Banking-as-a-Service Trends for Digital Services

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Banking as Platform is an end-to-end on-demand service, which is provided over the web. The process involves moving the banking services to subscription-based platform services hosted over the web. The service automates the development of the application backend and also takes care of backend cloud infrastructure. With the help of Backend as a Service, users will get enhanced security to their applications. A mBaaS solution will work with well-established security practices, update security patches, and provide a more robust environment than a self-coded backend. Humans as a service represents the top layer of the proposed revision of the BaaS stack.

BaaP Examples and Advantages

Financial services industry incumbents will need to become governance nerds and fast. Will decisions taken between the incumbents in the platform eco-system be consensus-based, top down, a hybrid? How will differences of opinion be reconciled, how will conflict be resolved?

What the benefits of a BaaS?

So my view and argument is there is huge difference in Bank and Banking and Banking is needed , Banking not necessarily provided by banks Banking as a Service on Banking as a Platform can be provided by any one. So who is real hero is it Bank, Payment Service Provider as FinTech company or MNO …. All Digital Payment initiatives in India are not caused by banks , this domain of market in India is disrupted by FinTech companies by putting banks on back seat as banks were unable to do so. A Backend as a Service platform automates server-side development and handles the underlying infrastructure. It delivers ready-to-use backend building blocks, allows users to outsource the infrastructure management, and is used by app developers to build web and mobile apps. Embracing the new developments in financial technology and services, the Banking-as-a-Service stack can be redefined in analogy to the Cloud stack.

In specific, a European bank would not be able to use an Infrastructure-as-a-Service provider from USA like AWS. The Fintegration and delivery of fin-services are changing and coming out as service and platform which can house new channels, products, partnerships and opportunities . Strategies around BaaP and Baas require a different approach to architect business and services. More details about my posts, subjects and relevance please read thedisclaimer. Companies can integrate seamlessly with our existing back-office of banking service.

  • Tony created a specification that would describe Wordnik’s online dictionary JSON API.
  • The PaaS provider would be unable to see what happens in a black box software, especially when it is hosted in a different environment.
  • Russian banks are actively introducing BaaS, for example, the largest private bank Alfa Bank.
  • A single service provider is at a greater risk of failure than a provider that offers a larger portfolio of services.

This project has benefitted the bank to improve the customer experience and drive customer acquisition costs significantly. The use of the banking platform drove the customer acquisition costs down to €5 from as high as €150-€165. DBS has also provided its APIs for automated compliance platforms, AI Chabot services, and mobile push notifications.

The user of a dApp will pay a cryptocurrency fee to the developer to download and use the program’s source code. A smart contract is a type of source code that allows users to complete transactions without revealing personal information. However, such platforms often make life easier as interfaces are standardized between all the services that are using it. And they provide whole set of advantages that we will discuss later in the banking context. The U.S. Securities and Exchange Commission has their hand in a lot of this, especially in investment/banking platforms such as Robinhood, Wealthfront, Acorns, etc. These platforms can’t be backed by the Federal Deposit Insurance Corporation FDIC (which insures deposits, provides protection for investments, etc.), if the platform is not in compliance with SEC requirements for security.

OpenAPI Strengths

MNO were the first to pick up the opportunity and started giving banks hard time. Idea of BaaS got rocket speed in market where banking penetration was almost non existence and banks were not interested to penetrate the market due to many reasons. This enables FinTech banks to compete directly with https://globalcloudteam.com/ traditional banks by offering core-banking services without having to build all the products that would be needed. For example, different banking-as-a-service providers offer different sets of services. Did you know that a financial institution can sell its software, license, and/or services?

While OpenAPI can be considered the industry standard, in the end, companies often pick the format that best suits their business needs. The API definition of a service defines how clients can interact with it without the need for the client to read its source code. Looking as the banking organizations can go into decline when there are no businesses working with them, banks keep actively searching for industries to work with and exploring alternate sources for profitability.

Infrastructure as Code

For instance, DBS is ramping up its digital efforts for corporate banking customers by relying on APIs. Last year, they reported a net profit increase of 28 percent to USD 4.17 billion. Driven by regulation, the advent of open APIs will upend the status quo by allowing third parties to act as alternative distributors and offer a new range of products. As the delivery of financial services changes, incumbent banks are being forced to consider alternative models — Banking as a Platform is one of these options. BaaS FinTech– Banking and Insurance as FinTech is in existence since early 2000 and got stronger and stronger with rise of mobile money and mobile payment services.

Whenever the underlying source code of an API changes, the documentation updates. Legacy specification documents require manually updating Word documents whenever the system changes. If an API specification conforms to another format, like RAML or API Blueprint, the documentation has a structure that adheres to that format. While it has disadvantages, OpenAPI will likely grow in adoption while the long-term viability of other specification types is uncertain. API Blueprint focuses on clear documentation with reliance on markdown format as opposed to JSON or YAML . Because of its low adoption, API Blueprint lacks community support and robust tooling for OpenAPI.

