Banks contribute 3.8% to Canada’s GDP, which means banking as a service could change the traditional structure of the banking system. So, what does that mean for financial institutions?
Also known as BaaS, white-label marketing makes it possible for FinTechs to create digital banking services without an official banking license. People are using this opportunity to increase their income and bypass banks.
This new service uses APIs to offer more efficient systems for traditional banks and gives customers a flexible financial option.
What Is Banking as a Service?
Now that we know what BaaS is, how does it work?
Third parties can use banking as a service with a bank’s API to offer banking solutions like online payments to users. Most of the time, you see BaaS on apps where people can control their spending.
To use banking as a service, FinTech companies or third parties must pay a fee for licensing. Then, they can create new companies and banking platforms.
Unlike embedded finance which is how this technology provides the interfaces to these banking solutions. For example, a digital wallet or contactless payments. Embedded finance aims to make it easier for B2B transactions.
One of the most well-known BaaS providers is Stripe. While primarily known as a payment processor, Stripe also offers a suite of BaaS products, including issuing and processing services for debit and credit cards, bank accounts, and digital wallets. Companies like Shopify and Postmates have leveraged Stripe’s BaaS offerings to create their own digital banking services.
How Banking as a Service Influences FinTech
The accessibility of banking as a service is one huge part of the appeal of this software. It makes it quicker for users to receive loans and reduces the barrier between a bank and the customer.
As the technology develops, there will be more upgrades in the FinTech world and user options. For instance, people can expect more saving pots for lifestyle choices.
Quick loans will rise in popularity, and there will be an increase in buy now, pay later solutions. Currently, it’s possible to buy expensive items in installments without going through the typical banking procedure.
From a business perspective, this cuts down the time spent filling out paperwork and communicating every detail. The process of lending money is quick and easy.
Without the restrictions of old processes, people have the ability to control their finances from different locations and invest in products that enhance their life.
The Benefits of BaaS
BaaS technology benefits all aspects of banking, from traditional institutions to modern FinTech companies. With the right tools and optimization, banking as a service can attract more users and build your customer base.
Banking institutions can save money on old processes by working with BaaS and offering solutions. Banks can sell API features and services to non-banking partners.
There’s also the possibility of starting revenue-sharing agreements. So, banks don’t need to miss out on income because of this new invention. They can harness their reputation and make money from API features.
Be Part of the Technological Future
Any company that deals with finances can benefit from BaaS and should put it at the top of its priority list. Especially if you want to reach more customers and save time.
As the marketplace grows and eCommerce opens up new customer bases, it’s essential to use software that upgrades existing financial institutions.
People need to move money from many locations, and BaaS is a seamless solution to organizing finances without the hassle of back-and-forth communication.
And people have to jump through hoops in order to qualify for loans.
In the past, people had to queue at bank lines to be seen by a staff member. But now, you can ask for help through online agents and receive support 24/7.
Plus, this software increases security by offering more checks and verification elements. So, the same level of safety is given to users with the help of technology.
Learn More About Users
Personalization is a new trend in marketing that helps businesses attract their target demographic. If you don’t have the correct information on users, you won’t be able to offer them helpful financial help.
BaaS approaches finances with a focus on customer engagement and functionality. This is important if bank services want to remain relatable to their users.
Outdated processes and complicated paperwork are not good ways to encourage young users to use your services. If your financing company is available on mobile phones, it’s more likely that people will reach out.
But, if you need to travel to a physical building just to ask about a loan, people will pick the easiest option.
Shifting the image of banks to a friendly, supportive service that is there to help you instead of intimate you or overwhelm you is a great way to grow a brand.
Businesses have less to worry about when looking through loan applications, and users feel more confident approaching banks for financial aid.
Suitable for Small and Large Businesses
Lack of funding is one of the main reasons that people don’t pursue a new business. But, BaaS is a way to skip the long process of loaning money, taking out a new credit card, or applying for a mortgage.
Eliminating the middleman and using technology to communicate better with customers is the perfect way to build more trust. Your customers will benefit from efficient customer service.
And bank services will see rapid growth in their engagement rates online.
It’s vital that you cover the security before exploring BaaS options for your business. So, it would help if you researched verification tools to clarify user identity.
This way, your business will not suffer from fraudulent activity and security breaches. The security process needs to be quick and high-quality. So you can focus on building your company with loyal customers.
Instant Bank Verification for Your Business
Getting verification software for your banking as a service platform should not blow your entire budget. It’s important that you pick an affordable service that covers basic identity checks and monitors data risks.
Transform your internal processes with Inverite’s comprehensive verification tools at competitive prices. Our ID Verification, Risk Score, and Instant Bank Verification help provide accurate tracking of your customer’s information. Book a demo with our specialists to explore how Inverite can help you prioritize your customers and improve your business operations.