Banking as a Service- Extended Arms of Traditional Banking

Banking as a Service- Extended Arms of Traditional Banking
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Those days won’t have erased from your memory when you had to walk in-person to the nearest branch of your bank to access desired financial services. Weren’t they time-consuming and full of struggles?

Around a decade or a little more, traditional banking services were limited to their premises or certain locations only, and certainly those were offering painful experiences even if someone had to access personal banking details. Do you remember when updates in your passbook was only possible by visiting a branch, else you can’t archive your expense management? Similarly, withdrawing money was only possible when you visit your bank and meet the executive after standing several hours in the queue.

Certainly, at that time financial services landscape was incompetent, inconvenient, and full of miseries, but uncontrollable for consumers too. Customers had to spend endless hours in accomplishing their financial objectives. Bank representatives were not so welcoming inside the premise, and delivery of banking services to every single door used to look beyond imagination. Even after banking got digitalized, there was partial comfort to consumers as they had to visit banking premises at least occasionally.

This was a time when banking-as-a-service (BaaS) evolved to ensure consumers access banking services at their places and in their comfort zone. It enabled consumers to enjoy banking capabilities through extended hands. Meanwhile learning about BaaS in a more explanatory way would allow you to understand its types and uses convincingly.

What is Banking-as-a-Service?

Banking-as-a-Service, also called white-label banking is a system in which non-banking or non-financial institutions can embed financial services into their products. This definition would become easy to understand with a little more elaboration through this example- you may have seen companies that are not banks but offer payment services or loans to consumers by embedding digital banking into their systems. These companies are called BaaS providers, though banks can themselves create such platforms or work along with third-party financial services providers offering BaaS solutions.

Diving deep in the BaaS world, here are some more examples that are ready to teach you to a greater extent about it-

In some cases, BaaS acts as a backbone for financial app development. Betterment, a popular investing app is such banking-as-a-Service product.

Delivery of remittance is a great help to poor countries as it acts as a major source of income for them. The development of remittance software is a classic example of BaaS as banks become able to render their services with their partner financial institutions without any obligations.

Similarly, mortgage and money lending are two essential services in banking, and often collaborate with third-party financial institutions to reach a broader audience base. Banking-as-a-Service enables the development of mortgage software and money lending apps.

All these services are implemented by a third party and provided and supported by a bank. Banking as a Service adding more wings to the existing digital financial services and allowing licensed banks to expand their customer base. The association of third party and banking organizations will surely bring more new useful services to make banking capabilities more enjoyable for customers. The disruption in the financial services sector will come to an end, and transparency & reach to banking capabilities will increase on the go.

Read: Embedded Finance: A New Concept in Financial Industry

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