Guide:
Top BaaS Providers
Banking as a Service empowers tech companies to provide their customers with financial offerings. Learn more about its functioning, top providers, its benefits and disadvantages.
Author: Ekaterina Podgaiskaya
Last updated Aug 30
Contents
Introduction
In today's rapidly evolving financial landscape, Banking as a Service (BaaS) has emerged as a transformative concept, reshaping the way businesses access and provide financial services. This comprehensive guide aims to provide you with a deep understanding of BaaS, its significance, advantages and disadvantages, use cases, comparison with traditional banking, the latest trends, and a curated list of top BaaS providers in 2023. Whether you're a fintech startup, an established business, or a non-financial company looking to integrate wallet services, this guide will equip you with the knowledge needed to navigate the world of BaaS effectively.
What is Banking as a Service (BaaS)? How does BaaS work?
Banking as a Service (BaaS) refers to the practice of allowing third-party entities, such as fintech companies, to leverage the underlying infrastructure of traditional banks to offer banking and financial services. BaaS enables these entities to provide seamless full-banking services directly through their own non-bank business offerings without the need to obtain a full banking license. Embedded bank services include Fintech payments and getting product financing, loans, and credit cards through a seller’s website.
How Does BaaS Work? Understanding Banking as a Service (BaaS) requires knowing basic concepts and where it’s used. The foundation of BaaS is an Application Program Interface (API) software link between banks and non-banks, including fintech firms, enabling businesses to integrate various financial functionalities into their platforms. These services may include account creation, payments processing, lending, compliance, and more. BaaS essentially acts as a bridge between traditional banking services and innovative digital platforms. To obtain financial services such as loans, payment processing, product financing, credit cards, or digital wallets, the user doesn’t need to visit different banks’ websites. The financial services provided by the embedded BaaS can be co-branded or implemented as white-label banking, which hides the branding of the bank.
In the BaaS model, there are several key players involved in the value chain:
Providers
BaaS providers are the licensed banks that offer their banking services to non-bank businesses through APIs. These can be traditional banks or challenger banks.
Distributor aggregators
Distributor aggregators are companies that work with BaaS aggregators to distribute the BaaS offering to a wide range of non-bank businesses.
Aggregators
BaaS aggregators are companies that bring together the services of multiple BaaS providers and offer them to non-bank businesses as a single solution.
Distributors
Distributors are companies that offer BaaS services to their customers on behalf of BaaS providers or aggregators.
Role of BaaS in the modern financial industry
BaaS offers new clients and expanded revenue streams for traditional banks. Launching new small businesses with significant growth potential, innovative products, and business models is a specialty of fintech firms and other BaaS experience providers.
BaaS driving banks to digitize and modernize. Banks are modernizing their outdated banking systems. To integrate financial services and financial goods into numerous businesses, bank technology must function in BaaS. Customers now have access to a wider variety of high-quality banking applications thanks to BaaS partners.
Banking as a Service is being quickly embraced by businesses. They come in a variety of sizes, from start-ups and small businesses to Fortune 500 corporations. These companies provide their consumer base with quick access to embedded financial services and banking products as a direct result of BaaS.
Benefits of BaaS for businesses:
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Accelerated time-to-market: BaaS eliminates the need to build banking infrastructure from scratch, allowing businesses to launch financial products and services faster.
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Cost savings and reduced complexity: BaaS providers handle regulatory compliance and backend operations, reducing operational costs and complexities.
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Enhanced customer experience: BaaS empowers businesses to offer seamless financial experiences, leading to higher customer satisfaction.
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Access to banking infrastructure: non-financial companies can integrate financial services without navigating complex regulatory requirements.
Use Cases for BaaS:
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Fintech startups (payments, card-issuing, investments): BaaS enables startups to focus on innovation and customer experience without the burden of developing complex banking systems.
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Neo- or challenger banks - organizations that are often digital-only with no physical branches.
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Established businesses: traditional companies looking to diversify into financial services can leverage BaaS to enter the market swiftly.
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Non-financial companies: retailers, e-commerce platforms, and other non-financial entities can integrate payment and lending services seamlessly.
BaaS seamlessly provides essential services and financial products to customers, contributing substantially to economic growth.
