revenue for sellers of all sizes

Significant Challenges

Implementation and data security challenges are major factors hindering the market growth. FinTech companies entering the banking as a service space may encounter challenges in terms of product awareness and implementation.

These challenges include navigating legal and security considerations, a limited understanding of available offerings, and the need to onboard additional service providers. Furthermore, the market’s increased focus on data security and privacy adds to the concerns, as the digitization of customer financial data raises apprehensions about potential misuse. As a result, some financial enterprises may express scepticism about adopting banking as a service for their operations. These challenges may impede the growth of the global BaaS market during the forecast period.

Banking As A Service Market 2023-2027: Market Segmentation

This banking as a service (BaaS) market report extensively covers market segmentation by End-user (banks, NBFC, and government), Component (platform and services), and Geography (North America, Europe, APAC, South America, and Middle East and Africa).

• The BaaS market share growth by the banks segment will be significant during the forecast period. The increasing integration of advanced financial technology in banks is a key driver behind the segment’s growth. Banking as a service enables banks to utilize APIs for seamless data sharing with third-party financial institutions. With open banking gaining prominence, banking as a service presents new revenue streams for banks.
• It offers cost-saving opportunities and enhances customer insights, making it an attractive solution for banks. These advantages are expected to fuel the adoption of banking as a service in banks, thereby driving the growth of the banks’ segment in the global banking as a service (BaaS) market during the forecast period.