Author: James Simcox, Chief Product Officer and Managing Director International at Equals Money
In the fast-moving world of Fintech, innovation is accelerating at an unprecedented pace. However, this rapid progress is being met with increasing regulatory scrutiny, particularly around Banking-as-a-Service (BaaS) models. Continuous regulatory changes often hit startups the hardest, making it challenging to adapt while building and maintaining customer trust. Despite these hurdles, BaaS presents an exciting opportunity for fintechs to challenge the status quo, drive innovation, and deliver exceptional financial services to their customers.
How can BaaS benefit your business?
BaaS offers a wide range of benefits to many different kinds of businesses. Overcoming legal and regulatory barriers is one of the key advantages of implementing BaaS.
By leveraging open banking and APIs, businesses can embed BaaS solutions into their existing products. This integration is significant as it means banks can adopt fintech innovations while businesses can incorporate banking functionalities. For companies that exist outside of the banking arena, this integration can transform their core product offering for their customers.
Businesses can also benefit from a white-labelled product that is tailored to their unique branding. White-labelling provides a versatile solution that can be utilised as a front-end service, through an API, or a combination of both. This level of flexibility allows businesses to use this turnkey solution to quickly enter the market whilst retaining the ability to build and customise their own products on top of it.
Additionally, BaaS offers businesses fast go-to-market speed due to the cross-border, multicurrency banking services that can be introduced without the need for a time-consuming build.
The challenges of adopting BaaS
Whilst BaaS provides a range of benefits to businesses, it can present challenges. For a business that exists outside of the banking space, incorporating financial services can be overwhelming and costly, particularly without the help of a fintech. Therefore, it’s important for any business to be aware of these challenges.
Traditionally, the cost and complexity of providing embedded financial services have been a significant deterrent for businesses. Establishing a financial service offering typically involves hefty fees, substantial setup costs and lengthy regulatory processes. These time-consuming and financially significant investments limit market entry for smaller, emerging fintech players.
In recent years, regulatory scrutiny has only intensified. Regulatory bodies demand stringent compliance with financial regulations which can be daunting for smaller businesses lacking the necessary resources. Navigating these regulations requires a deep understanding of the regulatory landscape, as well as robust compliance mechanisms.
A common misstep among businesses is attempting to obtain their own licenses to offer financial services. While this approach might seem viable, it underestimates the complexity and time required to build the necessary tools for compliance. Regulations often feel like a maze. Building compliant infrastructure from scratch can delay product launches and distract from the business’s core objectives. This is where fintechs can help.
How can fintechs support businesses
Fintechs can offer businesses access to their open banking and APIs, meaning businesses can embed BaaS solutions into their existing products and services seamlessly. This integration means banks can leverage fintech innovations, and businesses can enhance their offerings, benefiting both parties financially and operationally.
At Equals Money, we’ve been working with CASHét, a renowned film services payments provider, and Chorus TM, a global treasury management solution for the music and entertainment sector. Taking Chorus TM as our example, they are a business that has used BaaS to integrate financial services to enhance their global reach and operational efficiency. Their platform offers fast, secure payments, real-time spending reports and streamlined reconciliation. By using BaaS, they can provide quick, secure transactions with real-time visibility over expenditures.
Chorus TM is just one of many businesses that are using BaaS to adapt to fast-moving expectations to ensure their proposition remains competitive.
Looking to the future
As we look to the future, the demand for digital solutions is on an upward trajectory.Expanding into BaaS aligns with these growing expectations, offering services that are readily accessible at customers’ fingertips. By integrating banking products directly into their services, businesses provide a convenient user experience.
By leveraging the expertise of BaaS providers such as our team at Equals Money, businesses can deliver customer-centric financial solutions. When a business offers more, customers are far less inclined to look elsewhere.
