Members Only Webinar Banking as a Platform BaaP in Emerging Markets

I think we are living a digital transformation and the banking is not the exception. This opportunity comes as financial services incumbents struggle with low performance. One reason is that incumbent financial institutions are not using their technological assets as efficiently as they could and find it difficult to reduce the cost of technology. That landscape was ripe for plundering, and disruptive fintechs and big tech seized the opportunity, building specific solutions for niche verticals.

• The transition to a new business model enabled by platform banking isn’t expected to be easy, but the payoff could be significant.
• Older guidelines were centered around Customer Due Diligence , but more updated measures look to KYC, or the Know Your Customer rule.
• With high upfront costs, investment capital required, and a timeframe of over 1–2 years just to test the market, organizations were eager for a faster, lower-cost solution.
• With a much narrower scope to contend with, these disruptors could bring a new solution to market quicker and cheaper than the big banks, building APIs and banking as a platform services that took full advantage of open banking.
• While we’ve seen a growth in online payments software, platform banking is still on the rise.
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Overall Open Banking, Microservices architecture is Bringing changes to the Banking world. Technology is dynamically evolving and even the slightest banking-as-a-service of the upgrades change the course of the business operations. Through our website, we try to keep you updated with all the technological advances.

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Using an International Money Transfer APISila’s innovative international money transfer API can expedite international payments and open up global financial systems. Its primary aim was to make banking a fun activity to improve customer engagement. They built a digital platform with a single API, which acted as an integration point for other APIs to eliminate the challenge of connecting endless points and complicating the process.

Banking as Platform is an end-to-end on-demand service, which is provided over the web. The process involves moving the banking services to subscription-based platform services hosted over the web. Adopting an API-fueled, platform strategy brings with it many organizational and technical challenges.

Our solutions for your embedded finance needs

For example, let’s say you add payments to your core solution, allowing your customers to accept money on your platform. You see a lot of interest, but customers tell you that they also want the ability to easily pay for business expenses with their revenue, so you want to test offering your customers a card. The best BaaS solutions should allow you to quickly add different capabilities and test them before rolling them out more broadly. These APIs should not be viewed simply as technical interfaces that expose data to third parties, but instead as radical enablers of new and exciting customer experiences.

The capital becomes available on Hair Flair’s financial account they have through The Brush, without having to submit extra paperwork. This guide focuses on the financial services available to platforms through BaaS—beyond payment processing. If you’re interested in embedding online payments, you can read our introduction to online payments and learn how to monetize payments.

And Hair Flair can easily spend that extra capital on their business card they have through The Brush. The card is tied to their financial account and can access all of their funds in one place. Funds are immediately available, so they can use their card as soon as clients pay for their services. The salon owners also need capital to invest in marketing and studio renovations.

The concepts BaaS — Banking as a Service and BaaP — Banking as a Platform emerge as a way to formalize this strategy and consolidate the related efforts of FinTechs, Software Factories and Stakeholders. Research by Deloitte, for example, shows that34% of US consumersare positive about using a platform service offered by their primary bank. Uber is an excellent example of how institutions should “ideally” interact with their consumers. When an individual books a car, his or her main purpose is to get from point A to point B.

Digital Transformation Journey to Platform Banking

Building these platforms in the cloud, given its potential for scale, modernization, and agility, will likely be the logical approach for many banks instead of on-premise/hybrid solutions. This leads to reduced development time, cost, and a unified view of the customer by leveraging a common platform across most products and services. To meet this need, we can expect to see banks and credit unions partnering regularly with third-party BaaP providers, even if the service is branded as the incumbents.

A travel company offers customers an online loan to pay for package deals directly through its own website. It offers its own financing using BaaS rather than redirecting customers to a separate bank. With Sila, you gain access to some of the most powerful financial technology on the market, and access to ACH payment transactions, KYC and Know Your Business APIs, and smart contract technology for automation financial features. Additionally, some businesses may find that the implementation of platform banking is akin to a revolution of business strategy. Third-party relationships also pose a risk to high-security banking businesses, so information misuse, theft, system failures, legal disputes, regulatory noncompliance, and business disruptions are all likely to occur.

Cutting-edge technology

Banking-as-a-platform enables the financial services industry to choose any and all of the platform’s offerings that fit their needs, with the ability to scale and adapt as their needs change. By utilizing a platform business model, institutions can keep up to date with all that internet-based banking offers. Banking-as-a-platform is also versatile, as it enables data tracking across financial products, services, and applications to help financial institutions understand how their customers are interacting with their services.

The core banking platform secures the data exchange and authentication while the add-on delivers the functionality and innovation. In this business model, the bank is a net consumer of partner APIs and open data — aggregating its traditional services with digital and new services from third-party partners. This model is suitable for banks that want to rapidly offer new services or expand in a new market in cooperation with ecosystem partners.

JBFG’s open-source platform allows integration with Jason, Karaf, and many other big data tools. Their tech team developed a JB Open Bank Platform , which provides flexible, comprehensive, and customizable architecture to address the modern-day technological needs. FIDOR Bank was launched back in 2010, with the motto of “banking mit freunden” which translates as “banking with friends”.

According to a Stripe survey, 55% of businesses have to visit a local branch in person and 23% have to send a fax in order to open a bank account. Open banking is gaining momentum worldwide with PSD2 , CMA , UPI and many similar initiatives being undertaken elsewhere. These regulations seek to open the financial sector to competition, stimulate innovation, reduce costs, increase transparency and empower consumers. Bank customers win because they receive new and better services from a bank.

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In an earlier blog, we explored howcost and inconvenienceare the two key barriers to change. Currently, incumbent banks representjust under a thirdof the BaaP market, so we’re hardly witnessing a rush to innovate. Nevertheless, some of the bigger banks and credit unions have begun incorporating BaaP products into their core banking service. Banking as a Platform , or platformification of banks is increasingly becoming an accepted business model for several banks to cultivate, monetize, and leverage APIs.

Approach #4: Work with a platform that supports multiple banks

Banking as a Service and Banking as a Platform are two terms that are easy to mix up, but they are quite different in meaning. In this guide, we’ll break down the differences between Banking as a Service vs. Banking as a Platform so you can keep track of these business models. CBW overcame these challenges by building a sustainable digital model which has more control and greater flexibility to accommodate the third party solutions without hampering the security.

Banks can make use of the platform in a different way according to geographies, demography and market competitiveness. For example, in a highly competitive market or region, more importance is given to differentiation. So banks can have their SWOT analysis and build a platform or ecosystem around it. It can become a one-stop shop by offering all possible services on a single platform. Fintech- Fintechs are well integrated into the banking platform with the help of APIs.

Rather than using their personal card, they decide to apply for a business credit card to purchase new equipment and supplies.

Younger customers, both Gen Z and Millennials are more inclined towards financial superstore app, with an overwhelming 75% and 67% approval, respectively. 54% Gen X and 33% Boomers showed interest in a digital banking platform whilst on a cumulative level, 55% of all respondents had shown interest in India. India’s digital banking platform market was worth USD 776.7 million in the year 2021, according to BlueWeave Consulting Study. The study underscores that the market is estimated to grow at a CAGR of 9.8%, earning revenue of around USD 1,485.5 million by the end of 2028.