Recently, the BaaS market has received a lot of attention. A fresh study predicts that it will expand to $11.4 billion over the next seven years at a 16.9% CAGR.
Boosting the age of finance
Another report projects that the sector will grow to $66 billion during the same period. Despite the varying projections, one thing is certain – we cannot ignore the potential of this breakthrough technology for the modern financial industry.
BaaS can benefit all involved parties – banks, fintechs, and consumers – and become a crucial building block of a diverse financial system that promotes financial inclusion worldwide.
The transformation of financial services is being driven by Banking-as-a-Service (BaaS), which integrates the services of regulated banks with fintech providers to create improved financial products for consumers.
Fintech firms connect to financial institutions’ infrastructure and core systems through APIs in exchange for a fee, enabling them to provide banking services such as payment card issuance and deposit management to their customers.
By collaborating with fintech firms instead of competing, banks can embrace the ongoing digital revolution.
A whopping 85% of senior executives in banking, fintech, retail, and other industries are already implementing BaaS solutions or planning to do so in the next 12-18 months, indicating a rapid adoption rate for this technology among both large enterprises ($1-10 billion) and SMBs.
Reasons for the necessity of a partnership between banking and fintech necessary
The aim of BaaS is to make financial services accessible to everyone and encourage innovation in the banking sector.
However, there are several reasons why banks may find it challenging to fulfill the promises of BaaS. Firstly, it is important to note the outdated legacy systems and processes that most banks still rely on.
These systems are often slow and obsolete, which makes it harder for banks to adapt to changing market conditions or customer requirements promptly.
Stay tuned for more details about this.
