Banking-as-a-Service (BaaS) providers are revolutionizing how FinTech’s and digital online banks provide payment and banking services to their clients. BaaS allows them to integrate 3rd party payment capabilities and FX directly into their products using API, bypassing the need for traditional banking relationships and complex infrastructure. This innovation is particularly vibrant in Europe, where a robust regulatory framework and a dynamic tech ecosystem foster growth in Fintech sector.
Why BaaS Is So Popular Among Financial Institutions?
Banking-as-a-Service refers to the provision of banking processes, such as payments, currency exchange and card issuing through single API integrations. BaaS providers partner with top tier banks to aggregate banking services in one solution and then enabling smaller Fintech companies to offer financial products without having multiple banking relationships themselves by integrating BaaS solution and tapping into a developed banking products suite. This model has been pivotal in online banks, PSPs and remittance companies development in recent years allowing them to focus on their core markets and value proposition and not worrying too much on banking relationships.
Benefits Of BaaS
Scalability: FinTech’s can scale their services without the need for extensive capital investment in banking infrastructure.
Flexibility: BaaS is easily customizable banking service that can be fit to any banking core and front-end platform while giving a unique user experience to the end client.
Speed to Market: BaaS platforms reduce the time it takes to launch financial services.
Pricing: BaaS solutions are volume based therefore once a user business is scaling, the commercials can be adjusted downwards and profitability increased.
It’s Global: BaaS providers are distributed globally. Even if this article is focusing on EU, any remittance or payments business can tap into EU BaaS to unlock local payment rails and currencies and leverage it for providing top notch services to their end clients. One of the most popular use cases that we see with our clients – a Canadian MSB opening a BaaS account with EU providers to tap into SEPA, FPS, CHAPS and bunch of other local currencies and payment channels.
Top BaaS Providers in Europe
Europe boasts a number of leading BaaS providers, such as Solarisbank in Germany, Railsbank in the UK, Treezor in France, Mano Bank in Lithuania and so on. However, these providers have high limits and requirements for European clients and even more so for international ones. We have had multiple discussions with clients that were looking for alternatives and combined a list of less known BaaS providers in Europe that in our opinion are less strict and more flexible. We maintain that list and tweak it with time, once any of the providers change their requirements or rules. If you would like to get an up to date list from us, just fill out our contact form and we will send it to you by email.
Steps To Open A BaaS Account
Opening a BaaS account requires passing an enhanced due diligence, which can vary slightly depending on the provider:
Step 1: Identify Your Needs: Determine the specific banking services you need and how are you planning to integrate them into your ecosystem. Moreover, prepare financial projections which will dominate the commercial negotiations and might determine your commitments.
Step 2: Choose a Provider: Select a BaaS provider that best fits your needs, considering factors such as API foundation, ongoing compliance requirements, payments routes and currency availability, client support from the provider in case of any issues and scalability.
Step 3: Due Diligence: A thorough due diligence will be conducted from the BaaS providers side. You should prepare at least for the following requirements:
• Regular company documents, such as statues etc.
• A list of directors and shareholders and their IDs
• Proof of business trading address and for directors, UBOs
• License number from regulatory authority
• Financial statements
• AML/KYC/CDD policies
• AML audit report might be required as well
• Management information and business plan
Step 4: Implementation Stage: Engage in integration and testing phase with the provider’s IT team to ensure their APIs seamlessly connect with your existing systems.
Step 5: Compliance and Documentation: Complete all necessary compliance checks, answer all questions and provide documentation, which will be reviewed and approved by the BaaS provider.
Step 6: Launch: After successful integration and compliance checks, launch the financial services within your product offering.
Conclusion
Banking-as-a-Service has become a key enabler in the fintech sector, particularly in Europe. Choosing the right BaaS provider and successfully integrating banking services into your business can significantly change the course of its growth and development. By following the steps outlined above, FinTech’s can effectively open a BaaS accounts and embark on a journey of financial innovation and growth.
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