05 Aug

'BaaS vs. platform banking vs. open banking, three major areas in fintech' by Ned Hallett, Just After Midnight

At Just After Midnight, our spring mission is to push even further into the world of fintech.

A time for nurture, spring shoots and growth. A time for banking. But we digress.

This piece is all about drawing a line between three major areas in fintech. Namely, BaaS, open banking, and platform banking.

These are all fertile areas in the fintech world, and companies across the globe are busy sewing their disruptive seeds.

So, we’ll be explaining exactly what these concepts are, and what role cloud-native MSPs like ourselves have to play.

Now, let’s get to it.

1. BaaS (Banking as a service)

What is BaaS?

As anyone keeping up with the a-a-S-ification of all things will know, letter plus aaS means word-beginning-with-that-letter as a service. And in this case, B is for banking.

BaaS offerings come from traditional banks and are supplied to companies looking to offer digital banking products, minus a banking licence.

Example of BaaS

So, if we imagine for a moment that we’re Range Rover or Jaguar (exciting), and we’d like to offer our customers a loan and repayment service, so they can buy more of our rugged, beautiful vehicles, we might be in the market for BaaS.

We now just need to find a bank with a BaaS loan offering, which we then integrate into our site, and voila!

How BaaS solutions can work with MSPs 

BaaS and MSPs have a lot of play. The whole thing with BaaS is brick-and-mortar juggernauts stepping gingerly into the world of XaaS (anything as a service).

The key benefits of working with a cloud-native MSP is having that expert guidance, depth of technical knowledge, and experience in implementation needed to make these first forays fast, painless and profitable.

2. Platform banking 

What is platform banking? 

Platform banking is (sort of) the opposite of BaaS.

BaaS means a traditional bank offering a digital banking service as white label to a non-bank.

Platform banking means a fintech business offering services to a bank. So in BaaS, banks are the sellers, and in platform banking, they’re the buyers.

Example of platform banking 

Moving up in the world, we can now imagine ourselves as an entire bank. Pick your favourite.

The bad news is our POS service isn’t the winner we hoped it might be. 

If you don’t know – and as a bank, you really should – POS means point of sale, i.e. the software running the till at merchant X, Y and Z.

But, if we integrate fintech product A, B or C, we might now be able to guarantee things like smart transaction routing, meaning fewer fees, real-time POS analytics, and greater automation of POS services.

We can now imagine ourselves happy.

How platform banking solutions can work with MSPs 

Fintech products are a bread-and-butter customer for MSPs, with cloud-native technologies like microservices, containers and serverless in high demand.

Because fintechs often serve solutions with a huge scope – as in the our POS example – the scale of these technologies is key.

3. Open banking 

What is open baking?

Open banking could be called BaaS-lite.

In BaaS, non-banks integrate entire services into their apps.

In open banking, non-banks just access data, or in some cases trigger payments, via API.

And in this scenario, there’s often a third player, on top.

As in BaaS, there’s the bank and the non-bank business. However, the company that supplies the API which connects the two is often a specialist banking API provider.

Example of open banking

The classic example here is one of those personal finance apps that provides insights into one’s monthly spending.

Admittedly, this is our least glamorous imaginative leap to date.

In this scenario, we want access to our users’ bank accounts (for entirely legitimate reasons) so we need to find a bank that can integrate with a banking API AND a banking API provider. 

We can then draw the information, and tell people to cancel Netflix.

How open banking solutions can work with MSPs

With open banking, it’s more about helping skinnier more agile apps access the scale of services they need to keep growing.

An established managed services provider can help open banking platforms access things like out-of-hours support, dedicated technical staff and knowledge and skills they can’t afford to retain in house.

How we can help 

Well, we’ve kind of already said. But here’s the spiel in depth.

We’re a cloud-native MSP with a pioneering, tech-enabled 24/7 full-stack support service.

We’ve helped companies in legaltechfintech and SaaS navigate the technology landscape and bring fresh competitive innovations to market. 

Through consultation, implementation, and a one-of-a-kind support service, purpose-built to meet the needs of modern app design, we ensure our partners have what it takes.

And if you’re just getting started, why not check out our cheat sheet on choosing a cloud provider for your fintech product.

So, to find out how we could help you, or for anything else, just get in touch.

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