Banking as a Service (BaaS)

Banking as a Service (BaaS) might be difficult to understand at first in accordance with many banking terms. However, we are here to solve this problem.

BaaS Explanation with Examples

Let’s say you’re a manager of an airline. You know that there’s huge competition in your industry. That’s why you have to improve customer loyalty. If you could offer a debit card to your customers, you could award them with loyalty points with their payments, whenever they use their debit card. Also, each time customers use their card that means per each time interaction with your company. In this way, you would be able to understand their shopping behavior and be able to offer more specialized offers.

In other words, let’s say you are able to offer an online loan to your customers for their flight tickets via your company’s website. In this way, customers can easily finance their holidays without interrupting the journey. Your company most likely would increase the number of flight tickets and have a more intimate relationship with customers. Sounds like a win-win, right?

What is Exactly Banking as a Service (BaaS)?

There are lots of paths of how non-banks could improve their customer relationships and their experiences while boosting the company’s revenue via offering various banking services. However, it’s not easy to offer banking services without an owning banking license. And here Banking as a Service comes to aid us.

BaaS comes across as a model in which licensed banks to integrate their digital banking services into the services and products of other non-bank companies. Eventually, non-bank businesses, in our example the airline, can easily offer to customers digital banking services without necessarily needing a banking license of their own.

How Does it Work?

Banks’ servers allow your company’s customers to access their banking services upon your website or app via APIs. In this way, your company doesn’t need a license and can improve customer relationships while not touching customers’ money. As a result, BaaS is a service that works as a middleman.