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Future Trends: BaaS, Open Banking Threaten Existing Financial Services Solutions

Renato Capelj

Hydrogen, a New York-based fintech specializing in blockchain, banking and investing, released a report on the rise of Banking as a Service (BaaS), deriving some interesting conclusions for the way fintechs and financial institutions use APIs to build on infrastructure and differentiate offerings.

“[A]s the ‘Banks vs. Fintechs’ mentality has morphed into ‘Banks with Fintechs’ over the past few years, BaaS has enabled fintechs to make inroads into traditional financial institutions (FIs),” according to Hydrogen. “Smaller FIs are the ones who are benefiting the most from these fintech partnerships. They lack the resources necessary to provide the same level of service offerings that are available from larger FIs. This has enabled fintechs to help smaller FIs level the playing field through BaaS.”

Now banks, especially smaller ones, in conjunction with BaaS, are able to build and scale competitive services at lower costs, fueling the evolution of banking with the addition of new products.

With smaller banks tapping into wider markets with better products, consumers ultimately win through increased access to higher quality financial solutions.

To read more on why the growth of Open Banking, API, and BaaS offerings will continue into the next decade, please read the full report.

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