A Backend as a Service will make this process very smooth and straightforward. Most BaaS providers have a substantial quantity of servers under the hood, and scaling an application will be as easy as clicking a button. MVPs – Minimum viable products are delivered faster using a Mobile Backend as a Service solution. As a result, companies can get feedback from end-users in a shorter time frame than traditional backend coding. The most evident advantage of using BaaS solutions is accelerating the development speed.

That’s where TRACEDonate comes in with its identity management platform designed to enable transparent and traceable cross-border remittances and giving. Brave is based on Chromium, an open-source project maintained by Google and others. Chrome’s backend technologies, such as the Blink rendering engine and the V8 JavaScript engine, are also used by Brave. Creating networks of user-groups, by allying a multitude of smaller user clusters and aggregating them to a big enough inital group-size. An important aspect, authentication, will be discussed later in the article. In the 2010, the team around Alex Lenk at the Karlsruhe Institute of Technology structured “the Cloud” as described in the stack below.

Benefits of banking as a service and banking as a platform

These companies established the OpenAPI Initiative as a governance program under the Linux Foundation that maintains the OpenAPI standard and provides practical guidance. The founding companies that formed the OpenAPI initiative were CapitalOne, PayPal, SmartBear, IBM, 3Scale, Google, Apigee, Intuit, Microsoft, and Restlet. Since then, the number of companies participating in the initiative has grown considerably. Against this model it is clear that a platform play would not be successful within the banks with their current setups and mindsets as they have not developed the ability, nor the sophistication, to pull it off.

Integrating API Blueprint into your entire API lifecycle is difficult because its sole focus is documentation. At the time, a group of companies recognized that the industry needed a vendor-neutral and standardized way of describing APIs. The industry needed to provide “best practices” to the industry and oversee updates to OpenAPI over time. However, people usually banking-as-a-platform confuse banking-as-a-service with banking-as-a-platform. You now know what banking-as-a-service is, let’s learn about banking as a platform. Highest Rating Category means, with respect to an Eligible Investment, that the Eligible Investment is rated by each Rating Agency in the highest rating given by that Rating Agency for that general category of security.

If we plot these paradigm shifts across these vectors, where the Financial services industry incumbents will have to move the dial from left to right , the decisions for each vector become clear. I view these as meta vectors that can apply to front end, middleware, backend processes, people, products and services alike. Adopting an API-fueled, platform strategy brings with it many organizational and technical challenges. Organizationally, banks will need to create multidisciplinary teams, redesign customer experiences and reshape business architecture.

BaaP Examples and Advantages

It is highly compatible with systems written in different programming languages. OpenAPI is also highly readable for both humans and computers and has the support of a large, growing community. One example of Banking-as-a-platform can be seen in Wells-Fargo, a big banking giant based in San Francisco, famous for its use of technology in all its banking procedures. It was one of the first ones to adopt the banking-as-a-platform in its module and all local banks followed its example.

FIDOR Bank

Users can also check client crypto wallet spending against known-risk indicators and comply with anti-money laundering regulations using the service. The project’s goal is to eliminate the need for human commerce by allowing individuals to run entire businesses and organizations using Ethereum Blockchain. People can use the platform to create and manage decentralized autonomous organizations . Aragon also contains ANT, the platform’s token, which grants voting rights for future product development decisions.

What is a BaaS – Backend as a Service?

Traditional approaches and business models are easy as the banks had full control. Financial services industry incumbents created products, pushed them out and sold them to their customers. Value was produced upstream by the banks and consumed downstream by the customers. The fact that services may “easily” find users, may incite more service providers to come on-board. I hope we can differentiate between services offered by Bank as primary partner and 3rd party dragging banking services on their risk and support out of banks.

There is growing recognition that a BaaP approach will become a major feature of the financial services industry, but we’re not there yet. According to another survey by Accenture, incumbent banks made up only 30 percent of the BaaP players. This is because the cost of creating a platform from scratch is high, and such a project could mean taking on significant technical debt. During the 2010s, many financial services emerged which can be grouped as “Fintech”. An evolution like the Telecommunication sector during the 1990s and 2000s is likely to follow, with a fragmented, more dynamic, more competitive and more value-adding financial market.

Knowledge Management Portal: Ultimate Guide with Examples

When reading an API specification, you learn about the kinds of requests you can send and the responses you expect to receive back from the API. In addition, the specification describes the available options that affect the information returned. Like a legacy specification, you learn about a system, its components, and its interactions.

With the advent of BaaS platforms and strategy, banks have formed an unrealistic structure of cost and have completely transformed the financial service structure. If this continues, there will be a significant improvement in how banks work today and a lot more smooth experience for their clients. With the adaption of embedded financial services, many conventional methods of banking have been disrupted. Formerly, all financial interactions like taking loans and making payments were conducted by using banks. When non-financial organizations seamlessly adapt and integrate the banking financial services in their system, it’s called embedded finance. This smooth union between non-financial entities and banking-as-a-service has transformed the way we deal with finances and businesses.

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