Learn what an API is and how Banking as a Service (BaaS) works.
The Banking-as-a-Service model is spreading across Europe, transforming the financial services sector and accelerating the digitalisation of banks . It also favours the emergence of new business models and drives the development of the fintech ecosystem .
Banking as a Service (BaaS) is the result of PSD2, which has allowed fintechs to offer financial services. This has been a disruptive element in the banking industry, by developing competition and creating new business opportunities.
According to the PS2D regulations , banks must allow third parties to access customer accounts to view transactions or initiate a payment on their behalf, provided that there is consent from the owner of the information and the third party is authorized as an aggregator by the Bank of Spain.
What is Banking-as-a-Service (BaaS)?
Banking as a Service (BaaS) allows businesses to offer financial products and services to their customers by partnering with a financial institution . This partnership makes it easier for non-banking or fintech companies to incorporate digital banking services directly into their own products.
Thanks to banking as a service (BaaS):
Banking entities can expand their scope of action,
Fintechs can offer banking services,
and consumers can access financial services tailored to their needs, wherever and whenever they need them.
On the other hand, competition from fintechs can narrow the margins of financial institutions or cause them to lose part of their market share to non-banking entities with better services.
How is Banking as a Service (BaaS) different from Open Banking?
The main difference between open banking and banking as a service (BaaS) lies in the way APIs are used . In banking as a service, APIs are used to access banking functionalities , such as a credit card from a commercial establishment that needs to communicate with the associated account in a bank so that the payment can be made. Meanwhile, open banking uses APIs to access customer data . For example, a platform where you can see the positions you have in several banks or bank transactions.
What is an API?
An API ( Application Programming Interface ) is a set of protocols, commands, functions, and tools used by developers. It makes it easier for different software applications to communicate and interact with each other.
APIs make the work of programmers easier, since pharmaceutical email list they do not have to write code from scratch, but can use predefined functions in the interactions they carry out with other programmers.
Banks opting for BaaS must provide a series of open APIs that allow companies to offer financial products without being part of the banking sector.
For example, APIs allow you to verify that your bank details are correct when making online purchases.
Open APIs make it easier for accounting applications to integrate banking transactions into their programs. For this reason, it is advisable to rely on innovative accounting programs such as Sage XRT , which are constantly updated and have a powerful accounting and invoicing API .
An API facilitates communication between different software applications.
How does Banking as a Service (BaaS) work?
Below we review how Banking as a Service works:
Banks licensed to operate all types of regulated financial services open up their data and technology to companies such as fintechs.
A third-party provider (TPP), a fintech company, digital bank or other non-bank business, pays a bank a fee to access the bank's systems and tools.