BaaS market trends 2023
BaaS is quickly growing in popularity - especially in mature open banking markets like Europe and Australia, and shows strong growth potential in the North America markets as well. The global BaaS providers market would experience significant growth in the near future, and the trend is forecasted to follow a positive trajectory.
In 2023 the BaaS landscape is witnessing several notable trends:
- Global expansion: BaaS providers are expanding their services across geographical borders, enabling businesses to offer financial products internationally.
- Focus on compliance: Heightened regulatory scrutiny has led to BaaS providers placing greater emphasis on robust compliance procedures.
- Adoption of BaaS in many industries: BaaS has revolutionized how businesses across sectors offer financial services, empowering them to enhance customer experiences, streamline operations, and drive innovation. Among the sectors that adopted BaaS are neobanks, e-commerce, travel and hospitality, healthcare and insurtech, real estate and investments.
- Integration of advanced technologies: AI, blockchain, and data analytics are being integrated into BaaS offerings, enhancing security and efficiency.
- Ecosystem partnerships: BaaS providers might forge partnerships with fintech startups, established financial institutions, and other technology companies to create comprehensive financial ecosystems. This collaboration could offer users a wide range of integrated services under one platform.
Top 15 BaaS Providers in 2023
A BaaS provider is a fintech company or other third-party entity that delivers businesses a solution for incorporating BaaS financial services through APIs into their own products and platforms for user consumption. BaaS providers essentially act as intermediaries, enabling businesses to offer a wide range of financial functionalities without the need to develop and maintain a full banking software system or obtain a banking license. BaaS providers handle regulatory compliance, backend operations, and other complex processes, allowing businesses to focus on delivering innovative financial solutions and enhancing customer experiences.
In 2023, the BaaS landscape boasts a range of providers with diverse offerings. Here are the top 15 BaaS providers worldwide to consider:
(Germany) Solarisbank is a tech company with a full German banking license, including a Digital Assets Custody license, an e-money license – covering the UK and EEA – and a UK consumer credit license.
(UK) ClearBank was built on the belief that banking infrastructure would no longer slow down progress. Instead, it would be the catalyst that unlocks the potential to innovate. It would adapt to cater to different needs so a new era in financial services could begin.
(France) Treezor is a Paris-based banking platform as a service, a “one-stop-shop payment solution.” Recently acquired by the Societe Generale group due to their innovative expertise, the startup is accredited to provide its clients with personalized payment services. Acquiring, digital wallets, virtual and physical card products—nothing’s off the menu.
(Lithuania) ConnectPay is one of the fastest growing EMI companies in Europe, ConnectPay offers an all-in-one financial platform. With extensive functionality, the platform is able to be integrated into various online business, thus removing the need for companies to rely on multiple financial solutions and providers. ConnectPay is licensed and regulated by the Bank of Lithuania and is subject to the regulatory framework of the European Central Bank.
(Sweden) Intergiro is a Swedish fintech company licensed and registered as an electronic money institution with the Swedish Financial Supervisory Authority (Sw. Finansinspektionen) with the authority to issue electronic money and to provide payment services.
(UK) Finastra is a financial software company headquartered in London, England. The company offers a portfolio of products and solutions to the retail banking, transaction banking, lending, and treasury capital markets.
(Lithuania) Bankera is an international payment services business, offering solutions to individuals and companies. It is built with a focus on digital businesses; hence it welcomes clients from various digital industries such as affiliate marketing, eCommerce, gambling, cryptocurrency exchanges, P2P finance and others. Bank account alternative solution offers personal and business payment accounts with dedicated IBANs as well as private and corporate VISA cards. Currently, it supports SEPA and SWIFT transfers. Later the offering will expand to include mobile wallets and more.
(USA) The Green Dot Corporation is an American financial technology and bank holding company headquartered in Austin, Texas. It is the world's largest prepaid debit card company by market capitalization. Green Dot is also a payments platform company and is the technology platform used by Apple Cash, Uber, and Intuit.
(USA) Synapse is the regulated embedded finance platform provider that enables companies across the globe to launch feature complete deposit, payment, and credit products at scale. Synapse’s unified banking-as-a-service platform provides industry compliant payment, card issuance, deposit, lending, credit, and investment products through simple APIs.
