BaaS Boom: Making Waves through Major Moves

The second half of 2022 has been a whirlwind of activity in the BaaS landscape, as various partnerships, product launches, and funding rounds have taken centre stage. The industry has been abuzz with exciting developments and noteworthy events that have caught the attention of many.

• • Strategic synergies were on the menu for BaaS and open banking players in the past year. Serving a new way to pay, JJ Foodservice partnered with Solaris and Ecospend to offer an open banking payment solution, allowing customers to pay directly from business bank accounts with real-time cost visibility. Further in the partnerships saga, Treasury Prime and Plaid came together to leverage a proprietary solution that enables Treasury Prime customers to easily link their accounts to a variety of fintechs to deliver safe, secure, and instant payments.

• • Rolling the BaaS through novel propositions, Galileo Financial Technologies unveiled the Galileo Direct Deposit Switch, powered by Atomic, providing fintech clients with faster access to their wages and a sleek way to redirect paychecks into the financial accounts of their choice. Griffin broke down barriers for fintechs through its open, unlimited sandbox access – available to all brands for prototype development and experimentation without financial commitment or long wait times. BaaS platform Synapse also announced a series of year-end milestones achieved in 2022, including the launch of two new platforms, becoming cash-flow positive, and completing 91 million annualised transactions. The platform now aims to deliver more robust features, such as Modular Banking, Global Credit, and Identity, Fraud and Credit Intelligence for the year ahead.

• • BaaS providers were observed to be holding the fort against the funding crunch, with Toqio acquiring ~$22M in a Series A investment round to become the platform of choice for creating new fintech solutions. Meanwhile, Monese announced a $35M investment by HSBC as part of a broader partnership that will focus on supporting the continued growth of Monese’s cloud-based platform-as-a-service business.

The Fork in the Road for BaaS

We stand at an inflexion point as the BaaS market is paving the way for a new dawn in financial services by reshaping the banking value chain and boosting adoption through programmatic access to financial products. There are several tailwinds for BaaS, such as the rising adoption of cloud and cloud-native back-office technologies among banks, open banking and open finance initiatives from regulation, and expectation from consumers to get instant access to contextual financial products. But the sector is also expected to have run-ins with regulators increasing scrutiny of financial product manufacturers and distributors through initiatives, including Consumer Duty in the UK and Responsible Innovation in the US.

In the current economic climate, for the BaaS phenomenon to continue powering the next set of financial innovations, banks, BaaS middleware platforms, third-party technology providers, and customer-facing fintechs and brands need to collaborate to reduce risk, adhere to regulations, and offer cutting-edge financial products. With regulators expected to provide much-needed clarity on the roles and accountabilities of the BaaS value chain participants, the sector may just get what it needs to grow exponentially and responsibly.