Finastra: Banking-as-a-Service gains unstoppable momentum

The research canvassed the opinions of 1,600 senior industry executives, exploring the opportunities presented by Banking-as-a-Service (BaaS) – to provide retail or wholesale banking products and services to customers in context, as a service, using an existing licensed institution’s secure, regulated infrastructure with modern API-driven platforms. 

The Finastra research reveals the true extent of the appetite for BaaS, with almost 85% of respondents already implementing or planning to implement BaaS over the next 12-18 months. Key findings include: 

• More than 80% of regulated financial services providers expect the overall BaaS market to grow. Of these, 30% expect it to grow by more than 50% per year over the next five years. 
• BaaS represents a USD 7 trillion opportunity - distributors, including retailers, ecommerce firms, and other consumer brands, are migrating towards BaaS solutions and expect overall growth to exceed 70% per year over the next three years; 60-70% of distributors want to increase their spending on financial partnerships (including BaaS).
• SME lending, corporate lending and corporate treasury/FX services are poised to gain the highest traction. Simplifying SME lending through BaaS is expected to drive growth of 30% by 2024.
• The majority of enablers, including bigtechs and fintechs, expect the overall BaaS market to grow by more than 50% over the next five years. Some 40-50% of enablers want to increase their partnerships with distributors and financial services providers by more than 50% in the next five years.

Finastra’s research also assessed the monetisation strategies of distributors, enablers, and providers in BaaS, and explored the importance of partnerships. All respondents were in favour of a transition to a platform and marketplace model, where a greater range of niche solutions at competitive prices can be sourced by end customers.  

Finastra’s research shows that financial services providers need four key capabilities to work with distributors and enablers and to monetise BaaS. From a technology perspective, these include: 

From a product perspective, providers need dynamic and compelling offerings to entice customers.  

Learn more about the BaaS opportunities available for distributors, enablers and providers – and the growth potential of different market segments – in the full market assessment report here.