The Rise of Banking-as-a-Service

The pandemic has accelerated the adoption of digital solutions across industries, notably in e-commerce, which is forecasted to reach $92 billion in global financial transactions by 2025. The hyper-growth of the sector continues to push brands and marketplaces to build financial services into their platforms. Some researchers predict that embedding financial services into platforms for enhanced user experience will see 182% growth in the next five years.

Changing consumer preferences have also impacted other industries, including traditional finance. Digital banking has become the main method of financial interaction for many consumers worldwide, with the pandemic accelerating this shift, as almost 75% of consumers now use digital channels to open accounts, particularly through mobile apps. While this shift in consumer behavior pushed forward the need for more digital financial solutions, the recent regulatory changes and drop of investment in the fintech industry made entering the financial services sector more complex and resource intensive. 

Both cohorts — the customer-facing, nonfinancial brands that are looking for embedded finance capabilities, and fintechs that are typically the technology providers facilitating innovative digital solutions — are increasingly turning to Banking-as-a-Service (BaaS) to fast-track their business operations. Experts indicate that the industry is expanding by 26% annually. ConnectPay, an all-in-one finance platform for online businesses, reports a 350% increase in inquiries for BaaS when comparing Q1 of 2022 and Q1 of 2023. 

Banking-as-a-Service effectively allows non-bank institutions to offer branded (“white-label”) financial services without going through the difficult and costly process of obtaining their own banking licenses. A good BaaS provider will not only address a client’s present needs but also have the resources at hand to adapt to their future growth. “Through strategic partnerships, a good BaaS provider can offer its clients a wide range of services to ensure that they remain responsive in a rapidly changing market,” says Simas Simanauskas, chief business officer at ConnectPay. By leveraging the power of banking services and technology, brands can focus on what they do best and create more value for their customers and stakeholders.