BaaS is the latest technology making waves in the financial services world and Gartner predicts it will hit mainstream adoption within two years. BaaS is one of four technologies that Gartner says have the potential for high levels of transformation in the banking sector – the others being chatbots, public cloud for banking and social messaging payments apps.

A Deloitte report also says BaaS is becoming ubiquitous. “It’s reconfiguring the banking value chain, opening the door to disintermediation, and enabling new sources of growth,” it notes. 

How does BaaS work?

BaaS came about because the ability to offer banking services such as cards and loans as a non-bank enterprise improves the customer experience and boosts revenue. However, offering banking services requires a banking licence that is difficult to obtain – it also requires significant capital and compliance with strict regulations.

BaaS allows licenced banks to integrate their services directly into the products of non-bank businesses. Any business can offer its customers digital banking services, such as mobile bank accounts, debit cards, loans, and payment services, without needing to acquire a banking licence. The non-financial business can also distribute these financial products under its brand.

All of this happens through third-party distributors. These distributors build tech that allows digital banks, fintechs, and other third parties to connect directly with a bank’s systems via APIs.

In a nutshell, it enables embedded finance: banks integrate fintech or other FSP products into the banking journey (BaaS), while non-financial companies embed banking products into their services (embedded finance).

The benefits of BaaS

BaaS is reconfiguring the banking value chain by enabling third-party distributors to offer banking products and services. It’s opening the door to disintermediation and enabling new sources of growth for all parties – whether the bank, the fintech enabler or the third party.

The future

BaaS will become to fintech what Amazon Web Services is to data centres – a game changer, an absolute essential.

Through its multi-functional platform, Eclipse, Ukheshe has long been ahead of the fintech curve by offering both BaaS and embedded finance – even though it falls under the Software as a Service (SaaS) category.

Our strategy has always been to partner with banks, telcos and fintechs to shape their digital payment offering to their customers. It is core to our services to help shape their BaaS solution. We, in effect, enable the enablers and increase financial solutions to banking customers.

Note: This article has been contributed by Ukheshe Technologies. It connects businesses with payment technology. Ukheshe has created an extensive range of microservices that enable digital transaction propositions for clients.