6 December 2021

Banking as a Service (BaaS) allows non-financial businesses to provide banking services to their customers on demand. They partner with banks and other financial institutions to secure the regulatory certifications needed to operate in the financial space.

Below are the primary advantages of using BaaS:

1. BaaS Promotes Collaboration Between Incumbents and Fintech Innovators

BaaS enables banks and financial institutions to provide customers that may be difficult to reach, i.e. the unbanked. Incumbent banks and financial institutions can use the services of fintech companies to get unbanked and underbanked.

In contrast, the fintech companies can use the incumbents’ infrastructure to reach a more extensive customer base. They can each benefit from each other’s strengths.

2. BaaS Helps Incumbent Financial Institutions to Stay Profitable in the Long Run

BaaS decreases the cost of doing business while increasing revenue. It allows financial institutions to focus on high-value products and services rather than on basic services.

3. BaaS Decreases the Regulatory Compliance Risk

A big challenge for any financial institution is regulatory compliance. Apart from the hefty fines for non-compliance, many banks and financial institutions risk losing customers if compliance issues arise.

BaaS partners with banks to secure regulatory certifications, making it easy for banks to focus on delivering services and building relationships with customers.

4. BaaS Helps Financial Institutions Maintain Their Reputation for High Security

Many financial institutions have made significant investments in state-of-the-art security systems to protect their customers from cyber-attacks.

This high-security infrastructure is the foundation for BaaS. When a company uses BaaS, they’re leveraging the security of the banking institution, reducing the risk of cyber-attacks.

5. BaaS Helps Financial Institutions Focus on High-Value Offerings

BaaS enables banks and other financial institutions to build strong relationships with high-value customers rather than struggling to convert essential services to revenue. This leads to higher customer satisfaction and a better reputation for the financial institution.

6. BaaS Gives Financial Institutions Higher Returns on Investments

BaaS enables financial institutions to provide a multitude of services at a lower cost while increasing revenue.

7. BaaS Allows Financial Institutions to Provide a More Personalized Customer Experience

A major consequence of pursuing a BaaS strategy is that financial institutions will be required to evolve their technology infrastructure. This will enable them to support multiple services to meet customers’ needs.

It will also allow them to collect and process customer data to provide a more personalized customer experience.

8. BaaS Provides Financial Institutions with Early Warning System to Prevent Fraud

BaaS partners with banks to set up a secure, low-cost, real-time fraud detection system, helping banks prevent fraudulent transactions in their operations.

9. BaaS Lets Financial Institutions Divert More Resources to Core Business

BaaS allows banks and other financial institutions to focus more on core activities, i.e. providing high-value services to customers. Essentially, it lets financial institutions focus more of their resources on core business practices than anything else.

Conclusion

BaaS allows non-financial companies to leverage the infrastructure, resources, and expertise offered by banks and other financial institutions to provide banking services to their customers.

With the main focus on custom-software development, Informatics also specializes in infrastructure solutions and services through years of experience and knowledge in the industry. We gained a prominent position in the global IT sector, providing some of the most cutting-edge software & Infrastructure solutions with a local and international client list. If you’re in need of banking solutions or custom software, get in touch with us! Let us know how we can help.

 

Written by Daniele Paoletti