(USA) Mbanq is a global provider of cloud banking technology. They are headquartered in North America with additional offices in Europe and Asia.
(USA) Headquartered in Austin, Texas and part of the Q2 family, Helix gives innovative fintechs and brands the building blocks of banking — accounts, cards, payments, data and controls, admin tools, and monetization solutions — to make it easy to embed personalized financial experiences that easily integrate and scale.
(China) OneConnect is a technology-as-a-service platform for financial institutions. The Company was listed on the New York Stock Exchange in 2019. OneConnect is an associate of Ping An Group.
(USA) Solid is a modern fintech infrastructure provider – a one-stop shop that offers a fully integrated and compliant suite of fintech services.
(UK) Founded in 2009, Unlimit provides fast-growing innovative businesses with a constantly evolving financial interface, made by innovators for innovators, and designed to make the financial world of tomorrow closer to businesses here and now.
(Brazil) Nubank is a neobank and the largest fintech bank in Latin America. Its headquarters are located in São Paulo, Brazil.
How to choose a BaaS provider?
When selecting a BaaS provider, consider the following factors:
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Regulatory compliance: Most governments demand that anyone who wants to provide financial services has a banking or e-money license. Financial license acquisition is a time-consuming and expensive process. It is crucial that you verify that the BaaS provider you select has a strong compliance program and is up-to-date with all regulatory requirements. You can start your own financial service and use the banking or EMI license of many providers. Some providers, however, are constructed on top of other third-party licensed organizations, which can lead to unforeseen modifications to unanticipated changes in risk policy and extra expenses. Evaluate their data protection measures, AML, and KYC procedures.
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Customization and flexibility: Look for providers that offer customization options to tailor services to your business model.
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Pricing structure: Understand the provider's fee structure, additional costs, and scalability expenses. But don’t just look at the price - above all, learn what features are included and if are there any hidden costs. Make sure you understand all the costs before making a decision.
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Support and customer service: Check the provider's responsiveness, availability, and troubleshooting support.
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Technology stack is another key point when choosing a BaaS provider. Assess the provider's API capabilities, scalability, and security protocols. Ensure compatibility and ease of integration with your existing systems. Look for a provider that is investing in the future. Look at their roadmap and decide if it matches your business plans and vision.
Checklist of core BaaS features
When evaluating BaaS providers, it's essential to ensure that they offer a comprehensive set of features to meet your business needs. Here's a checklist of critical BaaS features to consider:
1. Account management:
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API access for account creation, management, and closure
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Support for different account types (individual/business/joint, savings, checking, multiple bank- or business-based accounts) and manage multiple expense cards out of a single account.
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Real-time balance and transaction information
2. Real-time payments (RTP) and transactions:
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Payment initiation and processing APIs (local and international)
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Real-time fund transfers and transaction tracking
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Integration with payment networks (ACH, SWIFT, SEPA, etc.)
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Payment status notifications and alerts
3. Card issuance and management:
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API access for card issuance and management (credit/debit, virtual/physical cards)
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Customizable card design and branding options
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Transaction history and card spending insights
4. Compliance and security:
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Anti-Money Laundering (AML) and Know Your Customer (KYC) verification APIs
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Identity verification and document authentication services
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Multi-factor authentication (MFA) for secure access
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Data encryption and protection measures
5. Lending and credit services:
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Loan origination and underwriting APIs
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Credit scoring and risk assessment tools
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Loan application status trackingIntegration with credit bureaus and scoring agencies
6. Regulatory and legal support:
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APIs for compliance with financial regulations and reporting requirements
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Support for tax reporting, regulatory filings, and audits
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Documentation and reporting for Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) compliance
7. Currency exchange and forex services:
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Real-time currency conversion rates and APIs
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Foreign exchange (Forex) APIs for international transactions
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Integration with global payment systems for cross-border payments
8. Analytics and reporting:
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Access to transaction data and financial insights
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Reporting and analytics APIs for monitoring financial activities
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Customizable dashboards and data visualization tools
9. Customization and branding:
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White-label options to brand the BaaS platform under your business identity
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Customizable user interfaces and user experiences
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Flexibility to tailor financial services to your target audience
10. Developer resources and support:
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Comprehensive API documentation and developer resources
11. Integration and compatibility:
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Compatibility with your existing technology stack and systems
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Flexibility to integrate with third-party applications and services
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API versioning and updates to ensure seamless integration over time
12. Regulatory compliance:
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Adherence to industry regulations and standards (e.g., PSD2, GDPR)
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Documentation and transparency for regulatory audits
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Regular compliance assessments and updates
BaaS disadvantages: how to overcome?
