Tech enthusiasts, who are providing Banking-as-a-Service are gradually taking over the Fintech ecosystem by inventing a new revenue stream—here’s how incumbents can follow suit, Business Insider Intelligence revealed.
In its recent report, Business Insider noted that Banking-as-a-Service providers use these best practices to gain a competitive advantage, stressing that Banking as a Service (BaaS), has been implemented by a relatively small number of innovative financial services providers over the last five years.
Although regulations don’t require banks to offer BaaS, tech-savvy incumbents are now turning to this business model as a ‘can’t beat ’em, join ’em’ strategy to get ahead of fintech disruption. BaaS providers have been exploring ways to gain from their offerings, including:
Banks can charge their BaaS clients a monthly fee for their services. These subscription plans usually come with monthly API call limits. The advantages of this pricing model are predictable monthly revenue and greater revenue from low-usage clients compared with a usage-based pricing model. However, it leaves little flexibility for customers and might not be an attractive fee model for those that only need to use the BaaS provider for one particular offering.
They can price each BaaS service individually or offer them as a bundle. Another way to directly monetize BaaS platforms is by adding a fee to each individual API call a client makes—also known as pay-as-you-go or usage-based billing. For this model to work, BaaS providers need a number of…
In The Banking-as-a-Service Report, Business Insider Intelligence looks at five major BaaS providers, ranging from fintechs to 20-year-old legacy providers that we think represent a good cross-section of approaches to offering BaaS.
The report gives an account of the most important aspects of these providers, including their histories, vital details, and the BaaS services they offer and analyzes some key considerations that yield competitive advantages or disadvantages for these providers.
Here are some of the key takeaways from the report:
- Despite getting off to a slow start, BaaS is getting hot in the US and UK as providers of all different stripes leap into the fray, seeking new revenue, data-sharing opportunities, and a chance to gain insights that can inform their own offerings going forward.
- But no one provider is dominating the market and competition remains as stiff as ever as providers compete to establish an advantage in terms of breadth and depth of services, reputation, speed to market, and scalability.
- The vastly different approaches taken by the giants that offer BaaS reveal some best practices that providers should take note of to optimize their chances of success.