Market Overview
In terms of revenue, the Global Banking-as-a-Service Market is expected to reach 87.88 billion by 2030 from 19.80 billion in 2021, and grow at a Compound Annual Growth Rate (CAGR) of 18.01% from 2022 to 2030.
The global market for banking as a service is accelerated due to banks’ increased usage of digital transformation technology and the simplification of financial services. Additionally, the expansion of the banking-as-a-service sector is positively impacted by advancements in fund transaction services across the U.S. and several emerging countries. However, the industry expansion is being hampered by increased cyber-attacks on personal banking data. On the other hand, during the forecast period, it is anticipated that rising demand for banking-as-a-service infrastructure to enhance business values and the integration of artificial intelligence in the banking-as-a-service platform will offer lucrative opportunities to expand the banking-as-a-service market.
COVID-19 Impact Analysis
The COVID-19 pandemic is anticipated to affect the financial markets, especially banking services, and the entire economy. People’s use of e-commerce platforms has significantly increased due to the COVID-19 pandemic, which has increased the demand for online payment technologies to share financial information with consumers. Additionally, banks and the FinTech sector are becoming more interested in banking as a service platform to improve their internal operations and offer secure contactless payments to expedite their payment transaction process. Additionally, the desire for banking-as-a-service is anticipated to rise following COVID-19 as banks and FinTech sectors are more likely to streamline their operations to better clients’ digital experiences. Therefore, these elements are projected to offer possible growth prospects in the upcoming years.
Market Segmentation
The Global Banking-as-a-Service Market is segmented based on component, type, enterprise size, and end user. Depending on the component, the market is divided into platform and service. Based on type, the market is classified into API-based bank-as-a-service and cloud-based bank-as-a-service. By enterprise size, the market is further segmented into large enterprises and small & medium-sized. And finally, based on end users, the market is fragmented into banks, fintech corporations/NBFC, and others.
By Component, the Services Segment is the Largest Contributor to the Banking-As-A-Service Market in 2021
The services segment is expected to witness a potential growth rate during the forecast period. By enabling distributors to offer banking goods and services via third-party platforms, BaaS is altering the banking value chain. In addition, BaaS often offers platform integration, implementation, and maintenance, including push notifications, cloud storage, database administration, hosting platforms, and user authentication. Thus, it helps to propel the segmental growth of the market.
By Enterprise Size, the Large Enterprises Segment is expected to be the Largest Contributor in 2021
The large enterprises segment accounted for the Global Banking-as-a-Service Industry in 2021. Many large businesses are investing in banking capabilities to provide consumers with additional financial solutions. A provider of financial IT software named Finastra found that 85% of respondents had already adopted or planned to use BaaS capabilities after speaking with 50 top business leaders and polling 1,600 additional people.
Market Dynamics:
Drivers:
Reconfiguration of the Banking Value Chain Opens the Door for Disintermediation and Enables New Sources of Growth
BaaS refers to the distribution of banking goods and services by outside distributors. BaaS products enable new, customized offers and accelerate their market time by combining non-banking enterprises with regulated financial infrastructure. BaaS offerings are quickly gaining root as consumer discontent with current offerings rises. For instance, 30% of customers are considering switching banks, 42% of customers have used a Buy Now, Pay Later service, and 2x ROAA for banks focused on BaaS offerings, according to the information provided by known sources. However, BaaS providers mainly concentrate on just one or two stages of the value chain, in contrast to traditional banks that own the entire value chain. As a result, existing offerings are being replaced by these new ones, based on specificity and agility, disaggregating many lucrative components of the traditional banking value chain in the process.
Enhancement in the Financial Services Drives the Market
Through APIs, the banking-as-a-service platform gives third-party organizations access to financial services. Additionally, banking-as-a-service helps banks and fintech firms streamline their financial services, improve their offerings, and improve customer experiences, all of which contribute to the market’s expansion. In addition, the banking-as-a-service platform aids financial institutions in providing customers with financial services ingrained in their everyday lives and enhancing their funding sources so they can better serve their sizable customer bases, which promotes market expansion on a global scale. Additionally, the need among banks to meet consumer demands and offer high security to customers’ important transactions is expanding, accelerating market expansion. Additionally, different banks are having trouble simplifying their money transaction processes. As a result, banks are refocusing their attention on banking-as-a-service platforms, which significantly contribute to the expansion of the global industry.
Regional Analysis
The Asia Pacific Accounted for the Largest Growth of the Market in 2021
North America held the largest share in the Global Banking-as-a-Service Market 2021. The establishment of the BaaS industry in this region is associated with the expansion of regional technology firms, including PayPal Holdings, Inc., Green Dot Bank, and others. For instance, a U.K.-based company named ‘Finastra’ announced a BaaS partnership with Microsoft in April 2022 to provide alternative lending alternatives to Small and Medium Enterprises (SMEs). Through this partnership, SME owners can quickly and easily obtain relevant and valuable company funding.
Key Market Players and Competitive Landscape
Some of the major key players operating in the market are Bankable, BBVA, ClearBank, Green Dot., and MatchMove Pay Pte. Ltd, Pi1, SolarisBank, Starling Bank, Square Inc., and Treasury Prime, among others.
This report categorizes the Banking-as-a-Service Market as follows,
Based on Component:
- Professional Service
- Managed Service
Based on Type:
- API-based Bank-as-a-service
- Cloud-based Bank-as-a-service
Based on Enterprise Size:
- Large Enterprise
- Small & Medium Enterprise
Based on End User:
- Banks
- FinTech Corporations/NBFC
- Others
Based on Component:
- Platform
- Service
- Professional Service
- Managed Service
Based on Type:
- API-based Bank-as-a-service
- Cloud-based Bank-as-a-service
Based on Enterprise Size:
- Large Enterprise
- Small & Medium Enterprise
Based on End User:
- Banks
- FinTech Corporations/NBFC
- Others
