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Banking-as-a-Service: A universal plug for financial services that meets everyone’s financial needs

By Prajit Nanu, Co-Founder and CEO, Nium

There is a trend brewing in the financial space that, once again, has the ability to impact the digital world. 

You have likely heard a lot lately about technology companies introducing payment flows within their apps, and doing so within a few short months. You may also have heard about banks, financial institutions or FinTechs launching full-fledged card issuance programs within record time. Processes that used to take at least a year, have now been shortened dramatically due to a major process disruption that is taking place within the financial sector — Banking-as-a-Service.

Banking-as-a-Service (BaaS), is simply defined as banks opening up their systems to allow FinTechs or other third-party providers to carry out banking transactions over the Internet, without the bank having to develop these functionalities from scratch. This process has been rapidly gaining steam in the last 18 months. BaaS is a big deal today because of the potential it brings to make it much easier for anyone (including start-ups, fintech unicorns, multinational technology corporations and banks) to access and create simple, fast, secure, and transparent banking experiences, even if they do not have the means to do so in-house.

The possibilities surrounding BaaS are tremendous — promising new revenue streams, expanded customer bases, and improved experiences across a wide range of banking and financial services including; account and transaction services, e-wallets, loan processing and even shoring up compliance and trust. This is the new world of banking; a plug-and-play model for banking services.

Some in the financial industry have labeled it as the “API-fication of Banking”. We, at Nium, like to call it a universal plug for financial services — where companies can pick and choose specific features to fulfill a specific business need, or merge multiple solutions to create an entire neobank if they wish.

Build and go live faster

With growing demands for digital experiences and the potential for FinTech to redefine banking, BaaS has the power to unlock capabilities and create new revenue streams for those bold enough to revamp their business model. However, while many look to become a FinTech or offer FinTech solutions, they may not have the existing technologies and capabilities to build and go live quickly enough before someone else does so. The quicker they go to market, the faster they can capture market share. In the race to finish first, close collaboration is encouraged to ensure that all aspects of BaaS are provided for at the shortest time possible.

Working with third-party BaaS providers can allow you to bypass much of these developmental complications. With an existing tech stack that you can just plug-and-play, Nium allows banks, other financial service providers and even enterprises to anticipate demand and scale up or down as needed, customize product offering, and enter new markets. 

For instance, Nium is working with a maritime company on a fully customized expense management solution that addresses a multitude of payment issues, including challenges on salary disbursements to a multinational workforce that has no stable network connection while at sea, concerns on piracy and exorbitant FX charges typically imposed on remittances to loved ones back home. To combat these legacy challenges, Nium created a Spend Management program that will allow the shipping company to disburse salary payouts directly to seafarers’ Virtual Visa card account that can be accessed via a customized app. 

Utilizing the app, and combined with Visa’s virtual card technology, crew members can immediately access their wages from anywhere in the world while onboard or on land, send money overseas, initiate card-to-card transfers, shop online and use their Nium Virtual Cards with mobile wallets onboard. Our flexible tech stack enables us to bundle relevant solutions for the maritime company and solve their payment challenges, not only within a couple of months, but also at a fraction of the cost it would typically take with multiple partners or to build in-house

Go faster. Go further. Overnight.

A second challenge for businesses intent on providing financial services products is dealing with complicated regulation and compliance. Take Brexit for example — when the transition period ends on 31 December 2020, businesses who possess an EU license will no longer be allowed to provide financial services in the United Kingdoms — they are required to apply for additional licenses specific to the country. Similarly, the Asia Pacific region is a highly fragmented market home to multiple regulatory bodies. Without a centralized governing body like the European Union, those who attempt to build out a payment solution on their own would also have to reach out to multiple regulators and government bodies individually before their solution can see the light of day.  

In such situations, partnering with financial technology solution providers that have a large portfolio of licenses under their belt can allow businesses to reduce the burden of this cumbersome process. That is why building out our global regulatory capabilities continues to be critical objective for Nium. Our network is powered by our portfolio of licenses, hard-earned by building trust with financial regulators in nearly 40 countries. Most recently, we have received our Electronic Money Institution (EMI) license from the Financial Conduct Authority (FCA) in the United Kingdoms to issue e-money and provide cross-border digital payment services in the country post-Brexit which will help minimize disruption for our customers.

Within each market, Nium takes care of the different KYC, regulatory requirements, and the infrastructure to receive or send out payments. All fraud control measures, and compliance requirements are also included in a single platform, so that customers can send, spend, and receive money from more than 130 million end users across more than 100 countries, 65 in real-time — without compromises on security. Supported by Nium’s portfolio of licenses, local or regional businesses turn into global payments providers overnight. 

A universal plug for all your financial needs

Undoubtedly, what will distinguish the future of BaaS hinges on what the financial technology solution providers can offer to support banks, financial institutions, and businesses in the frontiers of the new global economy. 

As a global financial technology platform that aims to redefine the way money moves across borders, this is just the beginning for us. Our team is continuously pursuing incremental growth and looking for the next milestone in our pursuit of an open platform, a universal plug for financial services so that any business, regardless of size or industry, can build a world free of the old constraints and restrictions — a world of Open Money.