LatAm to experience rapid adoption of BaaS solutions by 2027, study shows

By Puja Sharma

The banking as a service (BaaS) market size in Latin America is estimated to increase by $4,309.74 million, accelerating at a CAGR of 20.2% during the forecast. The growth of the market is driven by the increasing adoption of BaaS solutions by end-users. However, the implementation and data security challenges may hamper the market growth.

Banking as a Service Market in LatAm

Leading drivers– Increasing adoption of BaaS solutions by end-users is a primary factor driving the banking as a service (BaaS) market in Latin America market growth. BaaS platforms offer a diverse range of financial services for consumers to choose from, providing added benefits such as convenience, speed, and a wide selection of payment options. By integrating BaaS functionality into their products, NBFCs can provide hassle-free customer experiences, including bank accounts, digital wallets, lending, and payments.

Major challenges – Implementation and data security challenges is a major concern hindering the market growth. Legal and security concerns are the top barriers, followed by a lack of understanding of the available product and the need to onboard additional service providers. Organizations are skeptical about deploying BaaS for their operations, which can become a major challenge for the growth of the banking as a service (BaaS) market in Latin America during the forecast period.

Key trends – Increasing marketing initiatives is a major trend in the Latin America BaaS market. Vendors create advertisement campaigns followed by marketing campaigns that include internet pre-roll, a wide-reaching social media and blogging program, and an interactive website. They also use social media channels such as Instagram to showcase ideas and increase their market reach.

Similarly last year, Finastra published a market assessment report: ‘Banking as a Service: Outlook 2022 | Paving the way for Embedded Finance’. The research canvassed the opinions of 1,600 senior industry executives, exploring the opportunities presented by Banking as a Service (BaaS) – to provide retail or wholesale banking products and services to customers in context, as a service, using an existing licensed institution’s secure, regulated infrastructure with modern API-driven platforms.

The research reveals the true extent of the appetite for BaaS, with almost 85% of respondents already implementing or planning to implement BaaS over the next 12-18 months. The research shows that financial services providers need four key capabilities to work with distributors and enablers and to monetize BaaS. From a technology perspective, these include:

• an open API platform;
• an integrated data and analytics platform; and
• specialized digital solutions to seamlessly integrate customer journeys

The research also assessed the monetization strategies of distributors, enablers, and providers in BaaS, and explored the importance of partnerships. All respondents were in favor of a transition to a platform and marketplace model, where a greater range of niche solutions at competitive prices can be sourced by end customers.