According to the Market Statsville Group (MSG), the global banking as-a-service (BaaS) market size is expected to grow from USD 541.62 million in 2022 to USD 5,423.59 million by 2033, at a CAGR of 23.3% from 2023 to 2033. The service providers in the banking industry are fully licensed or use an external regulated bank's licensed banking services. The software-based financial services are provided through API integrations that facilitate plug-and-play operations flexibly. The FinTech industry has grown in a momentous way leading the transformation of companies concerning a customer-centric business. As a result, the judgement was spread among a large number of enterprises, ranging from startups to IT corporations to well-known firms all across the world. Financial services or technology firms might take either a confrontational or collaborative strategy company have undertaken each other’s lanes and progressing with disruptive and pioneering propositions in an ever-evolving business landscape. Through the innovative use of technologies, financial technology companies are delivering low-cost personalized products, which has a substantial impact on increasing customer expectations, coupled with surging pressure on traditional firms. On the other hand, the banking as a Service industry is on the verge of rapid growth all over the world. Technological innovations in the banking sector have delivered several benefits to banks and customers alike; however, using e-banking raises the vulnerability to system attacks and threats. This will resist the market over the forecast period. Moreover, the innovative marketing strategies by the key players will create new opportunities in this market for the forecasting period.
Banking-as-a-Service (BaaS) is the end-to-end process by which third parties such as FinTech, developers, non-FinTech, and others, grant them access to and use financial services capabilities. With the use of the BaaS platform, these entities are able to utilize its services without developing it by themselves. Banks and other financial verticals have started infusing banking services into their products and ecosystems, which enforces the services providers to offer advanced BaaS features in the market. Baas has proved its importance in every sector, where its conducting payroll, running a loyalty program, manages payables and receivables, manages employee expenses, operating a marketplace for buyers and sellers or helping users manage their finances better. The on-demand cloud BaaS saves initial set-up time with fewer infrastructure investments that lead many financial service providers to adopt the trend of BaaS and thereby satisfying the customer needs.
The emergence of the new coronavirus, COVID-19, has put a strain on global financial markets. The financial markets are extremely volatile at the moment, with nations all over the world suffering from the destabilizing impacts of the epidemic. No organization is immune to the economic issues posed by the health crisis, and there were genuine fears about the global economy's collapse.
As the COVID-19 spreads across the globe, to protect the health of employees, bank executives and all others involved, a tremendous increase in digitalization in the banking sector has been noticed. The World Health Organization (WHO) has advised to use contactless payment and avoid handling banknotes as much as possible. Due to the coronavirus may continue to live on banknotes for days, accelerating the spread of the disease.
Government agencies and banks are anticipating the shift towards digital banking and taking relevant measures. For instance: during this pandemic, the Federal Financial Institutions Examination Council advised U.S. banks to test their online systems’ capacity for handling an influx of digital banking demands. For remote working, the agency asked for increased reliance on online banking, telephone banking, and call center services. The global banking as a service market is estimated to witness an increase in 2020 due to the outbreak of the COVID-19 pandemic. Banking as a service is seemingly witnessing an increase recently in COVID-19. This is due to the need to reduce the in-person exchanges and is offering online digital tools for the banking services.
In the past few decades, there have observed considerable innovations in the banking industry. This is due to the increased competition from recent players, new entrants, surging costs, and the escalating need by banks to meet the needs of a sophisticated consumer base. New technological innovations have created bank services, products, and market opportunities more lucrative and efficient. Thus, internet banking is emerging as the most significant technological breakthrough that influences bank services, resulting in new products, market opportunities, and more information-orientated business management processes. Besides, together with the increasing rate of Internet and mobile services penetration, many bank service providers have been continually adapting to internet banking technology, and at the same time, they met consumer’s requirements with these new services. Moreover, the advent of the internet has impacted electronic banking. By using Internet, banking is no time limit and geographic constraints. Customers throughout the world can access their accounts within 24 days of the week. Also, internet banking enabled by web technologies allows customers to finance their activities in a virtual environment. Among the reasons cited for the rapid development of the banking service industry, many companies focused on providing better services to their customers to conduct financial transactions via the Internet coupled with their high net worth. Thus, the necessity for banking as a service is contributing to the increased demand for financial services, which, in turn, strengthening the market growth across the developed and emerging markets.
Banking as a Service is seeing significant expansion all around the world. Technology advancements in the banking industry have provided several benefits to both banks and clients; yet, the usage of e-banking increases the susceptibility to system assaults and threats. As a result of the comprehensive data privacy and security regime in these businesses, it has become a borderline exploitative and severe concern globally. Because of several technological and other factors, the security risks associated with online banking services are substantial. Specifically, data security and privacy risks stem from poor data practises in digital banking. Sharing, unregulated data broking, non-consensual or excessive data collecting, storage, and inability to de-identify data are examples of corrupt behaviours from the standpoint of privacy. In terms of security, corrupt practises entail insufficient mechanical control, the use of weak encryption, centralized data storage, and a lack of cyber cognition.
Furthermore, while banking as a service and digital efforts provide several benefits, they also pose privacy hazards that hurt businesses, markets, the nation, and consumers. The market is primarily hurt by cyber vigilantism, the expansion of informal channels, and a loss of public trust in digital services. They do, however, hurt merchants through criminal responsibility, actual losses from indemnities, loss of goodwill, and damages and fines. This aspect has a detrimental influence on merchants and the market, limiting the global application of banking as a service.
Numerous small private businesses characterize banking as a service market as well as giants, including BBVA and Solaris Bank, among others. The market players operating in the market have steadily adopted ground-breaking marketing strategies to gain a competitive advantage. Companies often regularly involved themselves in endorsing banking and financial services not merely amongst the higher income groups while also in middle-income groups through adjusting their pricing policies. These help market players to enhance the business operations and support services to create a better business reputation in the industry. For instance, Banco Bilbao Vizcaya Argentaria, S.A. (BBVA) launched new banking as a service (BaaS) platform in the United States, enabling third parties to easily integrate payments and harmonizing banking services into their business models to make seamless user experiences. This initiative brings into line with strategic goals for continuously adding value to the platform and eventually banking customers.
The study categorizes the banking as-a-service (BaaS) market based on type and application area at the regional and global levels.
Based on the type, the market is divided into api based and cloud based. The cloud-based segment is expected to accounts the largest market share in 2022 in the global banking as-a-service (BaaS) market. This may be ascribed due to participants in the payments-as-a-service (PaaS) industry offering specialized services such as debit and credit card distribution and payments, dues clearing, international payments, and e-commerce services on cutting-edge cloud-based platforms. Leading public cloud providers provide a wide range of new application-as-a-service offerings that banks may utilize to enhance revenue, improve customer insights, cut costs, deliver market-relevant products swiftly and effectively, and monetize corporate data assets.
Based on the regions, the global freight procurement technology solutions market has been segmented across Europe, North America, the Middle East & Africa, Asia-Pacific and South America. Europe is projected to account the highest market share in 2022. Given the increased demand for digital banking services in Europe, incumbents both inside and outside the European Union have predicted a rapid uptake of BaaS services. It remains to be seen how British banks will react to Brexit's implementation. One thing is certain the influx of mobile banking players is projected to result in a more diverse financial environment, allowing for enhanced service quality and lower banking rates.
The banking as-a-service (BaaS) market is significant competitors and extremely cutthroat in the sector are using strategies including product launches, partnerships, acquisitions, agreements, and growth to enhance their market positions. Most sector businesses focus on increasing their operations worldwide and cultivating long-lasting partnerships.
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