Banking as a Service Market Overview
The global banking as a service market is expected to register a CAGR of ~25.4% during the forecast period, 2021–2027. In this report, CRI Report (CRI) includes the segmentation and dynamics of the Banking as a service Market to offer a better glimpse into the coming years.
A FinTech, digital bank, or other third-party provider (TPP) pays a charge to access the BaaS platform in the BaaS model. The financial institution makes its APIs available to the TPP, allowing it to access the systems and data needed to develop new banking products or provide white label banking services. Legacy institutions that create their own BaaS systems offer up new revenue streams in addition to gaining ahead in open banking. Charging clients a monthly subscription charge for access to the BaaS platform or charging a la carte for each service utilized are the two main monetization options for BaaS.
The major factors driving the growth of the banking as a service market are the rise in demand for financial services and growth in the presence of FinTech companies. However, the high costs of adoption the market growth. However, the rise in demand for embedded finance solutions is creating lucrative growth opportunities for the market.
The global banking as a service market has been segmented based on type, organization size, application, and region.
By type, the banking as a service market has been segmented into API-based bank-as-a-service and cloud-based bank-as-a-service. API banking is a set of protocols that allows a bank’s services to be accessed by other companies via APIs. This will enable banks and third-party firms to supplement their complementing specializations and offers beyond what they can supply to their clients alone. Cloud-based bank-as-a-service provides a variety of new goods-as-a-service that banks may use to boost revenue generation, increase customer insights, cut expenses, deliver market-relevant products quickly and efficiently, and monetize enterprise data assets. The cloud also provides a significant potential to synchronize the enterprise, breaking down operational and data silos in risk, financial, regulatory, customer support, and other areas.
By organization size, the banking as a service market has been divided into large enterprises and small & medium-sized enterprises. The large enterprises segment covers a diverse spectrum of businesses, from sole proprietorships to multinational firms with thousands of employees spread over multiple countries. Small-scale enterprises, micro-enterprises, large-scale industries, public enterprises, and multinational corporations are the different types of businesses included in this segment. One of the most distinguishing criteria in separating small businesses from large businesses is the number of individuals working in the organization.
By application, the banking as a service market has been segmented into banks, NBFC, and government. In the banking industry, financial technology has become a catalyst for increased competitiveness. Neo-banks are gaining market share by offering services for a third of the price of incumbent banks. In and of itself, increased cost-efficiency is commendable but hardly revolutionary, as IT expenses account for only 6-8 percent of a typical bank’s income. Modern core banking systems enable entrants to disrupt stagnant markets and create value by onboarding and maintaining customers quickly and efficiently.
The global banking as a service market is characterized by the presence of several regional and local providers. Some of the key players in the global market are Twilio Inc. (US), Braintree (US), BOKU (US), Coinbase Global Inc., Dwolla (US), Zettle (Sweden), Fidor Bank (Germany), GoCardless (UK), Gemalto (Netherlands), Intuit (US), Square Inc. (US), PayPal (US), Prosper Inc. (US), Solaris Bank (Germany), and Moven (US).
The regional analysis for the global banking as a service market has been done for North America, Europe, Asia-Pacific, the Middle East & Africa, and South America.
The market in North America accounted for the largest market share, and it is expected to register strong growth during the forecast period. However, the market in Europe is expected to register the highest CAGR during the forecast period. This growth can be attributed to the new players entering the market due to new revenue opportunities in the region.