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Banking as a Service Gains New Momentum

The BaaS model has been adopted across a wide range of industries due to its ability to streamline financial processes for non-banks and foster innovation. BaaS has several industry-specific use cases, where it creates new revenue streams.

Banking as a Service (BaaS) is rapidly emerging as a growth market, allowing non-bank businesses to integrate banking services into their core products and online platforms.

As defined by Juniper Research, BaaS is "the delivery and integration of digital banking services by licensed banks, directly into the products of non-banking businesses, commonly through the use of APIs."

BaaS Market Development

The core idea is that licensed banks can rent out their regulated financial infrastructure through Application Programming Interfaces (APIs) to third-party Fintechs and other interested companies.

This enables those organizations to offer banking capabilities like payment processing, account management, and debit or credit card issuance without having to build that functionality themselves or obtain a banking license.

Juniper's market assessment outlines how BaaS works and why it is growing across multiple industries from fintech startups to gig economy platforms to travel companies. Let's explore some of their key findings.

The numbers tell a compelling BaaS growth story. Juniper forecasts that global BaaS platform revenue from account/card issuing and transaction fees will soar 158 percent over the next four years, increasing from $36.4 billion in 2024 to $94 billion by 2028.

This expansion is being driven by increasing API deployments across e-commerce marketplaces, freelancer platforms, and other digital services looking to connect users to innovative banking tools.

The Juniper market study outlines how BaaS is being leveraged by a diverse set of companies across several key industry verticals:

  • Fintech startups lack resources for banking licenses, so BaaS allows them to rapidly build digital wallets, lending apps, robo-advisors and more on regulated rails.
  • Gig economy platforms like Uber and DoorDash use BaaS for instant payouts, increasing worker satisfaction and utilization.
  • Travel companies leverage BaaS for payments, foreign exchange, travel insurance and loyalty programs integrated into their booking flows.

While Fintechs were early BaaS adopters, the common use cases are expanding rapidly as more traditional companies seek to embed financial services capabilities.

Moreover, BaaS represents a significant unbundling of traditional banking with a few big winners emerging across the globe.

While BaaS allows licensed banks to monetize their regulatory infrastructure, the real value will accrue to the digital platforms that can integrate banking into customer experiences.

Companies like Uber, Doordash, Airbnb and others can drive deeper user engagement and operating margins by controlling the entire transaction lifeycle through BaaS solutions.

Fintechs building new mobile banking experiences will similarly benefit from embedding regulated BaaS components without dealing with that cost and complexity themselves.

At the same time, increased regulatory costs for compliance and identity verification may make it harder for smaller BaaS players to compete. This could accelerate further BaaS provider consolidation as the market matures.

Outlook for BaaS Applications Growth

"Financial inclusion is driven by accessibility, and BaaS helps serve specific industries or demographics overlooked by traditional banks’ all‑encompassing approach. This allows businesses to stand out and focus on being inclusive to their specific audience; driving growth," said Daniel Bedford, research analyst at Juniper Research.

Overall, BaaS is a pivotal trend that will unbundle banking into re-bundled experiences controlled by dominant digital platforms. For customers, it will make banking services more tightly woven into the apps they use daily.

That said, I believe the upside for market growth looks extremely promising for the BaaS providers that can build defensible financial services platforms and competitive moats.

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