85% of senior executives surveyed are already implementing BaaS solutions or plan to do so within the next 12-18 months
DUBAIWATER, LONDON and NEW YORK, March 28, 2022 /PRNewswire/ — Finastra released a market valuation report today: ‘Banking as a service: perspectives 2022 | Paving the way to integrated finance”. The research polled the opinions of 1,600 senior industry executives, exploring the opportunities presented by Banking as a Service (BaaS) – to deliver retail or wholesale banking products and services to customers in a context, as a service, using the secure and regulated system of an existing accredited institution. infrastructure with modern API-driven platforms.
Finastra research reveals the true scale of the appetite for BaaS, with nearly 85% of respondents already implementing or planning to implement BaaS within the next 12-18 months. Key findings include:
- More than 80% of regulated financial service providers expect growth in the overall BaaS market. Of these, 30% expect growth of more than 50% per year over the next five years
- BaaS represents a 7 trillion dollars Opportunity – Distributors, including retailers, e-commerce companies and other consumer brands, are migrating to BaaS solutions and expecting overall growth of over 70% per year over the next three years; 60 to 70% of distributors want to increase their spending on financial partnerships (including BaaS)
- Small business loans, business loans and cash/exchange services are about to gain the most popularity. Simplifying SME lending via BaaS is expected to drive 30% growth by 2024
- The majority of enablers, including bigtechs and fintechs, expect the overall BaaS market to grow by more than 50% over the next five years. Some 40-50% of facilitators want to grow their partnerships with distributors and financial service providers by more than 50% over the next five years
Angus RossChief Revenue Officer, Banking as a Service at Finastra said“There is no doubt that BaaS is an incredibly exciting opportunity for the entire financial services ecosystem. Financial institutions can reach more customers at a significantly lower cost, while private labels can open up new sources of revenue and build deeper relationships with their customers. It is clear from our research that consumers (individuals or businesses) are changing their source of financial services and turning to non-banking channels. This trend will only only accelerate because the integration of regulated products in the customer journey becomes as simple as the creation of an account on social networks.”
Brian McKenneyChief Innovation Officer, HSBC said“The application of BaaS represents an attractive opportunity to create new value for businesses around the world. The integration of financial solutions will bring contextualized and integrated banking services into the products and platforms businesses use every day. How suppliers partnering and meeting this unique international business need will ultimately be the real differentiator.”
david palmDigital Asset Broker product manager, Vodafone said, “Embedded finance and BaaS present a significant opportunity in the rapidly growing ‘economy of things’. It is estimated that there will be up to 60 billion IoT devices in use by 2025; we expect these devices to interact, transact and many will need Integrating integrated finance and BaaS solutions with IoT and the Thing economy presents exciting new business and monetization opportunities.
Finastra’s research also assessed the monetization strategies of BaaS distributors, enablers and providers, and explored the importance of partnerships. All respondents favored a move to a platform and marketplace model, where a greater range of competitively priced niche solutions can be purchased by end customers.
Theodora LauFounder, Unconventional Ventures commented, “I am encouraged by the growth of the integrated finance ecosystem, particularly in terms of extending services to communities and businesses that have traditionally been underserved with limited offerings. Small businesses and entrepreneurs are the backbone of our economies. Through thoughtful innovation, we have the opportunity to create a fairer level playing field and a fairer future for all. Technological innovation must ultimately be about people.
Jim Marousco-editor of The Financial Brand said: “Opportunities associated with BaaS are exploding in the banking ecosystem as organizations not only seek new ways to improve customer engagement and enhance experiences, but also find new sources of revenue within and outside outside the financial services market.”
Finastra research shows that financial service providers need four key capabilities to work with distributors and facilitators and to monetize BaaS. From a technological point of view, these include:
- an open API platform;
- an integrated data and analytics platform; and
- specialized digital solutions to seamlessly integrate customer journeys
From a product perspective, vendors need dynamic and compelling offerings to attract customers.
Learn more about the BaaS opportunities available to distributors, enablers, and vendors – and the growth potential of different market segments – in the full market assessment report here.
Notes to media:
To compile the market assessment report, Finastra interviewed nearly 50 senior executives and interviewed another 1,600 to assess the maturity of the Banking as a Service (BaaS) market. The research reveals the high potential for disruption and transformation across a number of sectors, spanning banking and fintech, healthcare, retail and technology. The research gathers the opinion of BaaS distributors, enablers and vendors, with responses split roughly evenly across large companies (1 billion -> $108 billion) and small and medium enterprises ($250 million – $1 billion).
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Finastra is building an open platform that accelerates collaboration and innovation in financial services, creating better experiences for people, businesses and communities. Backed by the broadest and most comprehensive portfolio of financial services software, Finastra delivers this vitally important technology to financial institutions of all sizes across the world, including 90 of the world’s top 100 banks. Our open architecture approach brings together a number of partners and innovators. Together, we are leading the way in which applications are written, deployed and consumed in financial services to evolve with changing customer needs. Find out more at finastra.com
FusionFabric.cloud is a scalable, open and collaborative platform built by Finastra. It brings together an ecosystem of financial institutions, commodity providers, developers and fintechs, as well as embedders and financial services distributors. Financial institutions use FusionFabric.cloud to improve efficiency, create new experiences for customers and offer services through new delivery channels as part of Banking as a Service (BaaS). Integrators and distributors can tap into the platform to source and integrate with financial institutions that can quickly produce new financial products in context.
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