BaaS: A Revenue Opportunity.
In this article, we discuss key benefits for banks to find new revenue streams and foster growth. Banking as a Service (BaaS) is a strategy which allows banks to share their data and existing infrastructure with other third parties whose business platforms require banking service functionality. Banks generate fees in exchange for access to the bank's core services.
Find the ways to leverage BaaS to identify new revenue growth opportunities that are right for your institution.
Key Takeaways —
BaaS — a new revenue stream.
Banking as a Service (BaaS) is a partnership between a financial institution and another business requiring banking services to complete an end to end offer to their customers.
This relationship enables the company to offer banking services to its customers by leveraging the financial institution’s capabilities — things like payments processing, card services and lending along with fraud and compliance services.
For the financial institution, fintech becomes a new revenue stream, together with an opportunity to scale revenue, without ongoing customer acquisition costs. Leveraging your existing infrastructure and processes allows them to leverage existing assets in all the right ways.
Why now?
There is an intense marketplace need from businesses who want to offer a full service end to end experience alongside their existing products and services. For example, Sutton Bank provides services directly for its consumers such as the BankAdvantage Checking Accounts, but is also the issuing bank for Cashapp, one of the largest fintechs in the US.
In addition to accounts, card issuing and payments processing, some businesses will seek a variety of additional services including ACH, fraud management, know your customer (KYC) and account verification.
For banks, extending into fintech as a partner bank to other businesses offers new growth and greater return opportunities. “In addition to new sources of revenue, the returns on existing assets and equity for banks offering BaaS exceed the industry averages for the entire banking category.”¹
Where to start?
Identify those products and services in your arsenal which may add value in the marketplace to select partners and which your institution can scale without requiring transformational change. Use your existing infrastructure and resources in new ways for growth and scale.
Next identify those target markets which are most applicable to your services. A BaaS advisor can help you find your optimal targets and how to reach them.
How NXTMoves can help.
NXTMoves offers market research and opportunity analysis for financial institutions including BaaS advisory, next generation activation and go-to-market strategy.
We consult, we plan, we implement, we support. Let us help you identify the most optimal new revenue streams for your institution.
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