BaaS and other API-driven technologies are gaining prominence among financial organizations due to its numerous advantages. These benefits include rapid time-to-market and reduced operating costs. However, while API solutions and cloud-based BaaS offer substantial advantages, they do not address all the challenges faced by both traditional banks and non-bank entities aiming to establish embedded banking offerings.
Some of the other issues that make BaaS offerings unattractive for building new products are:
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Lack of flexibility. Most BaaS platforms are being distributed "as is," and customers should not expect any customizations to be made. While many BaaS solutions on the market cover many types of businesses and use cases, many businesses still require more attention than BaaS vendors can give.
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Lack of geographic coverage. Expanding into the global market is a common goal for numerous fintechs. However, few BaaS providers can offer the required geographic coverage.
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Pricing structure: Understand the provider's fee structure, additional costs, and scalability expenses. But don’t just look at the price - above all, learn what features are included and if are there any hidden costs. Make sure you understand all the costs before making a decision.
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Support and customer service: Check the provider's responsiveness, availability, and troubleshooting support.
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Technology stack is another key point when choosing a BaaS provider. Assess the provider's API capabilities, scalability, and security protocols. Ensure compatibility and ease of integration with your existing systems. Look for a provider that is investing in the future. Look at their roadmap and decide if it matches your business plans and vision.
How to overcome the challenges?
Velmie seeks to address these BaaS disadvantages by offering a next-generation banking software solution with unique attributes:
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Modular approach, based on microservices architecture, ensures greater flexibility because modules can be customized and configured independently for each customer.
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Ecosystem. Velmie has built up an extensive network of partners and integrations, allowing banking solutions to be configured for all local markets.
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Data security. The software is usually based on single-tenant systems, with no shared resources between different customers. Different customers' data is kept independently, which means that if one customer's data is breached, other customers' will not be compromised. It also allows user experiences to be customized.
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IP ownership. Customers have more control and flexibility over managing and expanding their business because Velmie shares the IP rights with the client.
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End-to-end delivery. Customers don't have to gain expertise and resources required for system integration and support as it all handled by Velmie.
While BaaS holds significant potential for banks and their non-bank collaborators, the long-term success of the offering dependes on the sustainability, scalability, and flexibility of the digital banking platform. What may appear cost-effective now could potentially lead to higher expenses in the future. Hence, prudent selection is crucial to ensure your system delivers the superior financial services and customer experience you seek.
FAQ
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Is BaaS the same as Open Banking?
No. BaaS is different from open banking, which refers to the permissioned sharing of bank customer data and information in Fintech products and services. Open banking serves as one catalyst for deploying BaaS applications.
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Is BaaS the same as Embedded Finance?
Embedded finance refers to the incorporation of financial products and services into non-financial platforms, like e-commerce, social media, or mobile applications. In essence, this enables non-financial businesses to provide financial services to their customers through collaborations with financial institutions.
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How long does it take to launch a business with BaaS?
Opting for a direct collaboration with a banking partner might demand up to 24 months and a financial commitment of around 2 million dollars. Moreover, preparing to recruit an extensive, specialized banking team is also necessary. Conversely, choosing to engage with a banking as a service platform offers a more expedited timeline, allowing you to launch within a few months, at an approximate cost of $100K, and without the requirement of assembling a substantial team.
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What is Banking as a Platform?
Banking as a Service (BaaS) and Banking as a Platform (BaaP) are terms that are sometimes used interchangeably. However, these terms not only carry distinct meanings, but they also represent opposing concepts. In contrast, Banking as a Platform (BaaP) takes a different direction. While BaaS enables non-bank entities to offer financial services to customers, BaaP facilitates non-bank businesses in delivering services to banking institutions. Subsequently, these services are channeled through the banks to their own clientele.
