Banking-as-a-Service: Navigating a New Frontier
“Every company will be a fintech company.” That phrase traces its roots back to a presentation given by Angela Strange in November 2019. Since then, many different versions of this idea have been splashed around in the media, all driving home the same point that banking isn’t just for banks anymore. This notion, that any brand can get into financial services, is a powerful one. But it misses a very significant point — for nonregulated companies in the US to offer financial products, they generally have to partner with an actual bank.
Banking-as-a-Service, or BaaS, centers on this kind of partnership, by which a regulated bank provides its charter to a nonregulated brand, enabling the latter to offer financial services to their customers. If this sounds like white-labeling, that’s because it is. But it’s also more than that — there are a slew of operational and compliance components that go into launching “bank,” and the actual bank underneath needs full oversight and visibility into how those components are being managed. That’s where BaaS providers come in. These technology-first facilitators help the bank to manage their BaaS operations, while working with fintechs or brands to set up all of the components they need to get to market, from their risk stack to their ledger.